[Federal Register: August 2, 2005 (Volume 70, Number 147)]
[Notices]
[Page 44421-44461]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au05-89]
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Part II
Millennium Challenge Corporation
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Notice of Entering Into a Compact With the Government of Nicaragua;
Notice
[[Page 44422]]
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MILLENNIUM CHALLENGE CORPORATION
[MCC FR 05-14]
Notice of Entering Into a Compact With the Government of the
Republic of Nicaragua
AGENCY: Millennium Challenge Corporation.
ACTION: Notice.
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SUMMARY: In accordance with Section 610(b)(2) of the Millennium
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium
Challenge Corporation is publishing a detailed summary and text of the
Millennium Challenge Compact between the United States of America,
acting through the Millennium Challenge Corporation, and the Government
of the Republic of Nicaragua. Representatives of the United States
Government and the Republic of Nicaragua executed the Compact documents
on July 14, 2005.
Dated: July 28, 2005.
Jon A. Dyck,
Vice President & General Counsel, Millennium Challenge Corporation.
Summary of Millennium Challenge Compact With the Republic of Nicaragua
I. Introduction
Once one of the faster-growing countries in Latin America,
Nicaragua fell into a state of severe economic collapse in the 1980s
and only began a process of slow macroeconomic recovery in the last few
years. Looking toward the future, Nicaragua now has an opportunity to
achieve growth by taking advantage of regional economic integration and
trade openings. The recently-approved MCC program (``Program'') will
help the country to build the necessary capacity to take full advantage
of these opportunities.
The Government of Nicaragua (GON) presented MCC with a strategy to
achieve economic growth and poverty reduction by building the
productive capacity of the departments of Le[oacute]n and Chinandega, a
region with proven growth potential due to its fertile land and
connection to international markets. After extensive consultations, the
Nicaraguans identified insecure property rights, under-developed
infrastructure, and low-value rural business activity as the greatest
barriers to growth, and developed a proposal to address them with MCA
assistance. The Program will contribute to improving the lives of the
800,000 residents of Le[oacute]n and Chinandega by raising household
incomes in the region and also will benefit the country by transforming
the region into an engine of economic growth. The Program has three
objectives:
Increase investment by strengthening property rights in
Le[oacute]n. (Property Regularization Project).
Reduce transportation costs between Le[oacute]n and
Chinandega and domestic, regional and global markets (Transportation
Objective Project.
Increase profits and wages of farms and enterprises in
Le[oacute]n and Chinandega (Rural Business Development Project).
The five-year, $175 million Compact will help Nicaragua accomplish
these objectives as outlined below.
II. Program Overview and Impact
1. Property Regularization Project ($26.5 Million)
Insecure property rights, high land transaction costs, and
inefficient property registration services undermine enterprise
development, investment, and rural income growth in Nicaragua. To
address these problems, the GON is focusing on legal, judicial, and
institutional reforms at the national level. At the regional level, the
Property Regularization Project will expand to Le[oacute]n an existing
World Bank project in Chinandega, Proyecto de Ordenamiento de la
Propiedad (``PRODEP''), thereby leveraging PRODEP's implementation
experience and structure. Combined, these efforts will lay the
foundation for increasing investment and income.
The Activities of this Project include:
Institutional Capacity Building: Provide technical support
to government institutions to implement and sustain tenure
regularization reforms in Le[oacute]n.
Cadastral Mapping: Conduct area-wide cadastral mapping in
Le[oacute]n to obtain current property descriptions to be recorded in a
geographic information system.
Land Tenure Regularization: Clarify land tenure, resolve
disputes, and improve formal documentation of property rights.
Database Installation: Link municipal and national
registry and cadastral databases.
Protected Area Demarcation: Demarcate and legally validate
the boundaries of four environmentally-sensitive protected areas,
regularize land rights within the perimeter of each, and facilitate the
adoption of land use management plans by occupants therein.
Analysis and Communications: Fund short-term technical
assistance, policy analysis and outreach to promote participation in,
use and sustainability of the improved property registration system.
Benefits: This Project will work to eliminate the institutional and
regulatory barriers preventing productive investment in property in
Le[oacute]n. Eliminating these barriers will contribute to improving
the investment climate, increasing the asset value of land, reducing
land-related social conflict, encouraging intelligent management of
regional natural resources, and strengthening local government land use
planning.
2. Transportation Project ($92.8 Million)
High transportation costs are a significant constraint to economic
growth, particularly for agriculture and small- and medium-sized rural
businesses. The Pacific Corridor, important for trade between Nicaragua
and its neighbors, links producers and consumers in Le[oacute]n and
Chinandega to markets north in neighboring Honduras and El Salvador and
south to Nicaragua's urban center.
Activities under this Project include:
N-I Road (segment of Pacific Corridor): Improve a 58-
kilometer segment of the Pacific Corridor between Nejapa and Izapa.
Secondary Roads: Pave and upgrade key secondary routes to
link rural producers to the primary road network.
Technical Assistance: Provide technical assistance to the
Ministry of Transportation and Infrastructure (MTI) and the Nicaraguan
Road Maintenance Fund (Fondo de Mantenimiento Vial or FOMAV).
Benefits: This Project will reduce transportation costs, stimulate
economic development, and improve access to markets and social services
for road users. This will help Nicaragua, Honduras, and El Salvador
fully realize the benefits of DR-CAFTA. A sustainable road maintenance
mechanism will safeguard the funding of road improvements and lengthen
road lifespan.
3. Rural Business Development Project ($33.7 Million)
Despite a comparative advantage in the production, processing and
marketing of agricultural products, over 70 percent of the rural
population in Le[oacute]n-Chinandega is poor. Producers, suppliers,
service providers, processors, and marketing agents frequently work in
isolation or are absent in the region. Women are less likely to
participate in agricultural organizations, receive technical assistance
or credit or plant higher profit-yielding crops, despite their
significant presence as producers. The region also suffers from
pronounced
[[Page 44423]]
deforestation and water supply constraints to farming and other
productive activities, especially the poor communities in the northern
highlands.
The activities to be implemented under this Project include:
Rural Business Development Services: Expand higher-profit
agriculture and agribusiness by providing business development
services, disseminating market information, developing improved
production techniques, and managing the two Project Activities
described below.
Technical and Financial Assistance: To help small- and
medium-sized farms and agribusiness transition to higher-profit
activities, provide technical and financial assistance to these
enterprises, including support that will directly offset certain costs
of small farms; and
Grants to Improve Water Supply for Farming and Forestry
Production: Based on a watershed management action plan, provide grants
to improve the water supply for irrigation and facilitate higher value,
sustainable agriculture and forestry in the upper watershed areas of
the region.
Benefits: These activities will facilitate increases in the
production of high-value goods and the profits and wages of farmers,
agribusinesses and other non-farm businesses. These increases in
profits and wages will translate into higher disposable incomes of
families in the region, reducing the high incidence of poverty. In
addition, these activities are expected to generate employment and
contribute to a regional economy well-positioned to take advantage of
national and international investment and market opportunities. Better
water management will encourage more productive use of land and
environmental sustainability, particularly for communities in the
northern highlands.
4. Measuring Outcome and Impact ($3.3 Million)
The overall objective of the Program is to increase income and
reduce poverty in Le[oacute]n and Chinandega, and the Program's success
will be measured by the increase in income of beneficiaries due to the
Program. The Monitoring and Evaluation Plan will assess progress toward
the achievement of the Compact's objectives and goal.
By the end of the Property Regularization Project, an estimated 70
percent of rural and 50 percent of urban properties (or ~43,000 land
parcels) in Le[oacute]n will have more secure, registered titles.
Thousands of disputes over property rights will be expected to have
been successfully mediated and the costs in time and money of
conducting property-related transactions are projected to have been
reduced by 50 percent. Together, this more secure investment climate
and more efficient registration system will encourage investment and
environmental protection. Farmers who have their land titles
regularized by the Project are expected to increase investment in land
improvement by 32 percent over five years. All four protected areas in
Le[oacute]n will be formally demarcated and occupant tenure will be
regularized, allowing effective development and enforcement of land use
management plans.
Road upgrades will reduce transportation costs between the region
and domestic, regional and international markets for an estimated 3,300
current road users per day. Upgrading up to 100 kilometers of secondary
roads is anticipated to reduce travel times and transport costs to
markets and education and health services for rural communities.
Improvements to the N-I road and the secondary roads are important for
realizing the economic benefits outlined in the Rural Business
Development Project as well as for stimulating new investments in
Nicaragua as trade north from Managua to Honduras and El Salvador
becomes more efficient and cost-effective.
Thousands of farmers will directly benefit from the Rural Business
Development Project by receiving help with transitioning into higher-
value agriculture. In addition, an estimated 7,000 jobs will be
created. The additional profits and wages of farms generated as a
result of the Rural Business Development Project are projected to total
$30 million annually, beginning six years after the Project's
initiation. To ensure that the benefits from the Project are long-term,
the Project will facilitate linkages among different actors involved in
rural business, such as distributors and processors, and build local
capacity to link producers to market opportunities. In addition,
thousands of hectares of currently arid land will have improved water
supply and be under sustainable farm or forest production.
5. Program Management, Financial/Procurement Management, and Audit
($18.8 Million)
MCA-Nicaragua, a legal entity, will be established to implement the
Compact and is the entity ultimately accountable for Program success.
This entity will consist of an independent Board of Directors, with
central government, local government, and civil society
representatives, that will oversee the implementation of the Program.
It will also include a technical secretariat staffed with full-time
professional staff that will provide daily management of the
implementation of the Program. In addition to having observer status on
the MCA-Nicaragua Board, MCC will retain approval rights at a number of
key decision points during implementation, including key steps in
procurements, budgets for Project Activities, major re-disbursements
and key personnel decisions.
The Rural Business Project will be managed by competitively hired
professional staff who will reside in an office (``Rural Office'')
located in the region. For the Property Regularization Project, the
Compact will fund additional staff and activities within the existing
World Bank implementing unit (PRODEP). For the Transportation Project,
management, construction, and supervision will be handled by
competitively procured firms that will coordinate closely with the
Nicaraguan Ministry of Transportation and Infrastructure.
A competitively selected joint venture of international private-
sector accounting/consulting firms will serve as the Fiscal/Procurement
Agent (Agent) for the Program. The Agent will provide professional
services for (1) funds control, disbursement documentation and
management, cash management and accounting; and (2) the planning,
management and supervision of the procurement processes contemplated
under the MCC Program.
The Board of Directors will engage auditors to conduct both
financial audits and compliance audits of all financial and procurement
activities. For the first year of the Program, audits will be conducted
every six months. For subsequent years, the MCC will consider whether
audits should be conducted more or less frequently than every six
months. An auditor will be competitively selected from a list of
approved auditors to be provided by the MCC Inspector General.
III. Assessment
1. Economic Analysis
The Property Regularization Project has an economic rate of return
(ERR) of 29 percent. Clearer definition of property rights through
improved land titles is expected to benefit the economy by increasing
the private returns to investments on land, improving the ability to
use land to leverage credit, reducing high costs of land-related
transactions, and reducing the need for defensive expenditures to
protect
[[Page 44424]]
property rights. The preferred basis for estimating economic returns is
to combine estimates of increases in land values (reflecting new
economic benefits of having land) and savings in transactions costs.
The ERR for the Transportation Project is estimated to be 13
percent. This return is the weighted average of the returns for two
activities: N-I Road (23 percent) and Secondary Roads (8 percent
minimum). The economic benefits from the Transportation Project derive
both from the direct benefits of reduced transportation costs and from
the stimulus to new investment from lower transportation costs. The
stimulation of new businesses and investments due to lower transport
costs are more difficult to measure, but are likely to increase the
economic benefits. Sectors whose ratio of transport costs to production
price is relatively high, such as agriculture and agro-processing, are
likely to receive new investments as a result of improved
infrastructure. Additionally, improved transportation can have
additional benefits through increased school enrollment and improved
health outcomes. These indirect benefits have not been factored into
the economic returns, so the ERR mentioned above is likely a
conservative estimate of the gains from the Project.
The ERR for the Rural Business Development Project is estimated to
be 15 percent, calculated as a weighted average of its activities. The
return to the Rural Business Development Office was estimated to be 18
percent, based on projected costs, current crop profitability and
employment generation. An estimated 7,000 new jobs will be generated as
a result of this farm transition. The specific activities for the
improvement of water supply for farming and forest production will be
determined over the course of the Program. These activities, however,
will be required to achieve at least a 10 percent economic rate of
return.
2. Consultative Process
The technical team charged with developing the MCA proposal held
numerous meetings and work sessions in Managua and the country's
regional departments with leaders in the political and private sectors,
non-governmental organizations (NGOs), and various associations. Many
of the consultations included Nicaragua's Local Development Council
(LDCs)--representative bodies at the regional department level whose
members are elected from the public and private sector and civil
society. The technical team also spoke with local farm and women's
cooperatives, local business associations, and NGOs about the Program's
technical details.
Nicaragua's consultative process for the MCA proposal resulted in
three key outcomes: (1) A shift from a national to a regional focus,
(2) the prioritization of proposal components, and (3) ongoing
participation and ownership at the local level.
As discussions at the national and regional level
progressed about Nicaragua's constraints to economic growth and poverty
reduction, stakeholders came to focus on the departments of Le[oacute]n
and Chinandega, a region believed to have the greatest potential for
economic growth as well as some of the most extreme poverty.
The Le[oacute]n and Chinandega Development Councils--which
collectively represent over 100 civil society, private sector, and
local government organizations--provided crucial assistance to the GON
technical team in developing and prioritizing the proposal components.
The team also solicited feedback from other private sector and civil
society organizations at the regional and national level.
The GON technical team continues to involve the Local
Development Councils and other local groups and expects them to play an
important role in program oversight, including having representation on
the Board of the MCA-Nicaragua governing entity, an organization that
will be established specifically to implement and oversee the Program.
3. Government Commitment and Effectiveness
The Program has received a significant level of government
attention from the President of Nicaragua, Ministers and their staff.
The GON has also committed to make reforms as part of the Compact.
These reforms include passing and enacting several laws which relate to
MCC qualification criteria and to the implementation of components of
the Compact (e.g., road maintenance funding, new law governing tenure
regularization, etc.).
4. Sustainability
Sustainability of the Property Regularization Project will be
derived from the extent to which people use the improved registration
system and from the fiscal capacity of the registry, cadastre and
titling services. The incentives for people to use and pay for services
as well as the costs of services will be appropriate in the local
context. Several recent policy reforms (e.g., new cadastre and registry
laws) and proposed reforms (e.g., tenure regularization law) will bring
about new institutional relationships and operational practices that
will more effectively facilitate the process for keeping property
records up-to-date. The GON's ability to maintain modern, computerized
land records and maps and a well-trained staff will depend on both an
adequate public budget and the GON's ability to set and collect fees
for services. More accessible, reliable and efficient services will
likely increase the willingness of users to use the system and to pay
for services. The new registry law will provide an autonomous budget
for the registry so that it can more rationally project its costs and
revenues and set fees and budgets accordingly. This Project includes
specific support for training, technical assistance and analysis of
policy, fee structures and other measures to help ensure
sustainability.
The technical assistance activities in the Transportation Project
will promote institutional sustainability as well as the policy reforms
in the Compact. The Program will include conditions that have specific
targets, by date, for funding escrows required for maintenance. In
addition, the GON has agreed that if it has not satisfied its funding
obligation by year two of the Project, certain elements of this Project
will not be funded any further. The GON also expects municipalities to
cover a significant portion of maintenance costs for the secondary
roads.
The Rural Business Development Project's primary objective is to
increase the economic viability of farmers and agribusinesses in the
region. Initially, a Rural Office will be established as a division or
subsidiary of MCA-Nicaragua based on the view that the impacts must be
sustainable. Selection criteria for activities funded under the Project
will include their potential for self-sustainability. Expanded
horticultural production will create economies of scale that reduce the
unit costs of inputs and post-harvesting services. The Project is
expected to improve rural access to finance through its financial
literacy campaign and by promoting ``bankable'' business activities.
The watershed management action plan will provide a basis for improving
environmental sustainability of land uses throughout the region, and
beneficiaries will be assisted in establishing business models that
will pay the costs associated with maintaining investments over time.
[[Page 44425]]
5. Environmental and Social Impacts
Property Regularization Project
Overall, this Project is expected to be positive from an
environmental and social point of view. PRODEP promotes the
conservation of forests and other natural habitats directly through the
strengthening of existing protected areas. A Project-specific
environmental plan will be developed, similar to the plan in place for
PRODEP's work in Chinandega, to monitor potential negative impacts. The
Project also will (i) identify measures to facilitate increased access
by poorer households to land via land markets, (ii) help advance gender
equity in land tenure regularization to empower women property owners,
and (iii) work to gain consensus on indigenous community land rights
within the context of tenure regularization.
Transportation Project
While the majority of the works under this Project will occur along
existing rights-of-way, this Project qualifies as a significant
rehabilitation. For some of the roads, this rehabilitation will
fundamentally change the nature of the traffic, and therefore the
impacts after construction. Comprehensive road-specific Environmental
Impact Assessments (EIAs) have not yet been conducted; however, each of
the roads to be improved under this Project will require completion of
environmental analysis acceptable to MCC. The Project budget includes
funds to conduct the requisite environmental analyses.
Rural Business Development Project
Activities under this Project could potentially have adverse
environmental impacts that are site-specific and largely mitigable. The
Compact specifies the environmental review criteria for activities
sponsored by the Project and describes the environmental sustainability
principles for the agricultural and agribusiness technical assistance.
The activity to improve watershed management, in particular, will have
significant positive environmental impacts. Nicaragua has one of the
highest rates of deforestation in the region, resulting in decreased
soil productivity, significant erosion, and flooding. In addition, the
Estero Real estuary in the region is one of the most important
ecosystems in Central America and one of its most vulnerable. It is
vital for shrimp production and as a sanctuary for migratory birds and
endangered species, and serves as a natural flood control system.
Improvement in soil conservation and reforestation in the Project area
will positively benefit this sensitive ecosystem.
6. Donor Coordination
The proposed Projects complement and supplement efforts by other
donors. Nicaragua's Program calls for increasing rural incomes and
financing infrastructure. USAID, USDA, the World Bank, the Inter-
American Development Bank (IDB), IFAD, NDF, UNDP, and other development
agencies are all active in supporting various rural development
activities. Work to upgrade the Nicaraguan Pacific Corridor is being
funded by the World Bank, the Central American Bank for Economic
Integration, and the Nordic Fund. In addition, the IDB and World Bank
have funded projects to strengthen the capacity of MTI and the Road
Maintenance Fund. Further coordination with the larger donor community
will include participation by MCC in the Infrastructure and Rural
Development Donor Coordinating committees chaired by the GON. The Rural
Office also will assist farmers and agribusinesses in the region to
gain information on and access to programs sponsored by other donors.
IV. Summary and Conclusion
Nicaragua's MCC Program focuses on creating a regional engine for
economic growth in the northwestern part of the country by transforming
the rural business sector into a high-value, sustainable corridor that
is primed for greater trade with regional and international markets.
The Program complements economic growth strategies such as The
Dominican Republic-Central America-United States Free Trade Agreement
(DR-CAFTA) and enjoys broad support from civil society. The Property
Regularization, Transportation, and Rural Business Development Projects
will build the capacity of Le[oacute]n and Chinandega to accelerate the
economic transformation from subsistence farming to a demand-driven,
market-oriented, rural business zone. The combined effect of these
three core Projects will have a positive impact on economic growth and
poverty reduction in Nicaragua.
Millennium Challenge Compact Between the United States of America
Acting Through the Millennium Challenge Corporation and the Government
of the Republic of Nicaragua
Table of Contents
Article I. Purpose and Term
Section 1.1 Objectives
Section 1.2 Projects
Section 1.3 Entry into Force; Compact Term
Article II. Funding and Resources
Section 2.1 MCC Funding
Section 2.2 Government Resources
Section 2.3 Limitations on the Use or Treatment of MCC Funding
Section 2.4 Incorporation; Notice; Clarification
Section 2.5 Refunds; Violation
Article III. Implementation
Section 3.1 Implementation Framework
Section 3.2 Government Responsibilities
Section 3.3 Government Deliveries
Section 3.4 Government Assurances
Section 3.5 Implementation Letters; Supplemental Agreements
Section 3.6 Procurement; Awards of Assistance
Section 3.7 Policy Performance; Policy Reforms
Section 3.8 Records and Information; Access; Audits; Reviews
Section 3.9 Insurance; Performance Guarantees; Indemnification
Claims
Section 3.10 Domestic Requirements
Section 3.11 No Conflict
Section 3.12 Reports
Article IV. Conditions Precedent; Deliveries
Section 4.1 Conditions Prior to the Entry into Force and
Deliveries
Section 4.2 Conditions Precedent to MCC Disbursements or Re-
Disbursements
Article V. Final Clauses
Section 5.1 Communications
Section 5.2 Representatives
Section 5.3 Amendments
Section 5.4 Termination; Suspension
Section 5.5 Privileges and Immunities; Bilateral Agreement
Section 5.6 Attachments
Section 5.7 Inconsistencies
Section 5.8 Indemnification
Section 5.9 Headings
Section 5.10 Interpretation; Definitions
Section 5.11 Signatures
Section 5.12 Designation
Section 5.13 Survival
Section 5.14 Consultation
Section 5.15 MCC Status
Section 5.16 Language
Section 5.17 Publicity; Information and Marking
Exhibit A: Compendium of Defined Terms
Exhibit B: List of Certain Supplemental Agreements
Annex I: Program Description
Schedule 1--Property Regularization Project
Schedule 2--Transportation Project
Schedule 3--Rural Business Competitiveness Project
Annex II: Summary of Multi-Year Financial Plan
Annex III: Description of the Monitoring and Evaluation Plan
Millennium Challenge Compact
This Millennium Challenge Compact (the ``Compact'') is made between
the United States of America, acting through the Millennium Challenge
Corporation, a United States Government corporation (``MCC''), and the
Government of the Republic of Nicaragua (the ``Government'') (referred
to herein individually as a ``Party'' and collectively, the
``Parties''). A compendium of capitalized terms
[[Page 44426]]
defined herein is included in Exhibit A attached hereto.
Recitals
Whereas, MCC, acting through its Board of Directors, has selected
the Republic of Nicaragua (``Nicaragua'') as eligible to present to MCC
a proposal for the use of 2004 and 2005 Millennium Challenge Account
(``MCA'') assistance to help facilitate poverty reduction through
economic growth in Nicaragua;
Whereas, the Government has carried out a consultative process with
the country's private sector and civil society to outline the country's
priorities for the use of MCA assistance and developed a proposal,
which was submitted to MCC on October 25, 2004 (the ``Proposal'');
Whereas, the Proposal focused on, among other things, improving the
property rights, infrastructure and competitiveness of rural businesses
in the Nicaraguan departments of Le[oacute]n and Chinandega (the
``Le[oacute]n-Chinandega'');
Whereas, MCC has evaluated the Proposal and related documents to
determine whether the Proposal is consistent with core MCA principles
and includes proposed activities and projects that will advance the
progress of Nicaragua towards achieving economic growth and poverty
reduction; and
Whereas, based on MCC's evaluation of the Proposal and related
documents and subsequent discussions and negotiations between the
Parties, the Government and MCC determined to enter into this Compact
to implement a program using MCC Funding to advance Nicaragua's
progress towards economic growth and poverty reduction (the
``Program'');
Now, Therefore, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the Parties hereby agree as
follows:
Article I. Purpose and Term
Section 1.1 Objectives
The overall objective of this Compact (the `` Program Objective'')
is to increase income and reduce poverty in Le[oacute]n-Chinandega,
which is key to advancing the goal of economic growth and poverty
reduction in Nicaragua (the ``Compact Goal''). The Parties have
identified the following project-level objectives (each, a ``Project
Objective'' and together the ``Project Objectives'') to advance the
Program Objective, each of which is described in more detail in the
Annexes attached hereto:
(a) Increase investment by strengthening property rights in
Le[oacute]n (the ``Property Regularization Objective'');
(b) Reduce transportation costs between Le[oacute]n-Chinandega and
domestic, regional and global markets (the ``Transportation
Objective''); and
(c) Increase the value-added of farms and businesses in
Le[oacute]n-Chinandega (the ``Rural Business Development Objective'').
(The Program Objective and the individual Project Objectives are
referred to herein collectively as the ``Objectives'' and each
individually as an ``Objective''). The Government expects to achieve,
and shall use its best efforts to ensure the achievement of, these
Objectives during the Compact Term.
Section 1.2 Projects
The Annexes attached hereto describe the specific projects and the
policy reforms and other activities related thereto (each, a
``Project'') that the Government will carry out, or cause to be carried
out, in furtherance of this Compact to achieve the Objectives and the
Compact Goal.
Section 1.3 Entry Into Force; Compact Term
This Compact shall enter into force on the date of the last letter
in an exchange of letters between the Principal Representatives of each
Party confirming that all conditions set forth in Section 4.1 have been
satisfied by the Government and MCC (such date, the ``Entry into
Force''). This Compact shall remain in force for five (5) years from
the Entry into Force, unless earlier terminated in accordance with
Section 5.4 (the ``Compact Term'').
Article II. Funding and Resources
Section 2.1 MCC Funding
(a) MCC's Contribution. Subject to the terms and conditions herein,
MCC shall grant to the Government an amount not to exceed One Hundred
Seventy Five Million United States Dollars (USD $175,000,000) (``MCC
Funding'') during the Compact Term to enable the Government to
implement the Program and achieve the Objectives; provided, however,
MCC may elect, in its sole discretion, to grant all or any portion of
MCC Funding directly to an entity to be organized and established
pursuant to Nicaraguan law and in accordance with Section 3(d) of Annex
I and the Governance Agreement (``MCA-Nicaragua'') pursuant to a
separate Supplemental Agreement (the ``Grant Agreement'') between MCC,
the Government, and MCA-Nicaragua to enable the Government, through
MCA-Nicaragua, to implement the Program and achieve the Objectives.
(i) Subject to Sections 2.1(a)(ii), 2.2(b), and 5.4(b), the
allocation of the MCC Funding within the Program and among and within
the Projects shall be as generally described in Annex II or as
otherwise agreed upon by the Parties from time to time.
(ii) If at any time MCC determines that a condition precedent to an
MCC Disbursement has not been satisfied, MCC may, upon written notice
to the Government, reduce the total amount of MCC Funding by an amount
equal to the amount estimated in the applicable Detailed Financial Plan
for the Program or Project activity for which such condition precedent
has not been met. Upon the expiration or termination of this Compact,
(A) any amounts of MCC Funding not disbursed by MCC to the Government
shall be automatically released from any obligation in connection with
this Compact and (B) any amounts of MCC Funding disbursed by MCC to the
Government as provided in Section 2.1(b)(i), but not re-disbursed as
provided in Section 2.1(b)(ii) or otherwise incurred as permitted
pursuant to Section 5.4(e) prior to the expiration or termination of
this Compact, shall be returned to MCC in accordance with Section
2.5(a)(ii).
(b) Disbursements.
(i) Disbursements of MCC Funding. MCC shall from time to time make
disbursements of MCC Funding (each such disbursement, an ``MCC
Disbursement'') to a Permitted Account or through such other mechanism
agreed by the Parties under and in accordance with the procedures and
requirements set forth in Annex I, the Disbursement Agreement or as
otherwise provided in any other relevant Supplemental Agreement.
(ii) Re-Disbursements of MCC Funding. The release of MCC Funding
from a Permitted Account (each such release, a ``Re-Disbursement'')
shall be made in accordance with the procedures and requirements set
forth in Annex I, the Disbursement Agreement or as otherwise provided
in any other relevant Supplemental Agreement.
(c) Interest. Unless the Parties agree otherwise in writing, any
interest or other earnings on MCC Funding that accrue or are earned
(collectively, ``Accrued Interest'') shall be held in a Permitted
Account and accrue or be earned in accordance with the requirements for
the treatment of Accrued Interest as specified in Annex I or any
relevant Supplemental Agreement. On a quarterly basis and upon the
termination or expiration of this Compact, the Government shall return,
or ensure the return of, all Accrued Interest to any United States
[[Page 44427]]
Government account designated by MCC.
(d) Conversion; Exchange Rate. The Government shall ensure that all
MCC Funding that is held in the Permitted Account(s) shall be
denominated in the currency of the United States of America (``United
States Dollars'') prior to Re-Disbursement; provided, that a certain
portion of MCC Funding may be transferred to a Local Account and may be
held in such Local Account in the currency of Nicaragua prior to Re-
Disbursement in accordance with the requirements of Annex I and any
relevant Supplemental Agreement between the Parties. To the extent that
any amount of MCC Funding held in United States Dollars must be
converted into the currency of Nicaragua for any purpose, including for
any Re-Disbursement or any transfer of MCC Funding into a Local
Account, the Government shall ensure that such amount is converted
consistent with Annex I, including the rate and manner set forth in
Annex I, and the requirements of the Disbursement Agreement or any
other Supplemental Agreement between the Parties.
(e) Guidance. From time to time, MCC may provide guidance to the
Government through Implementation Letters on the frequency, form and
content of requests for MCC Disbursements and Re-Disbursements or any
other matter relating to MCC Funding. The Government shall apply such
guidance in implementing this Compact.
Section 2.2 Government Resources
(a) Necessary Resources. The Government shall provide or cause to
be provided such Government funds and other resources, and shall take
or cause to be taken such actions, including obtaining all necessary
approvals and consents, as are specified in this Compact or in any
Supplemental Agreement to which the Government is a party or as are
otherwise necessary and appropriate to effectively carry out the
Government Responsibilities or other responsibilities or obligations of
the Government under or in furtherance of this Compact during the
Compact Term and through the completion of any post-Compact Term
activities, audits or other responsibilities.
(b) Reallocation; Allocation Reductions.
(i) If at any time during the Compact Term, the Government
materially reallocates or reduces the allocation in its national
budget, or any other Nicaraguan governmental authority at a
departmental, municipal, regional or other jurisdictional level
materially reallocates or reduces the allocation of its respective
budget, of the normal and expected resources that the Government or
such other governmental authority, as applicable, would have otherwise
received or budgeted, from external or domestic sources, for the
activities contemplated herein, the Government shall notify MCC in
writing within fifteen (15) days of such reallocation or reduction,
such notification to contain information regarding the amount of the
reallocation or reduction, the affected activities, and an explanation
for such reallocation or reduction.
(ii) If MCC determines, independently or otherwise, upon review of
the executed national annual budget or budget of such other
governmental authority, that such a material reallocation or reduction
of resources has occurred, MCC shall notify the Government and, within
fifteen (15) days after such notification, the Government shall
provide, or cause to be provided, a written explanation for such
reallocation or reduction.
(iii) After reviewing such explanation, MCC may (A) reduce, in its
sole discretion, the total amount of MCC Funding or any MCC
Disbursement by an amount equal to the amount estimated in the
applicable Detailed Financial Plan for the activity for which funds
were reduced or reallocated or (B) otherwise suspend or terminate MCC
Funding in accordance with Section 5.4(b).
Section 2.3 Limitations on the Use or Treatment of MCC Funding
(a) Abortions and Involuntary Sterilizations. The Government shall
ensure that MCC Funding shall not be used to undertake, fund or
otherwise support any activity that is subject to prohibitions on use
of funds contained in (i) paragraphs (1) through (3) of section 104(f)
of the Foreign Assistance Act of 1961 (22 U.S.C. 2151b(f)(1)-(3)), a
United States statute, which prohibitions shall apply to the same
extent and in the same manner as such prohibitions apply to funds made
available to carry out Part I of such Act; or (ii) any provision of law
comparable to the eleventh and fourteenth provisos under the heading
``Child Survival and Health Programs Fund'' of division E of Public Law
108-7 (117 Stat. 162), a United States statute.
(b) United States Job Loss or Displacement of Production. The
Government shall ensure that MCC Funding shall not be used to
undertake, fund or otherwise support any activity that is likely to
cause a substantial loss of United States jobs or a substantial
displacement of United States production, including:
(i) Providing financial incentives to relocate a substantial number
of United States jobs or cause a substantial displacement of production
outside the United States;
(ii) Supporting investment promotion missions or other travel to
the United States with the intention of inducing United States firms to
relocate a substantial number of United States jobs or a substantial
amount of production outside the United States;
(iii) Conducting feasibility studies, research services, studies,
travel to or from the United States, or providing insurance or
technical and management assistance, with the intention of inducing
United States firms to relocate a substantial number of United States
jobs or cause a substantial displacement of production outside the
United States;
(iv) Advertising in the United States to encourage United States
firms to relocate a substantial number of United States jobs or cause a
substantial displacement of production outside the United States;
(v) Training workers for firms that intend to relocate a
substantial number of United States jobs or cause a substantial
displacement of production outside the United States;
(vi) Supporting a United States office of an organization that
offers incentives for United States firms to relocate a substantial
number of United States jobs or cause a substantial displacement of
production outside the United States; or
(vii) Providing general budget support for an organization that
engages in any activity prohibited above.
(c) Military Assistance and Training. The Government shall ensure
that MCC Funding shall not be used to undertake, fund or otherwise
support the purchase or use of goods or services for military purposes,
including military training, or to provide any assistance to the
military, police, militia, national guard or other quasi-military
organization or unit.
(d) Prohibition of Assistance Relating to Environmental, Health or
Safety Hazards. The Government shall ensure that MCC Funding shall not
be used to undertake, fund or otherwise support any activity that is
likely to cause a significant environmental, health, or safety hazard.
Unless MCC and the Government agree otherwise in writing, the
Government shall ensure that activities undertaken, funded, or
otherwise supported in whole or in part (directly or indirectly) by MCC
Funding comply with environmental guidelines delivered by MCC to the
Government or posted by MCC on its Web site or otherwise publicly made
available, as
[[Page 44428]]
such guidelines may be amended from time to time (the ``Environmental
Guidelines''), including any definition of ``likely to cause a
significant environmental, health, or safety hazard'' as may be set
forth in such Environmental Guidelines.
(e) Taxation.
(i) Taxes, Budgetary Earmarking. As required by applicable United
States law and in furtherance of the applicable requirement in the
General Agreement for Economic, Technical and Related Assistance
between the Government of the United States of America and the
Government of Nicaragua, dated May 14, 1962, as amended from time to
time (the ``Bilateral Agreement'') that assistance shall be exempt from
taxes, the Government shall ensure that the Program, any Program
Assets, MCC Funding and Accrued Interest shall be free from any and all
taxes, budgetary earmarking, withholding, charges, allocations, and
other obligations and contributions imposed under the laws currently or
hereafter in effect in Nicaragua during the Compact Term. This
exemption shall (A) be implemented in an administratively efficient
manner consistent with the principles that MCC Funding will be used
only to fund the Program and to achieve the Objectives and to avoid,
where possible, double taxation of Providers, irrespective of their
nationality and place of residence and (B) apply to any use of any
Program Asset, MCC Funding and Accrued Interest, including any Exempt
Uses, and to any work performed under or activities undertaken in
furtherance of this Compact by any person or entity (including
contractors and grantees) funded by MCC Funding, and shall apply to all
taxes, tariffs, duties, and other levies (each, a ``Tax'' and
collectively, ``Taxes''), including, except as otherwise provided
herein:
(1) To the extent attributable to MCC Funding, income taxes and
other taxes on profit or businesses imposed on organizations or
entities, other than nationals of Nicaragua, receiving MCC Funding,
including taxes on the acquisition, ownership, rental, disposition or
other use of real or personal property, taxes on investment or deposit
requirements and currency controls in Nicaragua, or any other tax,
duty, charge or fee of whatever nature, except fees for specific
services rendered; for purposes of this Section 2.3(e)(i)(1), the term
``national'' refers to organizations established under the laws
currently or hereafter in effect in Nicaragua, other than MCA-Nicaragua
or any other entity established solely for purposes of managing or
overseeing the implementation of the Program or any wholly-owned
subsidiaries, divisions, or Affiliates of entities not registered or
established under the laws currently or hereafter in effect in
Nicaragua;
(2) Customs duties, tariffs, import and export taxes, or other
levies on the importation, use and re-exportation of goods, services or
the personal belongings and effects, including personally-owned
automobiles, for Program use or the personal use of individuals who are
neither citizens nor permanent residents of Nicaragua and who are
present in Nicaragua for purposes of carrying out the Program or their
family members, including all charges based on the value of such
imported goods;
(3) Taxes on the income or personal property of all individuals who
are neither citizens nor permanent residents of Nicaragua, including
income and social security taxes of all types and all taxes on the
personal property owned by such individuals, to the extent such income
or property are attributable to MCC Funding, and such individuals shall
be accorded any special status required under Nicaraguan law to obtain
the exemption to the taxes contemplated in this Section 2.3(e)(i)(3);
and
(4) Taxes or duties levied on the purchase of goods or services
funded by MCC Funding, including sales taxes, tourism taxes, value-
added taxes (VAT), or other similar charges.
(ii) This Section 2.3(e) shall apply, but is not limited to (A) any
transaction, service, activity, contract, grant or other implementing
agreement funded in whole or in part by MCC Funding; (B) any supplies,
equipment, materials, property or other goods (referred to herein
collectively as ``goods'') or funds introduced into, acquired in, used
or disposed of in, or imported into or exported from, Nicaragua by MCC,
or by any person or entity (including contractors and grantees) as part
of, or in conjunction with, MCC Funding or the Program; (C) any
contractor, grantee, or other organization carrying out activities
funded in whole or in part by MCC Funding; and (D) any employee of such
organizations (the uses set forth in clauses (A) through (D) are
collectively referred to herein as ``Exempt Uses'').
(iii) If a Tax has been levied and paid contrary to the
requirements of this Section 2.3(e), whether inadvertently, due to the
impracticality of implementation of this provision with respect to
certain types or amounts of taxes, or otherwise, the Government shall
refund promptly to MCC to an account designated by MCC the amount of
such Tax in the currency of Nicaragua, within thirty (30) days (or such
other period as may be agreed in writing by the Parties) after the
Government is notified of such levy and tax payment; provided, however,
the Government shall apply national funds to satisfy its obligations
under this paragraph and no MCC Funding, Accrued Interest, or any
assets, goods, or property (real, tangible, or intangible) purchased or
financed in whole or in part by MCC Funding (``Program Assets'') may be
applied by the Government in satisfaction of its obligations under this
paragraph.
(iv) The Parties shall memorialize in a mutually acceptable
Implementation Letter or Supplemental Agreement or other suitable
document the mechanisms for implementing this Section 2.3(e), including
(A) a formula for determining refunds for Taxes paid, the amount of
which is not susceptible to precise determination, (B) a mechanism for
ensuring the tax-free importation, use, and re-exportation of goods,
services, or the personal belongings of individuals (including all
Providers) described in paragraph (i)(2) of this Section 2.3(e), and
(C) any other appropriate Government action to facilitate the
administration of this Section 2.3(e).
(f) Alteration. The Government shall ensure that no MCC Funding,
Accrued Interest, or Program Assets shall be subject to any
impoundment, rescission, sequestration or any provision of law now or
hereafter in effect in Nicaragua that would have the effect of
requiring or allowing any impoundment, rescission or sequestration of
any MCC Funding, Accrued Interest, or Program Asset.
(g) Liens or Encumbrances. The Government shall ensure that no MCC
Funding, Accrued Interest, or Program Assets shall be subject to any
lien, attachment, enforcement of judgment, pledge, or encumbrance of
any kind (each a ``Lien'') by any person or entity, including by any
government entity, except with the prior approval of MCC in accordance
with Section 3(c) of Annex I. In the event of the imposition of any
Lien not so approved, the Government shall promptly seek the release of
such Lien and shall pay any amounts owed to obtain such release;
provided, however, the Government shall apply national funds to satisfy
its obligations under this Section 2.3(g) and no MCC Funding, Accrued
Interest, or Program Assets may be applied by the Government in
satisfaction of its obligations under this Section 2.3(g).
(h) Other Limitations. The Government shall ensure that the use or
treatment of MCC Funding, Accrued Interest, and Program Assets shall be
[[Page 44429]]
subject to and in conformity with such other limitations (i) as
required by the applicable law of the United States of America now or
hereafter in effect during the Compact Term, (ii) as advisable under or
required by applicable United States Government policies now or
hereafter in effect during the Compact Term, or (iii) to which the
Parties may otherwise agree in writing.
(i) Utilization of Goods, Services and Works. The Government shall
ensure that any Program Assets, services, facilities or works funded in
whole or in part (directly or indirectly) by MCC Funding, unless
otherwise agreed by the Parties in writing, shall be used solely in
furtherance of this Compact.
(j) Notification of Applicable Laws and Policies. MCC shall notify
the Government of any applicable United States law or policy affecting
the use or treatment of MCC Funding, whether or not specifically
identified in this Section 2.3, and shall provide to the Government a
copy of the text of any such applicable law and a written explanation
of any such applicable policy.
Section 2.4 Incorporation; Notice; Clarification
(a) The Government shall include, or ensure the inclusion of, all
of the requirements set forth in Section 2.3 in all Supplemental
Agreements to which MCC is not a party and shall use its best efforts
to ensure that no such Supplemental Agreement is implemented in
violation of the prohibitions set forth in Section 2.3.
(b) The Government shall ensure notification of all of the
requirements set forth in Section 2.3 to any Provider and all relevant
officers, directors, employees, agents, representatives, Affiliates,
contractors, sub-contractors, grantees, and sub-grantees of the
Government or any Provider.
(c) In the event the Government or any Provider requires
clarification from MCC as to whether an activity contemplated to be
undertaken in furtherance of this Compact violates or may violate any
provision of Section 2.3, the Government shall notify, or ensure that
such Provider notifies, MCC in writing and provide in such notification
a detailed description of the activity in question. In such event, the
Government shall not proceed, and shall use its best efforts to ensure
that no relevant Provider proceeds, with such activity, and the
Government shall ensure that no Re-Disbursements shall be made for such
activity, until MCC advises the Government or such Provider in writing
that the activity is permissible.
Section 2.5 Refunds; Violation
(a) Notwithstanding the availability to MCC, or exercise by MCC of,
any other remedies, including under international law, this Compact, or
any Supplemental Agreement:
(i) If any amount of MCC Funding or Accrued Interest, or any
Program Asset, is used for any purpose prohibited under this Article II
or otherwise in violation of any of the terms and conditions of this
Compact, any guidance in any Implementation Letter, or any Supplemental
Agreement between the Parties, MCC may, upon written notice, require
the Government to repay promptly to MCC to an account designated by MCC
or to others as MCC may direct the amount of such misused MCC Funding
or Accrued Interest, or the cash equivalent of the value of any misused
Program Asset, in United States Dollars, plus any interest that accrued
or would have accrued thereon, within fifteen (15) days after the
Government is notified (or such other period as may be agreed in
writing by the Parties), whether by MCC or otherwise, of such
prohibited use; provided, however, the Government shall apply national
funds to satisfy its obligations under this Section 2.5(a)(i) and no
MCC Funding, Accrued Interest, or Program Assets may be applied by the
Government in satisfaction of its obligations under this Section
2.5(a)(i); and
(ii) If all or any portion of this Compact is terminated or
suspended and upon the expiration of this Compact, the Government
shall, subject to the requirements of Sections 5.4(e) and 5.4(f),
refund, or ensure the refund, to MCC the amount of any MCC Funding,
plus any Accrued Interest, promptly, but in no event later than thirty
(30) days after the Government receives MCC's request for such refund
(or such other period as may be agreed in writing by the Parties);
provided, that if this Compact is terminated or suspended in part, MCC
may request a refund for only the amount of MCC Funding, plus any
Accrued Interest, then allocated to the terminated or suspended
portion; provided, further, that any refund of MCC Funding or Accrued
Interest shall be to such account(s) as designated by MCC.
(b) Notwithstanding any other provision in this Compact or any
other agreement to the contrary, MCC's right under this Section 2.5 for
a refund shall continue during the Compact Term and for a period of (i)
five (5) years thereafter or (ii) one (1) year after MCC receives
actual knowledge of such violation, whichever is later.
(c) If MCC determines that any activity or failure to act violates,
or may violate, any Section in this Article II, MCC may refuse any
further MCC Disbursements for or conditioned upon such activity, and
may take any action to prevent any Re-Disbursement related to such
activity.
Article III. Implementation
Section 3.1 Implementation Framework
This Compact shall be implemented by the Parties in accordance with
this Article III and as further specified in the Annexes and in
relevant Supplemental Agreements.
Section 3.2 Government Responsibilities
(a) The Government shall have principal responsibility for
oversight and management of the implementation of the Program (i) in
accordance with the terms and conditions specified in this Compact and
relevant Supplemental Agreements, (ii) in accordance with all
applicable laws then in effect in Nicaragua, and (iii) in a timely and
cost-effective manner and in conformity with sound technical, financial
and management practices (collectively, the ``Government
Responsibilities''). Unless otherwise expressly provided, any reference
to the Government Responsibilities or any other responsibilities or
obligations of the Government herein shall be deemed to apply to any
Government Affiliate and any of their respective directors, officers,
employees, contractors, sub-contractors, grantees, sub-grantees, agents
or representatives.
(b) The Government shall ensure that no person or entity shall
participate in the selection, award, administration, or oversight of a
contract, grant or other benefit or transaction funded in whole or in
part (directly or indirectly) by MCC Funding, in which (i) the entity,
the person, members of the person's immediate family (defined as
relationships within the fourth degree of consanguinity or affinity) or
household or his or her business partners, or organizations controlled
by or substantially involving such person or entity, has or have a
direct or indirect financial or other interest or (ii) the person or
entity is negotiating or has any arrangement concerning prospective
employment, unless such person or entity has first disclosed in writing
to the Government the conflict of interest and, following such
disclosure, the Parties agree in writing to proceed
[[Page 44430]]
notwithstanding such conflict. The Government shall ensure that no
person or entity involved in the selection, award, administration,
oversight or implementation of any contract, grant or other benefit or
transaction funded in whole or in part (directly or indirectly) by MCC
Funding shall solicit or accept from, or offer to a third party, or
seek or be promised directly or indirectly for itself or for another
person or entity, any gift, gratuity, favor or benefit, other than
items of de minimis value and otherwise consistent with such guidance
as MCC may provide from time to time.
(c) The Government shall not designate any person or entity,
including any Government Affiliate, to implement, in whole or in part,
this Compact or any Supplemental Agreement between the Parties
(including any Government Responsibilities or any other
responsibilities or obligations of the Government under this Compact or
any Supplemental Agreement between the Parties), or to exercise any
rights of the Government under this Compact or any Supplemental
Agreement between the Parties, except as expressly provided herein or
with the prior written consent of MCC; provided, however, the
Government shall designate MCA-Nicaragua and may, with the prior
written consent of MCC, designate such other mutually acceptable
persons or entities, to implement some or all of the Government
Responsibilities or any other responsibilities or obligations of the
Government or to exercise any rights of the Government under this
Compact or any Supplemental Agreement between the Parties (referred to
herein collectively as ``Designated Rights and Responsibilities''), in
accordance with the terms and conditions set forth in this Compact or
such Supplemental Agreement (each, a ``Permitted Designee'').
Notwithstanding any provision herein or any other agreement to the
contrary, no such designation shall relieve the Government of such
Designated Rights and Responsibilities, for which the Government shall
retain ultimate responsibility. In the event that the Government
designates any person or entity, including any Government Affiliate, to
implement any portion of the Government Responsibilities or other
responsibilities or obligations of the Government or to exercise any
rights of the Government under this Compact or any Supplemental
Agreement between the Parties in accordance with this Section 3.2(c),
then the Government shall ensure that such person or entity (i)
performs such Designated Rights and Responsibilities in the same manner
and to the full extent to which the Government is obligated to perform
such Designated Rights and Responsibilities, (ii) does not assign,
delegate, or contract (or otherwise transfer) any of such Designated
Rights and Responsibilities to any other person or entity and (iii)
certifies to MCC in writing that it will so perform such Designated
Rights and Responsibilities in accordance with this Compact and any
other relevant Supplemental Agreement and will not assign, delegate, or
contract (or otherwise transfer) any of such Designated Rights and
Responsibilities to any person or entity without the prior written
consent of MCC.
(d) The Government shall, upon a request from MCC, execute, or
ensure the execution of, an assignment to MCC of any cause of action
which may accrue to the benefit of the Government, a Government
Affiliate, or any Permitted Designee, including MCA-Nicaragua, in
connection with or arising out of any activities funded in whole or in
part (directly or indirectly) by MCC Funding.
(e) The Government shall ensure that (i) no decision of MCA-
Nicaragua is modified, supplemented, unduly influenced or rescinded by
any governmental authority, and (ii) the authority of MCA-Nicaragua
shall not be expanded, restricted or otherwise modified, except in
accordance with this Compact, applicable law, the Governance Agreement,
the Governing Documents or any other Supplemental Agreement between the
Parties.
(f) The Government shall ensure that all persons and individuals
that enter into agreements to provide goods, services or works under
the Program or in furtherance of this Compact shall do so in accordance
with the Procurement Guidelines and shall obtain all necessary
immigration, business and other permits, licenses, consents, and
approvals to enable them and their personnel to fully perform under
such agreements.
Section 3.3 Government Deliveries
The Government shall proceed, and cause others to proceed, in a
timely manner to deliver to MCC all reports, documents or other
deliveries required to be delivered by the Government under this
Compact or any Supplemental Agreement between the Parties, in form and
substance as set forth in this Compact or in any such Supplemental
Agreement.
Section 3.4 Government Assurances
The Government hereby provides the following assurances to MCC that
as of the date this Compact is signed:
(a) The information contained in the Proposal and any agreement,
report, statement, communication, document or otherwise delivered or
otherwise communicated to MCC by or on behalf of the Government on or
after the date of the submission of the Proposal (i) are true, accurate
and complete in all material respects and (ii) do not omit any fact
known to the Government that if disclosed would (A) alter in any
material respect the information delivered, (B) likely have a material
adverse effect on the Government's ability to effectively implement, or
ensure the effective implementation of, the Program or any Project or
to otherwise carry out its responsibilities or obligations under or in
furtherance of this Compact, or (C) have likely adversely affected
MCC's determination to enter into this Compact or any Supplemental
Agreement between the Parties.
(b) The MCC Funding made available hereunder is not part of and is
in addition to the normal and expected resources that the Government
usually receives or budgets for the activities contemplated herein from
external or domestic sources.
(c) This Compact does not conflict and will not conflict with any
international agreement or obligation to which the Government is a
party or by which it is bound.
(d) No payments have been (i) received by any official of the
Government or any other government body in connection with the
procurement of goods or services to be undertaken or funded in whole or
in part (directly or indirectly) by MCC Funding, except fees, taxes, or
similar payments legally established in Nicaragua (subject to Section
2.3(e)) and consistent with applicable Nicaraguan law) or (ii) made to
any third party, in connection with or in furtherance of this Compact,
in violation of the United States Foreign Corrupt Practices Act of
1977, as amended (15 U.S.C. 78a et seq.).
Section 3.5 Implementation Letters; Supplemental Agreements
(a) MCC may, from time to time, issue one or more letters to
furnish additional information or guidance to assist the Government in
the implementation of this Compact (each, an ``Implementation
Letter''). The Government shall apply such guidance in implementing
this Compact.
(b) The details of any funding, implementing and other arrangements
in furtherance of this Compact may be memorialized in one or more
agreements between (i) the Government
[[Page 44431]]
(or any Government Affiliate or Permitted Designee) and MCC, (ii) MCC
and/or the Government (or any Government Affiliate or Permitted
Designee) and any third party, including any of the Providers or
Permitted Designees, or (iii) any third parties where neither MCC nor
the Government is a party, before, on or after the Entry into Force
(each, a ``Supplemental Agreement''). The Government shall deliver, or
cause to be delivered, to MCC within five (5) days of its execution a
copy of any Supplemental Agreement to which MCC is not a party.
Section 3.6 Procurement; Awards of Assistance
(a) MCC Funding shall not be subject to applicable Nicaraguan
procurement guidelines, including those established in Law 323, Ley de
Contrataciones del Estado. The Government shall ensure that the
procurement of all goods, services and works by the Government, MCA-
Nicaragua or any other Provider in furtherance of this Compact shall be
consistent with the procurement guidelines (the ``Procurement
Guidelines'') reflected in a Supplemental Agreement between the Parties
(the ``Procurement Agreement''), which Procurement Guidelines shall
include the following requirements:
(i) Open, fair and competitive procedures are used in a transparent
manner to solicit, award and administer contracts, grants, and other
agreements and to procure goods, services and works;
(ii) Solicitations for goods, services, and works shall be based
upon a clear and accurate description of the goods, services or works
to be acquired;
(iii) Contracts shall be awarded only to qualified and capable
contractors that have the capability and willingness to perform the
contracts in accordance with the terms and conditions of the applicable
contracts and on a cost effective and timely basis; and
(iv) No more than a commercially reasonable price, as determined,
for example, by a comparison of price quotations and market prices,
shall be paid to procure goods, services, and works.
(b) The Government shall maintain, and shall use its best efforts
to ensure that all Providers maintain, records regarding the receipt
and use of goods and services acquired in furtherance of this Compact,
the nature and extent of solicitations of prospective suppliers of
goods and services acquired in furtherance of this Compact, and the
basis of award of contracts, grants and other agreements in furtherance
of this Compact, for a period of ten years, or such other period as the
Parties may otherwise agree in writing.
(c) The Government shall use its best efforts to ensure that
information, including solicitations, regarding procurement, grant and
other agreement-related actions funded (or to be funded) in whole or in
part (directly or indirectly) by MCC Funding shall be made publicly
available in the manner outlined in the Procurement Guidelines or in
any other manner agreed upon by the Parties in writing.
(d) No goods, services or works may be funded in whole or in part
(directly or indirectly) by MCC Funding which are procured pursuant to
orders or contracts firmly placed or entered into prior to the Entry
into Force, except as the Parties may otherwise agree in writing.
(e) The Government shall ensure that MCA-Nicaragua and any other
Permitted Designee follows, and uses its best efforts to ensure that
all Providers follow, the Procurement Guidelines in procuring
(including soliciting) goods, services and works and in awarding and
administering contracts, grants and other agreements in furtherance of
this Compact, and shall furnish to MCC evidence of the adoption of the
Procurement Guidelines by MCA-Nicaragua no later than the time
specified in the Disbursement Agreement.
(f) The Government shall include, or ensure the inclusion of, the
requirements of this Section 3.6 into all Supplemental Agreements
between the Government, any Government Affiliate, MCA-Nicaragua or
other Permitted Designee or any of their respective directors,
officers, employees, Affiliates, contractors, sub-contractors,
grantees, sub-grantees, representatives or agents, on the one hand, and
a Provider, on the other hand.
Section 3.7 Policy Performance; Policy Reforms
In addition to the specific policy and legal reform commitments
identified in Annex I and the Schedules thereto, the Government shall
seek to maintain, and use its best efforts to improve, its level of
performance under the policy criteria identified in Section 607 of the
Millennium Challenge Act of 2003, as amended (the ``Act''), and the MCA
selection criteria and methodology published by MCC pursuant to Section
607 of the Act from time to time (``MCA Eligibility Criteria'').
Section 3.8 Records and Information; Access; Audits; Reviews
(a) Reports and Information. The Government shall furnish to MCC,
and shall use its best efforts to ensure that all Providers and any
other third party receiving MCC Funding, as appropriate, furnish to the
Government (and the Government shall provide to MCC), any records and
other information required to be maintained under this Section 3.8 and
such other information, documents and reports as may be necessary or
appropriate for the Government to effectively carry out its obligations
under this Compact, including under Section 3.12.
(b) Government Books and Records. The Government shall maintain,
and shall use its best efforts to ensure that all Providers maintain,
accounting books, records, documents and other evidence relating to
this Compact adequate to show, to the satisfaction of MCC, without
limitation, the use of all MCC Funding, including all costs incurred by
the Government and the Providers in furtherance of this Compact, the
receipt and use of goods and services acquired in furtherance of this
Compact by the Government and the Providers, agreed-upon cost sharing
requirements, the nature and extent of solicitations of prospective
suppliers of goods and services acquired by the Government and the
Providers in furtherance of this Compact, the basis of award of
Government and other contracts and orders in furtherance of this
Compact, the overall progress of the implementation of the Program and
any other documents required by this Compact or any Supplemental
Agreement between the Parties or reasonably requested by MCC upon
reasonable notice (``Compact Records''). The Government shall maintain,
and shall use its best efforts to ensure that all Covered Providers
maintain, Compact Records in accordance with generally accepted
accounting principles prevailing in the United States, or at the
Government's option and with the prior written approval by MCC, other
accounting principles, such as those (i) prescribed by the
International Accounting Standards Committee (an affiliate of the
International Federation of Accountants) or (ii) then prevailing in
Nicaragua. Compact Records shall be maintained for at least five (5)
years after the end of the Compact Term or for such longer period, if
any, required to resolve any litigation, claims or audit findings or
any statutory requirements.
(c) Access. The Government shall, at all reasonable times, permit,
or cause to be permitted, authorized representatives of MCC, the
Inspector General, the United States Government Accountability Office,
any auditor responsible for an audit contemplated
[[Page 44432]]
herein or otherwise conducted in furtherance of this Compact, and any
agents or representatives engaged by MCC or a Permitted Designee to
conduct any assessment, review or evaluation of the Program, the
opportunity to audit, review, evaluate or inspect activities funded, in
whole or in part (directly or indirectly) by MCC Funding or undertaken
in connection with the Program, the utilization of goods and services
purchased or funded in whole or in part (directly or indirectly) by MCC
Funding, and Compact Records, including of the Government or any
Provider, relating to activities funded or undertaken in furtherance
of, or otherwise relating to, this Compact, and shall use its best
efforts to ensure access by MCC, the Inspector General, the United
States Government Accountability Office or relevant auditor, reviewer
or evaluator or their respective representatives or agents to all
relevant directors, officers, employees, Affiliates, contractors,
representatives and agents of the Government or any Provider.
(d) Audits.
(i) Government Audits. The Government shall, on at least an annual
basis and as the Parties may otherwise agree in writing, conduct, or
cause to be conducted, financial audits of all MCC Disbursements and
Re-Disbursements during the year since the Entry into Force or since
the prior anniversary of the Entry into Force in accordance with the
following terms, except as the Parties may otherwise agree in writing.
As requested by MCC in writing, the Government shall use, or cause to
be used, an auditor named on the approved list of auditors in
accordance with the Guidelines for Financial Audits Contracted by
Foreign Recipients (``Audit Guidelines'') issued by the Inspector
General of the United States Agency for International Development (the
``Inspector General''), and as approved by MCC, to conduct such annual
audits. Such audits shall be performed in accordance with such
Guidelines and be subject to quality assurance oversight by the
Inspector General in accordance with such Guidelines. An audit shall be
completed and delivered to MCC no later than 90 days after the first
period to be audited and no later than 90 days after each anniversary
of the Entry into Force thereafter, or such other period as the Parties
may otherwise agree in writing.
(ii) Audits of U.S. Entities. The Government shall ensure that
Supplemental Agreements between the Government or any Provider, on the
one hand, and a United States non-profit organization, on the other
hand, state that the United States organization is subject to the
applicable audit requirements contained in OMB Circular A-133,
notwithstanding any other provision of this Compact to the contrary.
The Government shall ensure that Supplemental Agreements between the
Government or any Provider, on the one hand, and a United States for-
profit Covered Provider, on the other hand, state that the United
States organization is subject to audit by the cognizant United States
Government agency, unless the Government and MCC agree otherwise in
writing.
(iii) Audit Plan. The Government shall submit, or cause to be
submitted, to MCC, no later than 20 days prior to the date of its
adoption, a plan, in accordance with the Audit Guidelines, for the
audit of the expenditures of any Covered Providers, which audit plan,
in form and substance as approved by MCC, the Government shall adopt,
or cause to be adopted, no later than sixty (60) days prior to the end
of the first period to be audited (such plan, the ``Audit Plan'').
(iv) Covered Provider. A ``Covered Provider'' is (A) a non-United
States Provider that receives (other than pursuant to a direct contract
or agreement with MCC) USD $300,000 or more of MCC Funding in any MCA-
Nicaragua fiscal year or any other non-United States person or entity
that receives (directly or indirectly) USD $300,000 or more of MCC
Funding from any Provider in such fiscal year or (B) any United States
Provider that receives (other than pursuant to a direct contract or
agreement with MCC) USD $500,000 or more of MCC Funding in any MCA-
Nicaragua fiscal year or any other United States person or entity that
receives (directly or indirectly) USD $500,000 or more of MCC Funding
from any Provider in such fiscal year.
(v) Corrective Actions. The Government shall use its best efforts
to ensure that Covered Providers take, where necessary, appropriate and
timely corrective actions in response to audits, consider whether a
Covered Provider's audit necessitates adjustment of its own records,
and require each such Covered Provider to permit independent auditors
to have access to its records and financial statements as necessary.
(vi) Audit Reports. The Government shall furnish, or use its best
efforts to cause to be furnished, to MCC an audit report in a form
satisfactory to MCC for each audit required by this Section 3.8, other
than audits arranged for by MCC, no later than 90 days after the end of
the period under audit, or such other time as may be agreed by the
Parties from time to time.
(vii) Other Providers. For Providers who receive MCC Funding under
this Compact pursuant to direct contracts or agreements with MCC, MCC
shall include appropriate audit requirements in such contracts or
agreements and shall, on behalf of the Government, unless otherwise
agreed by the Parties, conduct the follow-up activities with regard to
the audit reports furnished pursuant to such requirements.
(viii) Audit by MCC. MCC retains the right to perform, or cause to
be performed, the audits required under this Section 3.8 by utilizing
MCC Funding or other resources available to MCC for this purpose, and
to audit, conduct a financial review, or otherwise ensure
accountability of any Provider or any other third party receiving MCC
Funding, regardless of the requirements of this Section 3.8.
(e) Application to Providers. The Government shall include, or
ensure the inclusion of, at a minimum, the requirements of:
(i) Paragraphs (a), (b), (c), (d)(ii), (d)(iii), (d)(v), (d)(vi),
and (d)(viii) of this Section 3.8 into all Supplemental Agreements
between the Government, any Government Affiliate, MCA-Nicaragua, any
other Permitted Designee or any of their respective directors,
officers, employees, Affiliates, contractors, sub-contractors,
grantees, sub-grantees, representatives or agents (each, a ``Government
Party''), on the one hand, and a Covered Provider that is not a U.S.
non-profit organization, on the other hand;
(ii) Paragraphs (a), (b), (c), (d)(ii), and (d)(viii) of this
Section 3.8 into all Supplemental Agreements between a Government Party
and a Provider that does not meet the definition of a Covered Provider;
and
(iii) Paragraphs (a), (b), (c), (d)(ii), (d)(v) and (d)(viii) of
this Section 3.8 into all Supplemental Agreements between a Government
Party and a Covered Provider that is a U.S. non-profit organization.
(f) Reviews or Evaluations. The Government shall conduct, or cause
to be conducted, such performance reviews, data quality reviews,
environmental audits, or program evaluations during the Compact Term or
otherwise and in accordance with the M&E Plan or as otherwise agreed in
writing by the Parties.
(g) Cost of Audits, Reviews or Evaluations. MCC Funding may be used
to fund the costs of any audits, reviews or evaluations required under
this Compact, including as reflected on Exhibit A to Annex II, and in
no event shall the Government be responsible for the costs of any such
audits, reviews or
[[Page 44433]]
evaluations from financial sources other than MCC Funding.
Section 3.9 Insurance; Performance Guarantees; Indemnification Claims
(a) Insurance; Performance Guarantees. The Government shall, to
MCC's satisfaction, insure or cause to be insured all Program Assets,
and shall obtain, or cause to be obtained, such other appropriate
insurance and other protections to cover against risks or liabilities
associated with the operations of the Program, including by requiring
Providers to obtain adequate insurance and post adequate performance
bonds or other guarantees. MCA-Nicaragua shall be named as the insured
party on any such insurance and the beneficiary of any other such
guarantee, including performance bonds. MCC shall be named as an
additional insured on any such insurance or other guarantee, to the
extent permissible under applicable laws. The Government shall ensure
that any proceeds from claims paid under such insurance or any other
form of guarantee shall be used to replace or repair any loss of
Program Assets or to pursue the procurement of the covered goods,
services, works, or otherwise; provided, however, at MCC's election,
such proceeds shall be deposited in a Permitted Account as designated
by MCA-Nicaragua and acceptable to MCC or as otherwise directed by MCC.
(b) Indemnification Claims. To the extent MCA-Nicaragua is held
liable under any indemnification or other similar provision of any
agreement between MCA-Nicaragua, on the one hand, and any other
Provider or other third party, on the other hand, the Government shall
pay in full on behalf of MCA-Nicaragua any such obligation; provided,
however, the Government shall apply national funds to satisfy its
obligations under this Section 3.9 and no MCC Funding, Accrued Interest
or Program Assets may be applied by the Government in satisfaction of
its obligations under this Section 3.9. If the Government believes in
good faith that such liability is not caused primarily by the
negligence or misconduct of MCA-Nicaragua or another Government Party,
the Government shall so notify MCC in writing within fifteen (15)
business days after such belief is formed, which notice shall contain
sufficient information for MCC to independently assess the accuracy of
the Government's position. If, within fifteen (15) business days after
receiving such notice, MCC determines, in its sole discretion, that
such liability is not caused primarily by the negligence or misconduct
of MCA-Nicaragua or another Government Party, MCC will authorize MCA-
Nicaragua, in writing, to use MCC Funding to fund such liability or
refund to the Government the payment of the same.
Section 3.10 Domestic Requirements
The Government shall proceed in a timely manner to seek any
required approval of this Compact or similar domestic requirement,
which process the Government shall initiate promptly after the
conclusion of this Compact. The absence of any necessary approval of
this Compact or noncompliance with any similar domestic requirement
shall not prevent MCC from, or otherwise adversely affect MCC in,
exercising of any of its rights under this Compact or any Supplemental
Agreement. Notwithstanding anything to the contrary in this Compact,
this Section 3.10 shall provisionally apply prior to the Entry into
Force.
Section 3.11 No Conflict
The Government shall undertake not to enter into any agreement or
other arrangement or take any action in conflict with this Compact or
any Supplemental Agreement during the Compact Term.
Section 3.12 Reports
The Government shall provide, or cause to be provided, to MCC at
least on each anniversary of the Entry into Force (or such other
anniversary agreed by the Parties in writing), and otherwise within
thirty (30) days of any written request by MCC, or as otherwise agreed
in writing by the Parties, the following information:
(a) The name of each entity to which MCC Funding has been provided;
(b) The amount of MCC Funding provided to such entity;
(c) A description of the Program and each Project funded in
furtherance of this Compact, including:
(i) A statement of whether the Program or any Project was solicited
or unsolicited; and
(ii) A detailed description of the objectives and measures for
results of the Program or Project;
(d) The progress made by Nicaragua toward achieving the Compact
Goal and Objectives;
(e) A description of the extent to which MCC Funding has been
effective in helping Nicaragua to achieve the Compact Goal and
Objectives;
(f) A description of the coordination of MCC Funding with other
United States foreign assistance and other related trade policies;
(g) A description of the coordination of MCC Funding with
assistance provided by other donor countries;
(h) Any report, document or filing that the Government, any
Government Affiliate or any Permitted Designee submits to any
government body in connection with this Compact;
(i) Any report or document required to be delivered to MCC under
the Environmental Guidelines, any audit plan, or any component of the
Implementation Plan; and
(j) Any other report, document or information requested by MCC or
required by this Compact or any Supplemental Agreement between the
Parties.
Article IV. Conditions Precedent; Deliveries
Section 4.1 Conditions Prior to the Entry Into Force and Deliveries
As conditions precedent to the Entry into Force, the Parties shall
satisfy the conditions set forth in this Section 4.1.
(a) The Government (or a mutually acceptable Government Affiliate)
and MCC shall execute a Disbursement Agreement, which agreement shall
be in full force and effect as of the Entry into Force.
(b) The Government (or a mutually acceptable Government Affiliate)
and MCC shall execute one or more term sheets that set forth the
material and principal terms and conditions of each of the Supplemental
Agreements identified in Exhibit B attached hereto (the ``Supplemental
Agreement Term Sheets'').
(c) The Government (or a mutually acceptable Government Affiliate)
and MCC shall execute a Procurement Agreement, which agreement shall be
in full force and effect as of the Entry into Force.
(d) The Government shall deliver a certificate signed and dated by
the Principal Representative of the Government that:
(i) Certifies the Government has completed all of its domestic
requirements for this Compact to be fully enforceable under Nicaraguan
law;
(ii) Attaches thereto, and certifies that such attachments are
true, correct and complete copies of all decrees, legislation,
regulations or other governmental documents relating to its domestic
requirements for this Compact to enter into force, which MCC may post
on its Web site or otherwise make publicly available; and
(iii) Attaches a written statement as to the incumbency and
specimen signature of the Principal Representative and each Additional
Representative of the Government executing any document under this
Compact, such written statement to be signed by a duly authorized
official of the Government other than the Principal Representative or
any such Additional Representative.
[[Page 44434]]
(e) MCC shall deliver a certificate signed and dated by the
Principal Representative of MCC that:
(i) Certifies that MCC has completed its domestic requirements for
this Compact to enter into force; and
(ii) Attaches a written statement as to the incumbency and specimen
signature of the Principal Representative and each Additional
Representative of MCC executing any document under this Compact such
written statement to be signed by a duly authorized official of the
Government other than the Principal Representative or any such
Additional Representative.
Section 4.2 Conditions Precedent to MCC Disbursements or Re-
Disbursements
Prior to, and as condition precedent to, any MCC Disbursement or
Re-Disbursement, the Government shall satisfy, or ensure the
satisfaction of, all applicable conditions precedent in the
Disbursement Agreement.
Article V. Final Clauses
Section 5.1 Communications
Unless otherwise expressly stated in this Compact or otherwise
agreed in writing by the Parties, any notice, certificate, request,
report, document or other communication required, permitted, or
submitted by either Party to the other under this Compact shall be: (a)
In writing; (b) in English; and (c) deemed duly given: (i) Upon
personal delivery to the Party to be notified; (ii) when sent by
confirmed facsimile or electronic mail, if sent during normal business
hours of the recipient Party, if not, then on the next business day; or
(iii) two (2) business days after deposit with an internationally
recognized overnight courier, specifying next day delivery, with
written verification of receipt to the Party to be notified at the
address indicated below, or at such other address as such Party may
designate:
To MCC:
Millennium Challenge Corporation, Attention: Vice President for
Country Programs (with a copy to the Vice President and General
Counsel), 875 Fifteenth Street, NW., Washington, DC 20005, United
States of America, Facsimile: +1 (202) 521-3700, Telephone: +1 (202)
521-3600, e-mail: VPCountryRelations@mcc.gov (Vice President for
Country Programs); VPGeneralCounsel@mcc.gov (Vice President and General
Counsel)
To the Government:
Secretary of Coordination and Strategy of the Presidency, Casa
Presidencial, Managua, Nicaragua, C.A.
Notwithstanding the foregoing, any audit report delivered pursuant
to Section 3.8, if delivered by facsimile or electronic mail, shall be
followed by an original in overnight express mail. This Section 5.1
shall not apply to the exchange of letters contemplated in Section 1.3
or any amendments under Section 5.3.
Section 5.2 Representatives
Unless otherwise agreed in writing by the Parties, for all purposes
relevant to this Compact, the Government shall be represented by the
individual holding the position of, or acting as, the Secretary of the
Presidency of Nicaragua, and MCC shall be represented by the individual
holding the position of, or acting as, Vice President for Country
Relations (each, a ``Principal Representative''), each of whom, by
written notice to the other Party, may designate one or more additional
representatives (each, an ``Additional Representative'') for all
purposes other than signing amendments to this Compact. The names of
the Principal Representative and any Additional Representative of each
of the Parties shall be provided, with specimen signatures, to the
other Party, and the Parties may accept as duly authorized any
instrument signed by such representatives relating to the
implementation of this Compact, until receipt of written notice of
revocation of their authority. A Party may change its Principal
Representative to a new representative of equivalent or higher rank
upon written notice to the other Party, which notice shall include the
specimen signature of the new Principal Representative.
Section 5.3 Amendments
The Parties may amend this Compact only by a written agreement
signed by the Principal Representatives of the Parties.
Section 5.4 Termination; Suspension
(a) Subject to Section 2.5 and paragraphs (e) through (h) of this
Section 5.4, either Party may terminate this Compact in its entirety by
giving the other Party thirty (30) days' written notice.
(b) Notwithstanding any other provision of this Compact, including
Section 2.1, or any Supplemental Agreement between the Parties, MCC may
suspend or terminate this Compact or MCC Funding, in whole or in part,
and any obligation or sub-obligation related thereto, upon giving the
Government written notice, if MCC determines, in its sole discretion,
that:
(i) Any use or proposed use of MCC Funding or Program Assets or
continued implementation of the Compact would be in violation of
applicable law or U.S. Government policy, whether now or hereafter in
effect;
(ii) The Government, any Provider, or any other third party
receiving MCC Funding or using Program Assets is engaged in activities
that are contrary to the national security interests of the United
States;
(iii) The Government or any Permitted Designee has committed an act
or omission or an event has occurred that would render Nicaragua
ineligible to receive United States economic assistance under Part I of
the Foreign Assistance Act of 1961, as amended (22 U.S.C. 2151 et
seq.), by reason of the application of any provision of the Foreign
Assistance Act of 1961 or any other provision of law;
(iv) The Government or any Permitted Designee has engaged in a
pattern of actions or omissions inconsistent with the MCA Eligibility
Criteria, or there has occurred a significant decline in the
performance of Nicaragua on one or more of the eligibility indicators
contained therein;
(v) The Government or any Provider has materially breached one or
more of its assurances or any other covenants, obligations or
responsibilities under this Compact or any Supplemental Agreement;
(vi) An audit, review, report or any other document or other
evidence reveals that actual expenditures for the Program or any
Project or Project Activity were greater than the projected expenditure
for such activities identified in the applicable Detailed Financial
Plan or are projected to be greater than projected expenditures for
such activities;
(vii) If the Government (A) materially reallocates or reduces the
allocation in its national budget or any other Government budget of the
normal and expected resources that the Government would have otherwise
received or budgeted, from external or domestic sources, for the
activities contemplated herein, (B) fails to contribute or provide the
amount, level, type and quality of resources required to effectively
carry out the Government Responsibilities or any other responsibilities
or obligations of the Government under or in furtherance of this
Compact, or (C) fails to pay any of its obligations as required under
this Compact or any Supplemental Agreement, including such obligations
which shall be paid solely out of national funds;
(viii) If the Government, any Provider, or any other third party
receiving MCC
[[Page 44435]]
Funding or using Program Assets, or any of their respective directors,
officers, employees, Affiliates, contractors, sub-contractors, grantee,
sub-grantee, representatives or agents, is found to have been convicted
of a narcotics offense or to have been engaged in drug trafficking;
(ix) Any MCC Funding or Program Assets are applied (directly or
indirectly) to the provision of resources and support to, individuals
and organizations associated with terrorism, sex trafficking or
prostitution;
(x) An event or condition of any character has occurred, including
any enactment or change of law, that: (A) Materially and adversely
affects, or is likely to materially and adversely affect, the ability
of the Government, MCA-Nicaragua or any other party to effectively
implement, or ensure the effective implementation of, the Program or
any Project or to otherwise carry out its responsibilities or
obligations under or in furtherance of this Compact or any Supplemental
Agreement or to perform its obligations under or in furtherance of this
Compact or any Supplemental Agreement or to exercise its rights
thereunder; (B) makes it improbable that the Objectives will be
achieved during the Compact Term; (C) materially and adversely affects
the Program, any Program Asset, or any Permitted Account; (D)
constitutes misconduct injurious to MCC, or constitutes a fraud or a
felony, by the Government, any Government Affiliate, MCA-Nicaragua or
any other Permitted Designee, any other Provider, or any officer,
director, employee, agent, representative, Affiliate, contractor,
grantee, subcontractor or sub-grantee of any of the foregoing; or (E)
materially contradicts, violates or otherwise conflicts with any
provision in this Compact or any Supplemental Agreement;
(xi) The Government, any Government Affiliate, MCA-Nicaragua or any
other Permitted Designee, or any Provider has taken any action or
omission or engaged in any activity in violation of, or inconsistent
with, the requirements of this Compact or any Supplemental Agreement to
which the Government, any Government Affiliate, MCA-Nicaragua or any
other Permitted Designee, or any Provider is a party; or
(xii) There has occurred a failure to meet a condition precedent or
series of conditions precedent to, or any other requirements or
conditions in connection with, an MCC Disbursement as set out in and in
accordance with any Supplemental Agreement between the Parties.
(c) MCC may reinstate any suspended or terminated MCC Funding under
this Compact or any Supplemental Agreement if MCC determines, in its
sole discretion, that the Government or other relevant party has
demonstrated a commitment to correcting each condition for which MCC
Funding was suspended or terminated.
(d) The authority to suspend or terminate this Compact or any MCC
Funding under this Section 5.4 includes the authority to suspend or
terminate any obligations or sub-obligations relating to MCC Funding
under any Supplemental Agreement without any liability to MCC
whatsoever.
(e) All MCC Funding shall terminate upon expiration or termination
of the Compact Term; provided, however, reasonable expenditures for
goods, services, and works that are properly incurred under or in
furtherance of this Compact before expiration or termination of the
Compact Term may be paid from MCC Funding, provided that the request
for such payment is properly submitted within sixty (60) days after
such expiration or termination.
(f) Except for payments which the Parties are committed to make
under noncancelable commitments entered into with third parties before
such suspension or termination, the suspension or termination of this
Compact or any Supplemental Agreement, in whole or in part, shall
suspend, for the period of the suspension, or terminate, or ensure the
suspension or termination of, as applicable, any obligation or sub-
obligation of the Parties to provide financial or other resources under
this Compact or any Supplemental Agreement, or to the suspended or
terminated portion of this Compact or such Supplemental Agreement, as
applicable. In the event of such suspension or termination, the
Government shall use its best efforts to suspend or terminate, or
ensure the suspension or termination of, as applicable, all such
noncancelable commitments related to the suspended or terminated MCC
Funding. Any portion of this Compact or any such Supplemental Agreement
that is not suspended or terminated shall remain in full force and
effect.
(g) Upon the full or partial suspension or termination of this
Compact or any MCC Funding, MCC may, at its expense, direct that title
to Program Assets be transferred to MCC if such Program Assets are in a
deliverable state; provided, for any Program Asset(s) partially
purchased or funded (directly or indirectly) by MCC Funding, the
Government shall reimburse to a U.S. Government account designated by
MCC the cash equivalent of the portion of the value of such Program
Asset(s).
(h) Prior to the expiration of this Compact or upon the effective
termination of this Compact, the Parties shall consult in good faith
with a view to reaching an agreement in writing on (i) the post-Compact
Term treatment of MCA-Nicaragua, (ii) the process for ensuring the
refunds of MCC Disbursements that have not yet been released from a
Permitted Account through a valid Re-Disbursement or otherwise
committed in accordance with Section 5.4(e), or (iii) any other matter
related to the winding up of the Program and this Compact.
Section 5.5 Privileges and Immunities; Bilateral Agreement
(a) MCC is an agency of the Government of the United States of
America and its personnel assigned to Nicaragua will be notified
pursuant to the Vienna Convention on Diplomatic Relations as members of
the mission of the Embassy of the United States of America. The
Government shall ensure that any personnel of MCC so notified,
including individuals detailed to or contracted by MCC, and the members
of the families of such personnel, while such personnel are performing
duties in Nicaragua, shall enjoy the privileges and immunities that are
enjoyed by a member of the United States Foreign Service, or the family
of a member of the United States Foreign Service so notified, as
appropriate, of comparable rank and salary of such personnel, if such
personnel or the members of the families of such personnel are not a
national of, or permanently resident in, Nicaragua.
(b) All MCC Funding shall be considered United States assistance
furnished under the Bilateral Agreement.
Section 5.6 Attachments
Any annex, schedule, exhibit, table, appendix or other attachment
expressly attached hereto (collectively, the ``Attachments'') is
incorporated herein by reference and shall constitute an integral part
of this Compact.
Section 5.7 Inconsistencies
(a) Conflicts or inconsistencies between any parts of this Compact
shall be resolved by applying the following descending order of
precedence:
(i) Articles I through V
(ii) Any Attachments
(b) In the event of any conflict or inconsistency between this
Compact and any Supplemental Agreement
[[Page 44436]]
between the Parties, the terms of this Compact shall prevail. In the
event of any conflict or inconsistency between any Supplemental
Agreement between the Parties and any other Supplemental Agreement, the
terms of the Supplemental Agreement between the Parties shall prevail.
In the event of any conflict or inconsistency between Supplemental
Agreements between any parties, the terms of a more recently executed
Supplemental Agreement between such parties shall take precedence over
a previously executed Supplemental Agreement between such parties. In
the event of any inconsistency between a Supplemental Agreement between
the Parties and any component of the Implementation Plan, the terms of
the relevant Supplemental Agreement shall prevail.
Section 5.8 Indemnification
The Government shall indemnify and hold MCC and any MCC officer,
director, employee, Affiliate, contractor, agent or representative
(each of MCC and any such persons, an ``MCC Indemnified Party'')
harmless from and against, and shall compensate, reimburse and pay such
MCC Indemnified Party for, any liability or other damages which (a) are
directly or indirectly suffered or incurred by such MCC Indemnified
Party or to which any MCC Indemnified Party may otherwise become
subject, regardless of whether or not such damages relate to any third-
party claim, and (b) arise from or as a result of the negligence or
willful misconduct of the Government, any Government Affiliate, MCA-
Nicaragua or any other Permitted Designee, directly or indirectly
connected with, any activities (including acts or omissions) undertaken
in furtherance of this Compact; provided, however, the Government shall
apply national funds to satisfy its obligations under this Section 5.8
and no MCC Funding, Accrued Interest, or Program Asset may be applied
by the Government in satisfaction of its obligations under this Section
5.8.
Section 5.9 Headings
The Section and Subsection headings used in this Compact are
included for convenience only and are not to be considered in
construing or interpreting this Compact.
Section 5.10 Interpretation; Definitions
(a) Any reference to the term ``including'' in this Compact shall
be deemed to mean ``including without limitation'' except as expressly
provided otherwise.
(b) Any reference to activities undertaken ``in furtherance of this
Compact'' or similar language shall include activities undertaken by
the Government, any Government Affiliate, any Permitted Designee, any
Provider or any other third party receiving MCC Funding involved in
carrying out the purposes of this Compact or any Supplemental
Agreement, including their respective officers, directors, employees,
Affiliates, contractors, grantees, sub-grantees, sub-contractors,
agents or representatives, whether pursuant to the terms of this
Compact, any Supplemental Agreement or otherwise.
(c) References to ``day'' or ``days'' shall be calendar days unless
provided otherwise.
(d) The term ``U.S. Government'' shall mean any branch, agency,
bureau, government corporation, government chartered entity or other
body of the Federal government of the United States.
(e) The term ``Affiliate'' of a party is a person or entity that
controls, is controlled by, or is under the same control as the party
in question, whether by ownership or by voting, financial or other
power or means of influence.
(f) The term ``Government Affiliate'' is an Affiliate, ministry,
bureau, department, agency, government corporation or any other entity
chartered or established by the Government.
(g) The term ``Provider'' shall mean (i) MCA-Nicaragua, any
Government Affiliate or any other Permitted Designee involved in any
activities in furtherance of this Compact or (ii) any third party who
receives at least USD $50,000 in the aggregate of MCC Funding (other
than employees of MCA-Nicaragua) during the Compact Term or such other
amount as the Parties may agree in writing, whether directly from MCC,
indirectly through Re-Disbursements, or otherwise.
(h) References to any Affiliate or Government Affiliate herein
shall include any of their respective directors, officers, employees,
affiliates, contractors, sub-contractors, grantees, sub-grantees,
representatives, and agents.
(i) Any references to ``Supplemental Agreement between the
Parties'' shall mean any agreement between MCC on the one hand, and the
Government or any Government Affiliate or Permitted Designee on the
other hand.
Section 5.11 Signatures
Other than a signature to this Compact or an amendment to this
Compact pursuant to Section 5.3, a signature delivered by facsimile or
electronic mail in accordance with Section 5.1 shall be deemed an
original signature, and the Parties hereby waive any objection to such
signature or to the validity of the underlying document, certificate,
notice, instrument or agreement on the basis of the signature's legal
effect, validity or enforceability solely because it is in facsimile or
electronic form. Such signature shall be accepted by the receiving
Party as an original signature and shall be binding on the Party
delivering such signature.
Section 5.12 Designation
MCC may designate any Affiliate, agent, or representative to
implement, in whole or in part, its obligations, and exercise any of
its rights, under this Compact or any Supplemental Agreement between
the Parties.
Section 5.13 Survival
Any Government Responsibilities, covenants, or obligations or other
responsibilities to be performed by the Government after the Compact
Term shall survive the termination or expiration of this Compact and
expire in accordance with their respective terms. Notwithstanding the
termination or expiration of this Compact, the following provisions
shall remain in force: Sections 2.2, 2.3, 2.5, 3.2, 3.3, 3.4, 3.5, 3.8,
3.9 (for one year), 3.12, 5.1, 5.2, 5.4(d), 5.4(e) (for sixty days),
5.4(f), 5.4(g), 5.4(h), 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, this
Section 5.13, 5.14, and 5.15.
Section 5.14 Consultation
Either Party may, at any time, request consultations relating to
the interpretation or implementation of this Compact or any
Supplemental Agreement between the Parties. Such consultations shall
begin at the earliest possible date. The request for consultations
shall designate a representative for the requesting Party with the
authority to enter consultations and the other Party shall endeavor to
designate a representative of equal or comparable rank. If such
representatives are unable to resolve the matter within 20 days from
the commencement of the consultations then each Party shall forward the
consultation to the Principal Representative or such other
representative of comparable or higher rank. The consultations shall
last no longer than 45 days from date of commencement. If the matter is
not resolved within such time period, either Party may terminate this
Compact pursuant to Section 5.4(a). The Parties shall enter any such
consultations guided by the principle of achieving the
[[Page 44437]]
Compact Goal in a timely and cost-effective manner.
Section 5.15 MCC Status
MCC is a United States government corporation acting on behalf of
the United States Government in the implementation of this Compact. As
such, MCC has no liability under this Compact, is immune from any
action or proceeding arising under or relating to this Compact and the
Government hereby waives and releases all claims related to any such
liability. In matters arising under or relating to this Compact, MCC is
not subject to the jurisdiction of the courts or other body of
Nicaragua.
Section 5.16 Language
This Compact is prepared in English and in the event of any
ambiguity or conflict between this official English version and any
other version translated into any language for the convenience of the
Parties, this official English version shall prevail.
Section 5.17 Publicity; Information and Marking
The Parties shall give appropriate publicity to this Compact as a
program to which the United States, through MCC, has contributed,
including by posting this Compact, and any amendments thereto, on the
MCC Web site and the MCA-Nicaragua Web site, identifying Program
activity sites, and marking Program Assets; provided, any announcement,
press release or statement regarding MCC or the fact that MCC is
funding the Program or any other publicity materials referencing MCC,
including the publicity described in this Section 5.17, shall be
subject to prior approval by MCC and shall be consistent with any
instructions provided by MCC from time to time in relevant
Implementation Letters. Upon the termination or expiration of this
Compact, MCC may request the removal of, and the Government shall, upon
such request, remove, or cause the removal of, any such markings and
any references to MCC in any publicity materials or on the MCA-
Nicaragua Web site.
In Witness Whereof, the undersigned duly authorized by their
respective governments, have signed this Compact this 14th day of July,
2005 and this Compact shall enter into force in accordance with Section
1.3.
Done at Washington, DC, in the English language.
For the Millennium Challenge Corporation, on Behalf of the United
States of America, Name: Paul V. Applegarth. Title: Chief Executive
Officer.
For the Government of the Republic of Nicaragua.
For the Government of the Republic of Nicaragua, Name: Norman Jose
Caldera Cardenal.
Title: Minister of Foreign Affairs.
Exhibit A--Compendium of Defined Terms
The following compendium of capitalized terms that are used herein
is provided for the convenience of the reader. To the extent that there
is a conflict or inconsistency between the definitions in this Exhibit
A and the definitions elsewhere in the text of this Compact, the
definition elsewhere in this Compact shall prevail over the definition
in this Exhibit A.
Accrued Interest is any interest or other earnings on MCC Funding
that accrues or are earned.
Act means the Millennium Challenge Act of 2003, as amended.
Activity Indicator is an Indicator of the M&E Plan that will
measure the delivery of key goods and services in order to monitor the
pace of Project Activity execution. A table of Activity Indicator
definitions is set forth at Section 2(a)(iii) of Annex III.
Additional Representative is a representative as may be designated
by a Principal Representative, by written notice, for all purposes
other than signing amendments to this Compact.
Affiliate means the affiliate of a party, which is a person or
entity that controls, is controlled by, or is under the same control as
the party in question, whether by ownership or by voting, financial or
other power or means of influence. References to Affiliate herein shall
include any of their respective directors, officers, employees,
affiliates, contractors, sub-contractors, grantees, sub-grantees,
representatives, and agents.
Atlantic Corridor is one of the main corridors of the International
Network of Mesoamerican Highways that runs along the coast of the
Atlantic Ocean.
Attachments are any annex, schedule, exhibit, table, appendix or
other attachment expressly attached to this Compact.
Audit Guidelines means the ``Guidelines for Financial Audits
Contracted by Foreign Recipients'' issued by the Inspector General of
the United States Agency for International Development.
Audit Plan means a plan, in accordance with the Audit Guidelines,
for the audit of the expenditures of any Covered Providers, which audit
plan, in the form and substance as approved by MCC, the Government
shall adopt, or cause to be adopted, no later than sixty (60) days
prior to the end of the first period to be audited.
Auditor means the auditor(s) as described in, and engaged pursuant
to, Section 3(h) of Annex I and as required by Section 3.8(d) of the
Compact.
Auditor/Reviewer Agreement is an agreement between MCA-Nicaragua
and each Auditor or Reviewer, in form and substance satisfactory to
MCC, that sets forth the roles and responsibilities of the Auditor or
Reviewer with respect to the audit, review or evaluation, including
access rights, required form and content of the applicable content of
the applicable audit, review or evaluation and other terms and
conditions such as payment of the Auditor or Reviewer.
Bank(s) means any bank holding an account referenced in Section
4(d) of Annex I.
Bank Agreement means an agreement between MCA-Nicaragua and a Bank,
satisfactory to MCC, that sets forth the signatory authority, access
rights, anti-money laundering and anti-terrorist financing provisions,
and other terms related to the Permitted Account.
Baseline means the value of each Indicator prior to undertaking any
activity that affects the value of such Indicator.
Beneficiaries means the Nicaraguans who participate or are covered
by the Program as identified in accordance with Annex I and further
described in Section (2)(a) of Annex III.
Bilateral Agreement means the General Agreement for Economic,
Technical and Related Assistance between the Government of the United
States of America and the Government of Nicaragua, dated May 14, 1962,
as amended from time to time.
Board means the independent board of directors of MCA-Nicaragua
that oversees MCA-Nicaragua's responsibilities and obligations under
this Compact (including any Designated Rights and Responsibilities) and
further described in Section 3(d)(ii) of Annex I.
Chairman means the Chairman of the board of directors of MCA-
Nicaragua.
Civil Board Members are the two representatives drawn from among
the Civil Observers to serve as voting members on the Board.
Civil Observer(s) are representatives appointed by civil society
organizations (as described in Section 3(d)(ii)(2)(B)(iii) of Annex I),
which representatives cannot be a public official, to serve as
Observers on the Board.
Compact means the Millennium Challenge Compact made between the
United States of America, acting through the Millennium Challenge
[[Page 44438]]
Corporation, and the Government of the Republic of Nicaragua.
Compact Goal means advancing economic growth and poverty reduction
in Nicaragua.
Compact Records shall have the meaning set forth in Section 3.8(b).
Compact Reports are any documents or reports delivered to MCC in
satisfaction of the Government's reporting requirements under this
Compact or any Supplemental Agreement between the Parties.
Compact Term means that this Compact shall remain in force for five
(5) years from the Entry into Force, unless earlier terminated in
accordance with Section 5.4 of this Compact.
Covered Provider means (i) A non-United States Provider that
receives (other than pursuant to a direct contract or agreement with
MCC) USD $300,000 or more of MCC Funding in any MCA-Nicaragua fiscal
year or any other non-United States person or entity that receives
(directly or indirectly) USD $300,000 or more of MCC Funding from any
Provider in such fiscal year or (ii) any United States Provider that
receives (other than pursuant to a direct contract or agreement with
MCC) USD $500,000 or more of MCC Funding in any MCA-Nicaragua fiscal
year or any other United States person or entity that receives
(directly or indirectly) USD $500,000 or more of MCC Funding from any
Provider in such fiscal year.
Designated Rights and Responsibilities shall have the meaning set
forth in Section 3.2(c).
Detailed Financial Plan means the financial plans that specify,
respectively, the annual and quarterly detailed budget and projected
cash requirements for the Program and each Project (including
monitoring, evaluation and administrative costs), projected both on a
commitment and cash requirement basis.
Disbursement Agreement is a Supplemental Agreement that MCC, the
Government (or a mutually acceptable Government Affiliate) and MCA-
Nicaragua shall enter into that (i) further specifies the terms and
conditions of any MCC Disbursements and Re-Disbursements, (ii) is in a
form and substance mutually satisfactory to the Parties, and (iii) is
signed by the Principal Representative of each Party (or in the case of
the Government, the principal representative of the applicable
Government Affiliate).
DR-CAFTA means The Dominican Republic-Central America-United States
Free Trade Agreement.
Entry into Force means the entry into force of this Compact, which
shall be on the date of the last letter in an exchange of letters
between the Principal Representatives of each Party confirming that all
conditions set forth in Section 4.1 have been satisfied by the
Government and MCC.
Environmental Guidelines means the environmental guidelines
delivered by MCC to the Government or posted by MCC on its Web site or
otherwise publicly made available, as such guidelines may be amended
from time to time.
ESI means Environmental and Social Impact.
Evaluation Component means the component of the M&E Plan that
specifies a methodology, process and timeline for the evaluation of
planned, ongoing, or completed Project Activities to determine their
efficiency, effectiveness, impact and sustainability.
Exempt Uses means (i) any transaction, service, activity, contract,
grant or other implementing agreement funded in whole or in part by MCC
Funding; (ii) any supplies, equipment, materials, property or other
goods (referred to collectively as ``goods'') or funds introduced into,
acquired in, used or disposed of in, or imported into or exported from,
Nicaragua by MCC, or by any person or entity (including contractors and
grantees) as part of, or in conjunction with, MCC Funding or the
Program; (iii) any contractor, grantee, or other organization carrying
out activities funded in whole or in part by MCC Funding; and (iv) any
employee of such organizations.
Expected Income Gains means the increase in income that accrues to
a group of Beneficiaries as a result of one or more Project Activities
over a period of time.
Final Evaluation shall have the meaning set forth in Section 3(a)
of Annex III.
Financial Plan means collectively, the Multi-Year Financial Plan
and each Detailed Financial Plan and each amendment, supplement or
other change thereto.
Financial Plan Annex means Annex II of this Compact, which
summarizes the Multi-Year Financial Plan for the Program.
Fiscal Accountability Plan shall have the meaning set forth in
Section 4(c) of Annex I.
Fiscal Agent shall have the meaning set forth in Section 3(g) of
Annex I.
Fiscal Agent Agreement is an agreement between MCA-Nicaragua and
each Fiscal Agent, in form and substance satisfactory to MCC, that sets
forth the roles and responsibilities of the Fiscal Agent and other
appropriate terms and conditions, such as payment of the Fiscal Agent.
FOMAV means Nicaraguan Road Maintenance Fund or Fondo de
Mantenimiento.
General Director means the General Director of MCA-Nicaragua.
Goal Indicator means the Compact Goal Indicator of the M&E Plan
that will measure the impact of the Program on the incomes of the
Beneficiaries. A table of Goal Indicator definitions is set forth at
Section 2(a)(i) of Annex III.
Governance Agreement means the governance agreement entered into by
the Government and MCA-Nicaragua, in a form and substance satisfactory
to MCC, on or before the time specified in the Disbursement Agreement
and based on the principles found in Section 3(d)(i) to Annex I.
Governing Document means any decree, legislation, regulation,
contractual arrangement or other document establishing or governing
MCA-Nicaragua, including the Governance Agreement.
Government means the Government of the Republic of Nicaragua.
Government Affiliate is an Affiliate, ministry, bureau, department,
agency, government corporation or any other entity chartered or
established by the Government. References to Government Affiliate shall
include any of their respective directors, officers, employees,
affiliates, contractors, sub-contractors, grantees, sub-grantees,
representatives, and agents.
Government Board Member(s) are the government members identified in
Section 3(d)(ii)(2)(A)(i) of Annex I serving as voting members on the
Board, and any replacements thereof.
Government Observer(s) are the government representatives appointed
by the ministries of (i) MAGFOR, (ii) MTI and (iii) MARENA to serve as
Observers on the Board.
Government Party means the Government, any Government Affiliate,
MCA-Nicaragua, any other Permitted Designee or any of their respective
directors, officers, employees, Affiliates, contractors, sub-
contractors, grantees, sub-grantees, representatives or agents.
Government Responsibilities means the Government shall have
principal responsibility for oversight and management of the
implementation of the Program (i) in accordance with the terms and
conditions specified in this Compact and relevant Supplemental
Agreements, (ii) in accordance with all applicable laws then in effect
in Nicaragua, and (iii) in a timely and cost-effective manner and in
conformity with sound technical, financial and management practices.
Grant Agreement means a separate Supplemental Agreement to be
entered
[[Page 44439]]
into between MCC, the Government, and MCA-Nicaragua, wherein MCC shall
grant to MCA-Nicaragua, an amount not to exceed one hundred seventy-
five million United States Dollars (USD $175,000,000) during the
Compact Term to enable the Government, through MCA-Nicaragua, to
implement the Program and achieve the Objectives.
IDB means the Inter-American Development Bank.
Implementation Letter is a letter that may be issued by MCC from
time to time to furnish additional information or guidance to assist
the Government in the implementation of this Compact.
Implementation Plan is a detailed plan for the implementation of
the Program and each Project, which will be memorialized in one or more
documents and shall consist of: (i) A Financial Plan; (ii) Fiscal
Accountability Plan; (iii) Procurement Plan; (iv) Program and Project
Work Plans; and (v) M&E Plan.
Implementing Entity means a Government Affiliate, nongovernmental
organization or other public- or private-sector entity or person to
implement and carry out the Projects or any other activities to be
carried out in furtherance of this Compact.
Implementing Entity Agreement is an agreement between MCA-Nicaragua
(or the appropriate Outside Project Manager) and an Implementing
Entity, in form and substance satisfactory to MCC, that sets forth the
roles and responsibilities of such Implementing Entity and other
appropriate terms and conditions, such as payment of the Implementing
Entity.
Indicators means the quantitative, objective and reliable data that
the M&E Plan will use to measure the results of the Program.
Inspector General means the Inspector General of the United States
Agency for International Development.
Le[oacute]n means the department of Le[oacute]n in Nicaragua.
Le[oacute]n-Chinandega means the departments of Le[oacute]n and
Chinandega in Nicaragua.
Lien means any lien, attachment, enforcement of judgment, pledge,
or encumbrance of any kind.
Local Account is an interest-bearing local currency of Nicaragua
Permitted Account at the Commercial Bank to which the Fiscal Agent may
authorize transfer from any U.S. Dollar Permitted Account for the
purpose of making Re-Disbursements payable in local currency.
M&E means Monitoring and Evaluation.
M&E Annex means Annex III of this Compact, which generally
describes the components of the M&E Plan for the Program.
M&E Plan means the plan to measure and evaluate progress toward
achievement of the Compact Goal and Objectives of this Compact as
generally described in Annex III.
MAGFOR means the Ministry of Agriculture and Forestry.
MARENA means the Ministry of the Environment and Natural Resources
of Nicaragua.
Material Agreement shall have the meaning set forth in Section
3(c)(i)(4) of Annex I.
Material Re-Disbursement means any Re-Disbursement that require MCC
approval under applicable law, the Procurement Agreement, the
Governance Agreement, any other Governing Document, or any other
Supplemental Agreement.
Material Terms of Reference means any terms of reference for the
procurement of goods, services or works that require MCC approval under
applicable law, the Procurement Agreement, the Governance Agreement,
any other Governing Document, or any other Supplemental Agreement.
Mayor Board Member means the mayor drawn from among the Mayor
Observers.
Mayor Observers means the mayor representatives elected pursuant to
Section 3(d)(ii)(2)(B)(iv) of Annex I.
MCA means the 2004 and 2005 Millennium Challenge Account.
MCA Eligibility Criteria means the MCA selection criteria and
methodology published by MCC pursuant to Section 607 of the Act from
time to time.
MCA-Nicaragua means an entity to be organized and established
pursuant to Nicaraguan law and in accordance with Section 3(d) of Annex
I and the Governance Agreement.
MCA-Nicaragua Web site means the Web site operated by MCA-
Nicaragua.
MCC means the Millennium Challenge Corporation.
MCC Disbursement means the disbursement of MCC Funding by MCC to a
Permitted Account or through such other mechanism agreed by the Parties
as defined in and in accordance with Section 2.1(b)(i) of this Compact.
MCC Disbursement Request means the applicable request that the
Government and MCA-Nicaragua will jointly submit for an MCC
Disbursement as may be specified in the Disbursement Agreement.
MCC Funding means an amount not to exceed one hundred seventy-five
million United States Dollars (USD $175,000,000).
MCC Indemnified Party means MCC and any MCC officer, director,
employee, Affiliate, contractor, agent or representative.
MCC Representative is a representative appointed by MCC to serve as
an Observer on the Board.
Monitoring Component means the component of the M&E Plan that
specifies how progress toward the Compact Goal, Objectives and Project
Activities will be monitored.
MTI means the Ministry of Transportation and Infrastructure.
Multi-Year Financial Plan means the multi-year financial plan for
the Program and for each Project, which is summarized in Annex II to
this Compact.
Multi-Year Financial Plan Summary is the Multi-Year Financial Plan
summary attached to this Compact as Exhibit A of Annex II.
N-I Road is a 58 kilometer stretch of road between Izapa and Nejapa
on the outskirts of Managua.
NDP means the National Development Plan (also known as the ``PRSP
II'').
Nicaragua means the Republic of Nicaragua.
Objective(s) mean the Program Objective and the individual Project
Objectives, collectively.
Objective Indicator means the Indicator for each Objective that
will measure the final results of the Projects in order to monitor
their success in meeting each of the Objectives. A table of Objective
Indicator definitions is set forth at Section 2(a)(ii) of Annex III.
Observers means the non-voting observers of the Board.
Officers shall have the meaning set forth in Section 3(d)(iii)(3)
of Annex I.
Outcome Indicator is an Indicator of the M&E Plan that will measure
the intermediate results of goods and services delivered under the
Project in order to provide an early measure of the likely impact of
the Projects on the Objectives. A table of Outcome Indicator
definitions is set forth at Section 2(a)(ii) of Annex III.
Outside Project Manager means the qualified persons or entities
engaged by the Technical Secretariat, on behalf of MCA-Nicaragua, to
serve as outside project managers in accordance with Section 3(e) of
Annex I.
Pacific Corridor is one of the main corridors of the International
Network of Mesoamerican Highways that runs along the Pacific Ocean.
Parties means the United States, acting through MCC, and the
Government, except as otherwise provided in Annex III.
Party means (i) the United States, acting through MCC, or (ii) the
Government.
[[Page 44440]]
Permitted Account(s) shall have the meaning set forth in Section
4(d) of Annex I.
Permitted Designee shall have the meaning set forth in Section
3.2(c).
Pledge means any pledge of any MCC Funding or any Program Assets,
or any guarantee directly or indirectly of any indebtedness.
PPP means Plan Puebla-Panama, which is a plan to create a reliable
Mesoamerican network of highways known as the International Network of
Mesoamerican Highways.
Principal Representative means (i) for the Government, the
individual holding the position of, or acting as, the Secretary of the
Presidency of Nicaragua, and (ii) for MCC, the individual holding the
position of, or acting as, the Vice President for Country Relations.
Procurement Agent(s) are the procurement agents that MCA-Nicaragua
will engage to carry out and/or certify specified procurement
activities in furtherance of this Compact on behalf of the Government,
MCA-Nicaragua, any Outside Project Manager or Implementing Entity.
Procurement Agent Agreement is the agreement that MCA-Nicaragua
enters into with the Procurement Agent, in form and substance
satisfactory to MCC, that sets forth the roles and responsibilities of
the Procurement Agent with respect to the conduct, monitoring and
review of procurements and other appropriate terms and conditions, such
as payment of the Procurement Agent.
Procurement Agreement is a Supplemental Agreement between the
Parties, which includes the Procurement Guidelines, and governs the
procurement of all goods, services and works by the Government or any
Provider in furtherance of this Compact.
Procurement Guidelines are the procurement guidelines reflected in
the Procurement Agreement and shall include the requirements set forth
in Section 3.6(a)(i-iv).
Procurement Plan means a procurement plan adopted by MCA-Nicaragua,
which shall forecast the upcoming eighteen-month procurement activities
and be updated every six months.
Procurement Supervisor(s) are the procurement supervisors that MCA-
Nicaragua shall engage to supervise specified procurement activities in
furtherance of this Compact on behalf of the Government, MCA-Nicaragua,
any Outside Project Manager or any Implementing Entity.
Procurement Supervisor Agreement is the agreement that MCA-
Nicaragua shall enter into with the Procurement Supervisor, in form and
substance satisfactory to MCC, that sets forth the roles and
responsibilities of the Procurement Supervisor with respect to the
conduct, monitoring and review of procurements and other appropriate
terms and conditions, such as payment of the Procurement Supervisor.
Program means the program to be implemented under this Compact,
using MCC Funding to advance Nicaragua's progress towards economic
growth and poverty reduction.
Program Annex means Annex I to this Compact, which generally
describes the Program that MCC Funding will support in Nicaragua during
the Compact Term and the results to be achieved from the investment of
MCC Funding.
Program Assets means (i) MCC Funding, (ii) Accrued Interest, or
(iii) any assets, goods, or property (real, tangible, or intangible)
purchased or financed in whole or in part by MCC Funding.
Program Objective means the overall objective of this Compact,
which is to increase income and reduce poverty in Leon-Chinandega,
which is key to advancing the Compact Goal.
Project(s) are the specific projects and the policy reforms and
other activities related thereto that the Government will carry out, or
cause to be carried out, in furtherance of this Compact to achieve the
Objectives and the Compact Goal.
Project Activity means the activities that will be undertaken in
furtherance of each Project as identified in the Schedules to Annex I.
Project Objective(s) means the project-level objectives that will
advance the Program Objective, each of which is described in more
detail in the Annexes to this Compact.
Project Specialist means the Infrastructure Specialist and the
Rural Business Specialist.
Property Regularization Objective means the Project Objective of
this Compact to increase investment by strengthening property rights in
Leon.
Property Regularization Project is the Project described in
Schedule 1 of Annex I, that the Parties intend to implement in
furtherance of the Property Regularization Objective.
Proposal is the proposal for use of MCA assistance submitted to MCC
by the Government on October 25, 2004.
Provider means (i) MCA-Nicaragua, any Government Affiliate or any
other Permitted Designee involved in any activities in furtherance of
this Compact or (ii) any third party who receives at least USD $50,000
in the aggregate of MCC Funding (other than employees of MCA-Nicaragua)
during the Compact Term or such other amount as the Parties may agree
in writing, whether directly from MCC, indirectly through Re-
Disbursements, or otherwise.
PRSP is the Poverty Reduction Strategy that Nicaragua began
developing in 2001 to work toward the Heavily Indebted Poor Countries
initiative.
Re-Disbursement is the release of MCC Funding from a Permitted
Account.
Reviewer shall have the meaning set forth in Section 3(h) of Annex
I.
Rural Business Development Objective means the Project Objective of
this Compact to increase the value-added of farms and businesses in
Leon-Chinandega.
Rural Business Development Project is the Project described in
Schedule 3 of Annex I, that the Parties intend to implement in
furtherance of the Rural Business Development Objective.
Rural Office means the MCA-Nicaragua office that will be set up and
equipped in Leon-Chinandega using MCC Funding to provide the services
described in Section 2(a) of Schedule 3 of Annex I.
Special Account means a single, completely separate U.S. Dollar
interest-bearing Permitted Account at a commercial bank that is
procured through a competitive process to receive MCC Disbursements.
Supplemental Agreement is an agreement between (i) the Government
(or any Government Affiliate or Permitted Designee) and MCC, (ii) MCC
and/or the Government (or any Government Affiliate or Permitted
Designee) and any third party, including any of the Providers or
Permitted Designees, or (iii) any third parties where neither MCC nor
the Government is a party, before, on or after the Entry into Force,
which agreement memorializes details any funding, implementing and
other arrangements in furtherance of this Compact.
Supplemental Agreement between the Parties means any agreement
between MCC on the one hand, and the Government or any Government
Affiliate or Permitted Designee on the other hand.
Supplemental Agreement Term Sheets means one or more term sheets
that the Government (or mutually acceptable Government Affiliate) and
MCC shall execute that set forth the material and principal terms and
conditions of each of the Supplemental Agreements identified in Exhibit
B attached to this Compact.
Target is the one or more expected results of an Indicator that
specifies the
[[Page 44441]]
expected value and the expected time by which that result will be
achieved.
Tax(es) shall have the meaning set forth in Section 2.3(e)(i).
Technical Secretariat means a management team to have overall
management responsibility for the implementation of this Compact and
further described in Section 3(d)(iii) of Annex I.
Transportation Objective means the Project Objective of this
Compact to reduce transportation costs between Leon-Chinandega and
domestic, regional and global markets.
Transportation Project is the Project described in Schedule 2 of
Annex I, that the Parties intend to implement in furtherance of the
Transportation Objective.
U.S. Government shall mean any branch, agency, bureau, government
corporation, government chartered entity or other body of the Federal
government of the United States.
United States Dollars (USD) means the currency of the United States
of America.
Watershed Plan means the watershed management action plan as
described in Section 2(c)(i) of Schedule 3 of Annex I.
Work Plans means work plans for the overall administration of the
Program and for each Project.
Exhibit B--List of Certain Supplemental Agreements
1. Governance Agreement.
2. Grant Agreement, if applicable.
3. Fiscal Agent Agreement.
4. Bank Agreement.
Annex I--Program Description
This Annex I to the Compact (the ``Program Annex'') generally
describes the Program that MCC Funding will support in Nicaragua during
the Compact Term and the results to be achieved from the investment of
MCC Funding. Prior to any MCC Disbursement or Re-Disbursement,
including for the Projects described herein, MCC, the Government (or a
mutually acceptable Government Affiliate) and MCA-Nicaragua shall enter
into a Supplemental Agreement that (i) further specifies the terms and
conditions of such MCC Disbursements and Re-Disbursements, (ii) is in a
form and substance mutually satisfactory to the Parties, and (iii) is
signed by the Principal Representative of each Party (or in the case of
the Government, the principal representative of the applicable
Government Affiliate) (the ``Disbursement Agreement''). Except as
specifically provided herein, the Parties may amend this Program Annex
only by written agreement signed by the Principal Representative of
each Party. Each capitalized term in this Program Annex shall have the
same meaning given such term elsewhere in this Compact. Unless
otherwise expressly stated, each Section reference herein is to the
relevant Section of the main body of the Compact.
1. Background; Consultative Process
(a) Background. Nicaragua is one of the poorest countries in the
Western Hemisphere. Over the last several decades, the country has
experienced a dramatic rise and decline that has left approximately 70%
of the country's rural population living in poverty. From 1958-1978,
the country benefited from one of the stronger growth rates in Latin
America, in part due to growth in agriculture in the northwestern part
of the country. This period was followed by economic collapse from
1979-1994 that sent the country back 50 years. As the economy began to
slowly recover during the late 1990s, corruption, weakening of
democratic institutions, and natural disasters (notably, Hurricane
Mitch) hampered the country's road to recovery. Despite the lack of
growth over the last two decades, Nicaragua has recently shown signs of
macroeconomic recovery. The potential impact of The Dominican Republic-
Central America-United States Free Trade Agreement (``DR-CAFTA'') and a
customs union agreement with Guatemala, Honduras, and El Salvador
provide a unique opportunity for the country to accelerate economic
growth.
In 2001, Nicaragua began the process of developing a Poverty
Reduction Strategy (``PRSP'') to work toward the Heavily Indebted Poor
Countries initiative. This strategy had a social emphasis and focused
on structural reforms, human capital investment, greater protection of
vulnerable groups, institutional development, environmental and social
protection, and decentralization. Consultations in 2002 began a process
of re-evaluating country priorities to achieve poverty reduction by
accelerating economic growth. As a result, the Government complemented
its PRSP with a National Development Plan \1\ (``NDP'') that consisted
of longer-term vision focused on productive development to accelerate
growth and poverty reduction. The NDP was presented to the Nicaraguan
consultative group in October 2003 and an updated draft is currently in
circulation.
---------------------------------------------------------------------------
\1\ The National Development Plan also is known as the ``PRSP
II.''
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The objective of the NDP is ``sustained economic growth through
local development and productive clusters, democratic governance with
citizen participation, transparency and accountability, and
modernization of the state.'' To accomplish this objective, the NDP
emphasizes actions to improve the investment climate, to facilitate
productive development by leveraging regional competitive potential,
and to link the country to international markets. This includes an
emphasis on improving human productivity, investing in productive
infrastructure, and strengthening governance capabilities at the local
level. The NDP served as the foundation from which the Government
launched a broad consultative effort to develop the MCC Proposal.
(b) Consultative Process. A diverse group of stakeholders at the
national, regional, and municipal levels provided input during the
development of Nicaragua's Proposal, building on the Government's PRSP/
NDP, which calls for strengthening local development and participation.
The technical team charged with developing the Proposal held numerous
meetings and work sessions in Managua and the country's regional
departments with leaders in the political and private sectors, non-
governmental organizations (NGOs), and various associations. Many of
the consultations included Nicaragua's Local Development Council
(LDCs), representative bodies at the regional department level whose
members are elected from the public and private sector and civil
society.\2\ The LDCs were established to increase citizen participation
in development planning. The technical team also spoke with local farm
and women's cooperatives, local business associations, and NGOs about
the Program's technical details.
---------------------------------------------------------------------------
\2\ Each of Nicaragua's regions and autonomous zones has a local
development council that the central government recognizes through
the Citizen Participation Law passed in July 2004.
---------------------------------------------------------------------------
Nicaragua's consultative process for the Proposal resulted in three
key outcomes: (1) A shift from a national to a regional focus, (2) the
prioritization of Proposal components, and (3) ongoing participation
and ownership at the local level.
(1) As discussions at the national and regional level progressed
about Nicaragua's constraints to economic growth and poverty reduction,
stakeholders came to focus on the departments of Leon and Chinandega, a
region believed to have the greatest potential for economic growth as
well as some of the most extreme poverty.
[[Page 44442]]
(2) The Leon and Chinandega LDCs, which collectively represent over
100 civil society, private sector, and local government organizations,
provided crucial assistance to the Government's technical team in
developing and prioritizing the Proposal components. The team also
solicited feedback from other private sector and civil society
organizations at the regional and national level. The high level of
participation by these LDCs marks the first time the Government has
bestowed this level of authority to a region and fulfills the
fundamental vision of the PRSP/NDP to strengthen local capacity and
participation.
(3) The Government's technical team continues to involve the LDCs
and other local groups and expects them to play an important role in
program oversight, including having representation on the Board of
Directors of MCA-Nicaragua.
Nicaragua's Proposal focuses on creating a regional engine for
economic growth in the northwestern part of the country (i.e., Leon-
Chinandega) by transforming the rural business sector there into a
high-value, sustainable one linked to regional and global markets. The
regional focus builds on three important themes from the NDP and
consultative process:
Improving the investment climate and creating jobs;
Facilitating productive development by leveraging regional
competitive potential; and
Linking the country more closely to international markets
(i.e., trade-led growth).
The region encompassing Leon and Chinandega was a major engine for
economic growth from 1958-1978 and today, benefits from the most
fertile soil in the country, proximity to the country's Pacific coast
port (Corinto) and Honduras' Atlantic coast port (Cortes), and a
growing concentration of entrepreneurial capacity. Notwithstanding the
region's potential, it suffers from serious constraints to economic
growth and poverty reduction. Additionally, the northern mountainous
part of the region and the peninsula of Cosiguina include some of the
most extreme poverty in the country, where communities suffer from
continuous land degradation, droughts, and isolation from domestic and
international markets.
After broad consultations with the private sector and NGOs,
discussions with other donors, and extensive meetings with local
development council members in the region, the Government and MCC have
agreed to an integrated development Program that will focus on removing
three major constraints to economic growth and poverty reduction: (i)
Insecure property rights; (ii) under-developed transportation
infrastructure; and (iii) low value-added rural business productivity.
2. Overview
(a) Program Objectives. The Program involves a series of specific
and complementary interventions that the Parties expect will achieve
the Objectives and thus, advance the progress of Nicaragua towards the
Compact Goal.
(b) Projects. The Parties have identified, for each Objective,
Projects that the Government will implement, or cause to be
implemented, using MCC Funding. Each Project is described in the
Schedules to this Program Annex. The Schedules to this Program Annex
identify the activities that will be undertaken in furtherance of each
Project (each, a ``Project Activity'') as well as the various
activities within a Project Activity. Notwithstanding anything to the
contrary in this Compact, the Parties may agree to amend, terminate or
suspend these Projects or create a new project by written agreement
signed by the Principal Representative of each Party without amending
this Compact; provided, however, any such amendment of a Project or
creation of a new project (i) is consistent with the Objectives; (ii)
does not cause the amount of MCC Funding to exceed the aggregate amount
specified in Section 2.1(a) of this Compact; (iii) does not cause the
Government's responsibilities or contribution of resources to be less
than specified in Section 2.2 of this Compact or elsewhere in this
Compact; and (iv) does not extend the Compact Term. The activities of
the Program generally will be undertaken in Leon-Chinandega.
(c) Beneficiaries. The intended beneficiaries of each Project are
described in the respective Schedule to this Program Annex and Annex
III to the extent identified as of the date hereof. The intended
beneficiaries shall be identified more precisely during the initial
phases of the implementation of the Program. The Parties shall agree
upon the description of the intended beneficiaries of the Program, and
the Parties will make publicly available a more detailed description of
these beneficiaries, including publishing such description on the MCA-
Nicaragua Web site.
(d) Civil Society. Civil society shall participate in overseeing
the implementation of the Program through its representation on, and as
Observers to, the Board, as provided in Section 3(d) of this Program
Annex. In addition, the Work Plans and/or Procurement Plans for each
Project shall note the extent to which civil society will have a role
in the implementation of a particular Project or Project Activity.
Finally, members of civil society may be recipients of training or
other public awareness programs that are integral to the Project
Activities.
(e) Monitoring and Evaluation. Annex III of this Compact generally
describes the plan to measure and evaluate progress toward achievement
of the Compact Goal and Objectives of this Compact (the ``M&E Plan'').
As outlined in the Disbursement Agreement and other Supplemental
Agreements, continued disbursement of MCC Funding under this Compact
(whether as MCC Disbursements or Re-Disbursements) shall be contingent,
among other things, on successful achievement of targets set forth in
the M&E Plan.
3. Implementation Framework
The implementation framework and the plan for ensuring adequate
governance, oversight, management, monitoring, evaluation and fiscal
accountability for the use of MCC Funding is summarized below and in
the Schedules attached to this Program Annex, or as may otherwise be
agreed in writing by the Parties.
(a) General. The elements of the implementation framework will be
further described in relevant Supplemental Agreements and in a detailed
plan for the implementation of the Program and each Project (the
``Implementation Plan''), which will be memorialized in one or more
documents and shall consist of a Financial Plan, Fiscal Accountability
Plan, Procurement Plan, Program and Project Work Plans, and M&E Plan.
MCA-Nicaragua shall adopt each component of the Implementation Plan in
accordance with the requirements and timeframe as may be specified in
this Program Annex, the Disbursement Agreement or as may otherwise be
agreed by the Parties from time to time. MCA-Nicaragua may amend the
Implementation Plan or any component thereof without amending this
Compact, provided any material amendment of the Implementation Plan or
any component thereof has been approved by MCC and is otherwise
consistent with the requirements of this Compact and any relevant
Supplemental Agreement between the Parties. By such time as may be
specified in the Disbursement Agreement or as may otherwise be agreed
by the Parties from time to time,
[[Page 44443]]
MCA-Nicaragua shall adopt one or more work plans for the overall
administration of the Program and for each Project (collectively, the
``Work Plans''). The Work Plan(s) shall set forth the details of each
activity to be undertaken or funded by MCC Funding as well as the
allocation of roles and responsibilities for specific Project
activities, or other programmatic guidelines, performance requirements,
targets, or other expectations for a Project.
(b) Government.
(i) The Government shall promptly take all necessary and
appropriate actions to carry out the Government Responsibilities and
other obligations or responsibilities of the Government under and in
furtherance of this Compact, including undertaking or pursuing such
legal, legislative or regulatory actions, procedural changes and
contractual arrangements as may be necessary or appropriate to achieve
the Objectives, to successfully implement the Program, to designate any
rights or responsibilities to any Permitted Designee, and to establish
MCA-Nicaragua, which shall have the form, structure and other features
to be determined and agreed upon by the Parties on or before the time
specified in the Disbursement Agreement and which shall be responsible
for the oversight and management of the implementation of this Compact
on behalf of the Government. The Government shall promptly deliver to
MCC certified copies of any documents, orders, decrees, laws or
regulations evidencing such legal, legislative, regulatory, procedural,
contractual or other actions.
(ii) During the Compact Term, the Government shall ensure that MCA-
Nicaragua is duly authorized and organized, and sufficiently staffed
and empowered, to fully carry out the Designated Rights and
Responsibilities. Without limiting the generality of the preceding
sentence, MCA-Nicaragua shall be organized, and have such roles and
responsibilities, as described in Section 3(d) of this Program Annex
and as provided in applicable law and in the Governance Agreement and
any other Governing Documents; provided, however, the Government or
another Permitted Designee may, subject to MCC approval, carry out any
of the roles and responsibilities designated to be carried out by MCA-
Nicaragua and described in Section 3(d) of this Program Annex or
elsewhere in this Program Annex, applicable law, the Governance
Agreement, or any other Governing Document or Supplemental Agreement
prior to and during the initial period of the establishment and
staffing of MCA-Nicaragua, but in no event longer than the earlier of
(i) the formation of the Board, establishment of MCA-Nicaragua
(including the Technical Secretariat) and engagement of each of the
Officers and (ii) six months from the Entry into Force, unless
otherwise agreed by the Parties in writing.
(c) MCC.
(i) Notwithstanding Section 3.1 of this Compact or any provision in
this Program Annex to the contrary, and except as may be otherwise
agreed upon by the Parties from time to time, MCC must approve in
writing each of the following transactions, activities, agreements and
documents prior to the execution or carrying out of such transaction,
activity, agreement or document and prior to MCC Disbursements or Re-
Disbursements in connection therewith:
(1) MCC Disbursements;
(2) Each component of the Financial Plan and any amendments and
supplements thereto;
(3) Any Audit Plan;
(4) Agreements (i) between the Government and MCA-Nicaragua, (ii)
between the Government, a Government Affiliate, MCA-Nicaragua or any
other Permitted Designee, on the one hand, and any Provider or
Affiliate of a Provider, on the other hand, (A) which require such MCC
approval under applicable law, the Procurement Agreement, the
Governance Agreement, any other Governing Document, or any other
Supplemental Agreement, or (iii) in which the Government, Government
Affiliate, MCA-Nicaragua or any other Permitted Designee appoints,
hires or engages any of the following in furtherance of this Compact:
(A) Auditor and Reviewer;
(B) Fiscal Agent;
(C) Bank;
(D) Procurement Agent and Procurement Supervisor;
(E) Outside Project Manager;
(F) Implementing Entity; and
(G) Director, Observer, Officer and/or other key employee or
contractor of MCA-Nicaragua, including any compensation for such
person. (Any agreement described in clause (i) through (iii) of this
Section 3(c)(i)(4) and any amendments and supplements thereto, each, a
``Material Agreement'');
(5) Any modification, termination or suspension of a Material
Agreement, or any action that would have the effect of such a
modification, termination or suspension of a Material Agreement;
(6) Any agreement that is (A) not at arm's length or (B) with a
party related to the Government, MCA-Nicaragua, or any of their
respective Affiliates;
(7) Any Re-Disbursement (each, a ``Material Re-Disbursement'') that
requires such MCC approval under applicable law, the Procurement
Agreement, the Governance Agreement, any other Governing Document or
any other Supplemental Agreement;
(8) Any terms of reference for the procurement of goods, services
or works that require such MCC approval under applicable law, the
Procurement Agreement, the Governance Agreement, any other Governing
Document or any other Supplemental Agreement (each, a ``Material Terms
of Reference'');
(9) The Implementation Plan, including each component plan thereto,
and any material amendments and supplements to the Implementation Plan
or any component thereto;
(10) Any pledge of any MCC Funding or any Program Assets or any
guarantee directly or indirectly of any indebtedness (each, a
``Pledge'');
(11) Any decree, legislation, regulation, contractual arrangement
or other document establishing or governing MCA-Nicaragua, including
the Governance Agreement (``Governing Document'');
(12) Any disposition (in whole or in part), liquidation,
dissolution, winding up, reorganization or other change of (A) MCA-
Nicaragua, including any revocation or modification of, or supplement
to, any Governing Document related thereto, or (B) any subsidiary or
Affiliate of MCA-Nicaragua;
(13) Any change in character or location of any Permitted Account;
(14) Formation or acquisition of any subsidiary (direct or
indirect) or other Affiliate of MCA-Nicaragua;
(15) Any (A) change of a Director, Observer, Officer or other key
employee or contractor of MCA-Nicaragua, or in the composition of the
Board, including approval of the nominee for Chairman, or (B) filling
of any vacant seat of the Chairman, a Director or an Observer or vacant
position of an Officer or other key employee or contractor of MCA-
Nicaragua;
(16) The management information system to be developed and
maintained by the Technical Secretariat of MCA-Nicaragua, and any
material modifications to such system;
(17) Any decision to amend, supplement, replace, terminate or
otherwise change any of the foregoing; and
(18) Any other activity, agreement, document or transaction
requiring the approval of MCC in this Compact, applicable law, the
Governance Agreement, any other Governing Document, the Procurement
Agreement,
[[Page 44444]]
the Disbursement Agreement, or any other Supplemental Agreement between
the Parties.
The Chairman of the Board (the ``Chairman'') and/or the General
Director of MCA-Nicaragua (the ``General Director'') or other
designated Officer, as provided in applicable law and the Governance
Agreement, shall certify any documents or reports delivered to MCC in
satisfaction of the Government's reporting requirements under this
Compact or any Supplemental Agreement between the Parties (the
``Compact Reports'').
(ii) MCC shall have the authority to exercise its approval rights
set forth in this Section 3(c) in its sole discretion and independent
of any participation or position taken by the MCC Representative at a
meeting of the Board. MCC retains the right to revoke its approval of
any matter, agreement or action if MCC concludes, in its sole
discretion, that its approval was issued on the basis of incomplete,
inaccurate or misleading information furnished by the Government, any
Government Affiliate, MCA-Nicaragua or any other Permitted Designee.
Notwithstanding any provision in this Compact or any Supplemental
Agreement to the contrary, the exercise by MCC of its approval rights
under this Compact or any Supplemental Agreement shall not (1) diminish
or otherwise affect the Government Responsibilities or any other
obligations or responsibilities of the Government under this Compact or
any Supplemental Agreement, (2) transfer any such obligations or
responsibilities of the Government, or (3) otherwise subject MCC to any
liability.
(d) MCA-Nicaragua.
(i) General. Unless otherwise agreed by the Parties in writing,
MCA-Nicaragua shall, as a Permitted Designee, be responsible for the
oversight and management of the implementation of this Compact. MCA-
Nicaragua shall be governed by applicable law, a governance agreement
to be entered into by the Government and MCA-Nicaragua, in a form and
substance satisfactory to MCC, on or before the time specified in the
Disbursement Agreement (``Governance Agreement''), and any other
Governing Documents, based on the following principles:
(1) The Government shall ensure that MCA-Nicaragua shall not
assign, delegate or contract any of the Designated Rights and
Responsibilities without the prior written consent of the Government
and MCC. MCA-Nicaragua shall not establish any Affiliates or
subsidiaries (direct or indirect) without the prior written consent of
the Government and MCC.
(2) Unless otherwise agreed by the Parties in writing, MCA-
Nicaragua shall consist of (a) an independent board of directors (the
``Board'') to oversee MCA-Nicaragua's responsibilities and obligations
under this Compact (including any Designated Rights and
Responsibilities) and (b) a management team (the ``Technical
Secretariat'') to have overall management responsibility for the
implementation of this Compact.
(ii) Board.
(1) Formation. The Government shall ensure that the Board shall be
formed, constituted, governed and operated in accordance with
applicable law and the terms and conditions set forth in the Governance
Agreement, any other applicable Governing Document, and any other
relevant Supplemental Agreement.
(2) Composition. Unless otherwise agreed by the Parties in writing,
the Board shall consist of (i) seven voting members, one of whom shall
be appointed the Chairman as provided in applicable law, the Governance
Agreement or any other Governing Document and subject to MCC approval,
and (ii) non-voting observers (the ``Observers'').
(A) Unless otherwise agreed by the Parties in writing, the Board
shall initially be composed of seven voting members as follows:
(i) Four (4) minister- or secretary-level representatives of the
Government (each, a ``Government Board Member''), each of whom shall be
appointed by the President of the Republic of Nicaragua, which
appointment shall be subject to MCC approval;
(ii) Two (2) representatives drawn from among the Civil Observers
(each, a ``Civil Board Member''); and
(iii) One (1) mayor drawn from among the Mayor Observers (the
``Mayor Board Member'').
(B) The Observers shall be:
(i) A representative (the ``MCC Representative'') appointed by MCC;
(ii) A representative (each, a ``Government Observer'' appointed by
each of the following Government ministries:
a. The Ministry of Agriculture and Forestry (``MAGFOR'');
b. The Ministry of Transportation and Infrastructure (``MTI''); and
c. The Ministry of the Environment and Natural Resources of
Nicaragua (``MARENA'');
(iii) A representative (each, a ``Civil Observer'') appointed by
each of the following civil society organizations, which representative
cannot be a public official:
a. Le[oacute]n Local Development Council;
b. Chinandega Local Development Council;
c. Two (2) other civil society organizations, the selection of
which shall be subject to MCC approval; and
d. Such other organization(s) to which the Parties mutually agree.
(iv) Two (2) mayor representatives (each, a ``Mayor Observer''),
one elected by all of the mayors of municipalities within the
department of Le[oacute]n, and the other elected by all of the mayors
of the municipalities within the department of Chinandega.
(C) Each Government Board Member position shall be filled by the
individual then holding the office identified, and such individuals
shall serve in their capacity as the applicable Government official and
not in their personal capacity. Each Government Board Member may be
replaced by another government official of comparable rank from a
ministry or other government body relevant to the Program activities,
subject to approval by the Government and MCC. Each Mayor Observer may
be replaced by another mayor elected by all of the mayors of
municipalities within the department where such Mayor Observer is from.
(D) The Parties shall mutually agree on the individual who shall
initially fill the seat of Chairman and any person who subsequently
serves as Chairman.
(E) Each Observer shall have rights to attend all meetings of the
Board, participate in the discussions of the Board, and receive all
information and documents provided to the Board, together with any
other rights of access to records, employees or facilities as would be
granted to a member of the Board under applicable law, the Governance
Agreement and any other Governing Document.
(F) The Chairman, in the presence of the other Government Board
Members and the MCC Representative, shall choose by lot the initial two
(2) Civil Board Members from among the four (4) Civil Observers, who
shall serve as voting members of the Board for two non-consecutive
terms of fifteen (15) months each beginning on the Entry into Force and
the day following the 30-month anniversary of the Entry into Force,
respectively. The remaining two (2) Civil Observers shall serve as
voting members of the Board for two non-consecutive terms of fifteen
(15) months each beginning on the day following the expiration of the
15-month anniversary of the Entry into Force and the day following the
45-month anniversary of the Entry into Force, respectively. This
Compact, applicable law, the Governance Agreement and relevant
[[Page 44445]]
Supplemental Agreements between the Parties shall govern the terms and
conditions of the participation of the Civil Observers on the Board.
For purposes of this paragraph and the next, a ``15-month'' term shall
equal 457 days for terms 1 and 2 and 456 days for terms 3 and 4. If the
Parties mutually agree to more than four (4) Civil Observers, the
Parties shall determine a mutually acceptable manner for modifying the
procedure for choosing the Civil Board Members to allow, to the extent
practical, all Civil Observers an equal opportunity to serve as a Civil
Board Member.
(G) The Chairman, in the presence of the other Government Board
Members and the MCC Representative, shall choose by lot the initial
Mayor Board Member from among the two (2) Mayor Observers, who shall
serve as a voting member of the Board for two non-consecutive terms of
fifteen (15) months each beginning on the Entry into Force and the day
following the 30-month anniversary of the Entry into Force,
respectively. The other Mayor Observer shall serve as a voting member
of the Board for two non-consecutive terms of fifteen (15) months each
beginning on the day following the expiration of the 15-month
anniversary of the Entry into Force and the day following the 45-month
anniversary of the Entry into Force, respectively. This Compact,
applicable law, the Governance Agreement and relevant Supplemental
Agreements between the Parties shall govern the terms and conditions of
the participation of the Mayor Observers on the Board. If the Parties
mutually agree to more than two (2) Mayor Observers, the Parties shall
determine a mutually acceptable manner for modifying the procedure for
choosing the Mayor Board Members to allow, to the extent practical, all
Mayor Observers an equal opportunity to serve as a Mayor Board Member.
(3) Role and Responsibilities.
(A) The Board shall oversee the Technical Secretariat, the overall
implementation of the Program and the performance of the Designated
Rights and Responsibilities.
(B) Certain actions may be taken, and certain agreements and other
documents and instruments may be executed and delivered, by MCA-
Nicaragua only upon the approval and authorization of the Board as
provided under applicable law or as set forth in the Governance
Agreement or any other Governing Document, including each MCC
Disbursement Request, selection or termination of certain Providers,
any component of the Implementation Plan, certain Re-Disbursements and
certain terms of reference.
(C) The Chairman shall certify the approval by the Board of all
Compact Reports or any other documents or reports from time to time
delivered to MCC by MCA-Nicaragua (whether or not such documents or
reports are required to be delivered to MCC), and that such documents
or reports are true, accurate and complete.
(D) Without limiting the generality of the Designated Rights and
Responsibilities that the Government may designate to MCA-Nicaragua,
and subject to MCC's contractual rights of approval as set forth in
Section 3(c) of this Program Annex or elsewhere in this Compact or any
relevant Supplemental Agreement, the Board shall have the exclusive
authority as between the Board and the Technical Secretariat for all
actions defined for the Board under applicable law and in the
Governance Agreement or any other Governing Document and which are
expressly designated therein as responsibilities that cannot be
delegated further.
(4) Indemnification of MCC Representative. The Government shall
ensure, at the Government's sole cost and expense, that appropriate
insurance is obtained and appropriate indemnifications and other
protections are provided, acceptable to MCC and to the fullest extent
permitted under the laws of the Republic of Nicaragua, to ensure that
Civil Board Members and Observers shall not be held personally liable
for the actions or omissions of the Board. Pursuant to Section 5.5 and
Section 5.8 of this Compact, the Government and MCA-Nicaragua shall
hold harmless the MCC Representative for any liability or action
arising out of the MCC Representative's role as a non-voting observer
on the Board. The Government hereby waives and releases all claims
related to any such liability and acknowledges that the MCC
Representative has no fiduciary duty to MCA-Nicaragua. In matters
arising under or relating to the Compact, the MCC Representative is not
subject to the jurisdiction of the courts or other body of Nicaragua.
MCA-Nicaragua shall provide a written waiver and acknowledgement that
no fiduciary duty to MCA-Nicaragua is owed by the MCC Representative.
(iii) Technical Secretariat. Unless otherwise agreed in writing by
the Parties, the Technical Secretariat shall report, through the
General Director or other Officer as designated in applicable law and
the Governance Agreement, directly to the Board and shall have the
composition, roles and responsibilities described below and set forth
more particularly in applicable law and the Governance Agreement and
any other Governing Document.
(1) Appointment of General Director. The General Director of MCA-
Nicaragua shall be selected and hired by the Board after an open and
competitive recruitment and selection process, which appointment shall
be subject to MCC approval.
(2) Appointment of Other Officers. Unless otherwise specified in
the Government Agreement or any other Governing Document, the other
Officers of MCA-Nicaragua shall be selected and hired by the General
Director after an open and competitive recruitment and selection
process, which appointment shall be subject to the approval of the
Board and MCC.
(3) Composition. The Government shall ensure that the Technical
Secretariat shall be composed of qualified experts from the public or
private sectors, including such offices and staff as may be necessary
to carry out effectively its responsibilities, each with such powers
and responsibilities as set forth in applicable law and the Governance
Agreement, any Governing Document and from time to time in any
Supplemental Agreement between the Parties, including the following:
(i) General Director; (ii) Administration and Finance Director; (iii)
Monitoring and Evaluation Director; (iv) Environmental and Social
Impact Specialist, (v) Management Information Systems Director; (vi)
Communications Director; and (vii) Infrastructure Specialist and Rural
Business Specialist (each, a ``Project Specialist'') (the persons
holding the positions in sub-clauses (i) through (vii) and such other
offices as may be created and designated in accordance with the
Governance Agreement and any other Supplemental Agreement between the
Parties, shall be collectively referred to as ``Officers''). The
Parties contemplate that for purposes of the initial period of
operations, and in no event longer than six months, MCA-Nicaragua may
appoint an acting General Director, subject to the prior approval of
MCC; provided, during such period, the Board shall ratify the actions
of such acting General Director and MCA-Nicaragua shall select a
permanent General Director through a competitive selection process and
subject to MCC prior approval in accordance with this Annex I.
(4) Role and Responsibilities.
(A) The Technical Secretariat shall assist the Board in overseeing
the implementation of the Program and shall have principal
responsibility (subject to the direction and oversight of
[[Page 44446]]
the Board and subject to MCC's contractual rights of approval as set
forth in Section 3(c) of this Program Annex or elsewhere in this
Compact or any relevant Supplemental Agreement) for the overall
management of the implementation of the Program.
(B) Without limiting the foregoing general responsibilities or the
generality of Designated Rights and Responsibilities that the
Government may designate to MCA-Nicaragua, the Technical Secretariat
shall develop the components of the Implementation Plan, oversee the
implementation of the Projects, manage and coordinate monitoring and
evaluation, maintain internal accounting records, conduct and oversee
certain procurements, and perform such other responsibilities as set
forth in applicable law and the Governance Agreement or delegated to
the Technical Secretariat by the Board from time to time.
(C) The Technical Secretariat shall have the obligation and right
to approve certain actions and documents or agreements, including
certain Re-Disbursements, MCC Disbursement Requests, Compact Reports,
certain human resources decisions, and certain procurement actions, as
provided in applicable law and the Governance Agreement.
(e) Outside Project Manager. The Technical Secretariat shall have
the authority to engage qualified persons or entities to serve as
outside project managers (each, an ``Outside Project Manager'') in the
event that it is advisable to do so for the proper and efficient day-
to-day management of a Project; provided, however, that the appointment
or engagement of any Outside Project Manager after a competitive
selection process shall be subject to approval by the Board and MCC
prior to such appointment or engagement. Upon Board approval, the
Technical Secretariat, on behalf of MCA-Nicaragua, may delegate,
assign, or contract to the Outside Project Managers such duties and
responsibilities as it deems appropriate with respect to the management
of the Implementing Entities and the implementation of the specific
Projects or Project Activities; and provided, further, that the
Technical Secretariat shall remain accountable for those duties and
responsibilities and all reports delivered by the Outside Project
Manager notwithstanding any such delegation, assignment or contract and
the Outside Project Manager shall be subject to the oversight of the
Fiscal Agent and Procurement Agent. The Board may, independent of any
request from the Technical Secretariat, determine that it is advisable
to engage one or more Outside Project Managers and instruct the
Technical Secretariat or, where appropriate, a Procurement Agent to
commence and conduct the competitive selection process for such Outside
Project Manager.
(f) Implementing Entities. Subject to the terms and conditions of
this Compact and any other Supplemental Agreement between the Parties,
MCA-Nicaragua may provide MCC Funding, directly or indirectly through
an Outside Project Manager, to one or more Government Affiliates or to
one or more nongovernmental organization or other public-or private-
sector entities or persons to implement and carry out the Projects or
any other activities to be carried out in furtherance of this Compact
(each, an ``Implementing Entity''). The Government shall ensure that
MCA-Nicaragua (or the appropriate Outside Project Manager) enters into
an agreement with each Implementing Entity, in form and substance
satisfactory to MCC, that sets forth the roles and responsibilities of
such Implementing Entity and other appropriate terms and conditions,
such as payment of the Implementing Entity (the ``Implementing Entity
Agreement''). An Implementing Entity shall report directly to the
Technical Secretariat or Outside Project Manager, as designated in the
applicable Implementing Entity Agreement or as otherwise agreed by the
Parties.
(g) Fiscal Agent. The Government shall ensure that MCA-Nicaragua
engages one or more fiscal agents (each, a ``Fiscal Agent''), who shall
be responsible for, among other things: (i) Ensuring and certifying
that Re-Disbursements are properly authorized and documented in
accordance with established control procedures set forth in the
Disbursement Agreement, the Fiscal Agent Agreement and other relevant
Supplemental Agreements; (ii) Re-Disbursement and cash management,
including instructing a Bank to make Re-Disbursements from a Permitted
Account (to which the Fiscal Agent has sole signature authority),
following applicable certification by the Fiscal Agent; (iii) providing
applicable certifications for MCC Disbursement Requests; (iv)
maintaining proper accounting of all MCC Funding financial transactions
and certain other accounting functions; (v) producing reports on MCC
Disbursements and Re-Disbursements (including any requests therefore)
in accordance with established procedures set forth in the Disbursement
Agreement, the Fiscal Agent Agreement or any other relevant
Supplemental Agreements; (vi) funds control; and (vii) procurement
functions, as may be specified from time to time. Upon the written
request of MCC, the Government shall ensure that MCA-Nicaragua
terminates a Fiscal Agent, without any liability to MCC, and the
Government shall ensure that MCA-Nicaragua engages a new Fiscal Agent,
subject to the approval by the Board and MCC. The Government shall
ensure that MCA-Nicaragua enters into an agreement with each Fiscal
Agent, in form and substance satisfactory to MCC, that sets forth the
roles and responsibilities of the Fiscal Agent and other appropriate
terms and conditions, such as payment of the Fiscal Agent (``Fiscal
Agent Agreement'').
(h) Auditors and Reviewers. The Government shall ensure that MCA-
Nicaragua carries out the Government's audit responsibilities as
provided in Sections 3.8(d), (e) and (f) of this Compact, including
engaging one or more auditors (each, an ``Auditor'') required by
Section 3.8(d) of this Compact. As requested by MCC in writing from
time to time, the Government shall ensure that MCA-Nicaragua also
engages (i) an independent reviewer to conduct reviews of performance
and compliance under this Compact pursuant to Section 3.8(f) of this
Compact, which reviewer shall have the capacity to (A) conduct general
reviews of performance or compliance, (B) conduct environmental audits,
and (C) conduct data quality assessments in accordance with the M&E
Plan, as described more fully in Annex III, and/or (ii) an independent
evaluator to assess performance as required under the M&E Plan (each, a
``Reviewer''). MCA-Nicaragua shall select the Auditor(s) or Reviewers
in accordance with the Governance Agreement, any other Governing
Document or other relevant Supplemental Agreement. The Government shall
ensure that MCA-Nicaragua enters into an agreement with each Auditor or
Reviewer, in form and substance satisfactory to MCC, that sets forth
the roles and responsibilities of the Auditor or Reviewer with respect
to the audit, review or evaluation, including access rights, required
form and content of the applicable audit, review or evaluation and
other appropriate terms and conditions such as payment of the Auditor
or Reviewer (the ``Auditor/Reviewer Agreement''). In the case of a
financial audit required by Section 3.8(f) of this Compact, such
Auditor/Reviewer Agreement shall be effective no later than 120 days
prior to the end of the relevant fiscal year or other period to be
audited; provided, however, if MCC
[[Page 44447]]
requires concurrent audits of financial information or reviews of
performance and compliance under this Compact, then such Auditor/
Reviewer Agreement shall be effective no later than a date agreed by
the Parties in writing.
(i) Procurement Agent. If requested by MCC, the Government shall
ensure that MCA-Nicaragua engages one or more procurement agents (each,
a ``Procurement Agent'') to carry out and/or certify specified
procurement activities in furtherance of this Compact on behalf of the
Government, MCA-Nicaragua, any Outside Project Manager or Implementing
Entity. The role and responsibilities of such Procurement Agent and the
criteria for selection of a Procurement Agent shall be as set forth in
the applicable Implementation Letter or Supplemental Agreement. The
Government shall ensure that MCA-Nicaragua enters into an agreement
with the Procurement Agent, in form and substance satisfactory to MCC,
that sets forth the roles and responsibilities of the Procurement Agent
with respect to the conduct, monitoring and review of procurements and
other appropriate terms and conditions, such as payment of the
Procurement Agent (the ``Procurement Agent Agreement''). Any
Procurement Agent shall adhere to the procurement standards set forth
in the Procurement Agreement and Procurement Guidelines and ensure
procurements are consistent with the procurement plan (the
``Procurement Plan'') adopted by MCA-Nicaragua, which plan shall
forecast the upcoming eighteen month procurement activities and be
updated every six months.
(j) Procurement Supervisor. If requested by MCC, the Government
shall ensure that MCA-Nicaragua engages one or more procurement
supervisors (each, a ``Procurement Supervisor'') to supervise specified
procurement activities in furtherance of this Compact on behalf of the
Government, MCA-Nicaragua, any Outside Project Manager or any
Implementing Entity. The role and responsibilities of such Procurement
Supervisor and the criteria for selection of a Procurement Supervisor
shall be as set forth in the applicable Implementation Letter or
Supplemental Agreement. The Government shall ensure that MCA-Nicaragua
enters into an agreement with the Procurement Supervisor, in form and
substance satisfactory to MCC, that sets forth the roles and
responsibilities of the Procurement Supervisor with respect to the
conduct, monitoring and review of procurements and other appropriate
terms and conditions, such as payment of the Procurement Supervisor
(the ``Procurement Supervisor Agreement''). Any Procurement Supervisor
shall ensure that the procurement standards set forth in the
Procurement Guidelines are adhered to and ensure procurements are
consistent with the Procurement Plan.
4. Finances and Fiscal Accountability
(a) Financial Plan.
(i) Multi-Year Financial Plan. The multi-year financial plan for
the Program and for each Project (the ``Multi-Year Financial Plan'') is
summarized in Annex II to this Compact.
(ii) Detailed Financial Plan. During the Compact Term, the
Government shall ensure that MCA-Nicaragua delivers to MCC timely
financial plans that specify, respectively, the annual and quarterly
detailed budget and projected cash requirements for the Program and
each Project (including monitoring, evaluation and administrative
costs), projected both on a commitment and cash requirement basis (each
a ``Detailed Financial Plan''). Each Detailed Financial Plan shall be
delivered by such time as specified in the Disbursement Agreement or as
may otherwise be agreed by the Parties. The Multi-Year Financial Plan
and each Detailed Financial Plan and each amendment, supplement or
other change thereto are collectively, the ``Financial Plan.''
(iii) Expenditures. No financial commitment involving MCC Funding
shall be made, no obligation of MCC Funding shall be incurred, and no
Re-Disbursement shall be made or MCC Disbursement Request submitted for
any activity or expenditure, unless the expense is provided for in the
Detailed Financial Plan and unless uncommitted funds exist in the
balance of the Detailed Financial Plan for the relevant period or
unless the Parties otherwise agree in writing.
(iv) Modifications to Financial Plan. Notwithstanding anything to
the contrary in this Compact, MCA-Nicaragua may amend or supplement the
Financial Plan or any component thereof without amending this Compact,
provided any material amendment or supplement has been approved by MCC
and is otherwise consistent with the requirements of this Compact and
any relevant Supplemental Agreement between the Parties.
(b) Disbursement and Re-Disbursement. The Disbursement Agreement
(and disbursement schedules thereto), as amended from time to time,
shall specify the terms, conditions and procedures on which MCC
Disbursements and Re-Disbursements shall be made. The obligation of MCC
to make MCC Disbursements or approve Re-Disbursements is subject to the
fulfillment, waiver or deferral of any such terms and conditions. The
Government and MCA-Nicaragua shall jointly submit the applicable
request for an MCC Disbursement (the ``MCC Disbursement Request'') as
may be specified in the Disbursement Agreement. MCC will make MCC
Disbursements in tranches to a Permitted Account from time to time as
provided in the Disbursement Agreement or as may otherwise be agreed by
the Parties, subject to Program requirements and performance by the
Government, MCA-Nicaragua and other relevant parties in furtherance of
this Compact. Re-Disbursements will be made from time to time based on
requests by an authorized representative of the appropriate party
designated for the size and type of Re-Disbursement in accordance with
the Governance Agreement and Disbursement Agreement; provided, however,
unless otherwise agreed by the Parties in writing, no Re-Disbursement
shall be made unless and until the written approvals specified herein
or in the Governance Agreement and Disbursement Agreement for such Re-
Disbursement have been obtained and delivered to the Fiscal Agent.
(c) Fiscal Accountability Plan. By such time as specified in the
Disbursement Agreement or as otherwise agreed by the Parties, MCA-
Nicaragua shall adopt as part of the Implementation Plan a fiscal
accountability plan that identifies the principles and mechanisms to
ensure appropriate fiscal accountability for the use of MCC Funding
provided under this Compact, including the process to ensure that open,
fair, and competitive procedures will be used in a transparent manner
in the administration of grants or cooperative agreements and the
procurement of goods and services for the accomplishment of the
Objectives (the ``Fiscal Accountability Plan''). The Fiscal
Accountability Plan shall set forth, among other things, requirements
with respect to the following matters: (i) Funds control and
documentation; (ii) separation of duties and internal controls; (iii)
accounting standards and systems; (iv) content and timing of reports;
(v) policies concerning public availability of all financial
information; (vi) cash management practices; (vii) procurement and
contracting practices, including timely payment to vendors; (viii) the
role of independent auditors; and (ix) the roles of fiscal agents and
procurement agents.
[[Page 44448]]
(d) Permitted Accounts. The Government shall establish, or cause to
be established, such accounts (each, a ``Permitted Account,'' and
collectively ``Permitted Accounts'') as may be agreed by the Parties in
writing from time to time, including:
(i) A single, completely separate U.S. Dollar interest-bearing
account (the ``Special Account'') at a commercial bank that is procured
through a competitive process to receive MCC Disbursements;
(ii) If necessary, an interest-bearing local currency of Nicaragua
account (the ``Local Account'') at the Commercial Bank to which the
Fiscal Agent may authorize transfer from any U.S. Dollar Permitted
Account for the purpose of making Re-Disbursements payable in local
currency; and
(iii) Such other interest-bearing accounts to receive MCC
Disbursements in such bank as the Parties mutually agree upon in
writing.
No other funds shall be commingled in a Permitted Account other
than MCC Funding and Accrued Interest thereon. All MCC Funding held in
an interest-bearing Permitted Account shall earn interest at a rate of
no less than such amount as the Parties may agree in the respective
Bank Agreement or otherwise. MCC shall have the right, among other
things, to view any Permitted Account statements and activity directly
on-line, where feasible, or at such other frequency as the Parties may
otherwise agree. By such time as shall be specified in the Disbursement
Agreement or as otherwise agreed by the Parties, the Government shall
ensure that MCA-Nicaragua enters into an agreement with each Bank,
respectively, satisfactory to MCC, that sets forth the signatory
authority, access rights, anti-money laundering and anti-terrorist
financing provisions, and other terms related to the Permitted Account,
respectively (each a ``Bank Agreement''). For purposes of this Compact,
any bank holding an account referenced in Section 4(d) of this Program
Annex are each a ``Bank'' and, are collectively referred to as the
``Banks.''
(e) Currency Exchange. The Bank shall convert MCC Funding to the
currency of Nicaragua at a rate to which the Parties mutually agree
with the Bank in the Bank Agreement.
5. Transparency; Accountability
Transparency and accountability to MCC and to the beneficiaries are
important aspects of the Program and Projects. Without limiting the
generality of the foregoing, in an effort to achieve the goals of
transparency and accountability, the Government shall ensure that MCA-
Nicaragua:
(a) Establishes an e-mail suggestion box as well as a means for
other written comments that interested persons may use to communicate
ideas, suggestions or feedback to MCA-Nicaragua;
(b) Considers as a factor in its decision-making the
recommendations of the Observers, particularly in MCA-Nicaragua's
deliberations over pending key Technical Secretariat decisions and key
Board decisions as shall be specified in applicable law, the Governance
Agreement and any other Governing Document;
(c) Develops and maintains a Web site (the ``MCA-Nicaragua Web
site'') in a timely, accurate and appropriately comprehensive manner,
such MCA-Nicaragua Web site to include postings of information and
documents in English and Spanish; and
(d) Posts on the MCA-Nicaragua Web site and otherwise makes
publicly available from time to time the following documents or
information, including by posting on the MCA-Nicaragua Web site, with
links to and from the official Web site of the Government (http://www.presidencia.gob.ni
) and the Web site of the Embassy of Nicaragua in
the United States (http://managua.usembassy.gov):
(i) All minutes of the meetings of the Board;
(ii) The M&E Plan, as amended from time to time, along with
periodic reports on Program performance;
(iii) All relevant Environmental Impact Assessments and supporting
documents;
(iv) Such financial information as may be required by this Compact
or as may otherwise be agreed from time to time by the Parties;
(v) All Compact Reports;
(vi) All audit reports by an Auditor and any periodic reports or
evaluations by a Reviewer;
(vii) A copy of the Disbursement Agreement, as amended from time to
time;
(viii) A copy of the Procurement Agreement (including Procurement
Guidelines), Procurement Plan, procurement policies and standard
documents, bid requests and awarded contracts; and
(ix) A copy of any documents related to the formation, organization
and governance of MCA-Nicaragua, including the Governance Agreement and
any other Governing Documents, and any amendments thereto.
Schedule 1 to Annex I--Property Regularization Project
This Schedule 1 generally describes and summarizes the key elements
of a property regularization project that the Parties intend to
implement in furtherance of the Property Regularization Objective (the
``Property Regularization Project''). Additional details regarding the
implementation of the Property Regularization Project will be included
in the Implementation Plan and in relevant Supplemental Agreements.
1. Background
Insecure property rights and high transaction costs in Nicaragua's
land market and property registration system restrict enterprise
development, investment and income growth, particularly in rural areas.
The shortcomings of Nicaragua's ineffective property registration
system are evidenced by the fact that more than sixty percent of all
land in Nicaragua is estimated to lack adequate property records. This
lack of secure property rights impedes national and international
sources of investment and finance, hindering entrepreneurship and
household asset growth. Land tenure insecurity also is an obstacle to
investment in public infrastructure such as streets, electricity, and
water and waste services. In recent years, the Government has taken
steps to implement a systematic approach to land title regularization
and to advance institutional and legal reforms, including new cadastre
and property registration laws that will, if implemented properly,
create a platform for significant progress in this area. Recent studies
supported by the World Bank show that regularizing property rights in
Nicaragua through land titling and property registration has been
associated with a 30% increase in asset values and a 10% increase in
the probability of landholders undertaking additional investments in
that property. With support from the World Bank and Nordic Development
Fund, the Government also has initiated work to modernize the property
registration system to clarify rights and to update records so that
beneficiaries in the Departments of Chinandega, Esteli and Madriz will
have accurate and registered land titles. MCC Funding will be used to
expand these reforms and strengthen property rights in the Department
of Leon (``Leon'') through the Project Activities described below.
[[Page 44449]]
2. Summary of Project Activities
The Property Regularization Project is designed to increase
investment by strengthening property rights in Leon. The key activities
of the Property Regularization Project include:
Institutional Capacity Building. Provide technical support
to government institutions to implement and sustain tenure
regularization reforms in Leon.
Cadastral Mapping. Conduct area-wide cadastral mapping in
Leon to obtain current property descriptions to be recorded in a
geographic information system.
Land Tenure Regularization. Clarify land tenure, resolve
disputes, and improve formal documentation of property rights.
Database Installation. Link municipal and national
registry and cadastral databases by installing the Integrated System of
Cadastral and Registration Information (SIICAR) in Leon.
Protected Area Demarcation. Demarcate and legally validate
the boundaries of four environmentally-sensitive protected areas,
regularize land rights within the perimeter of each, and facilitate the
adoption of land use management plans by occupants therein.
Analysis and Communications. Fund short-term technical
assistance, policy analysis and outreach to promote participation in,
the use and the sustainability of the improved property registration
system.
The M&E Plan (described in Annex III) will set forth anticipated
results and, where appropriate, regular benchmarks that may be used to
monitor implementation progress. Performance against these benchmarks
and the overall impact of the Property Regularization Project will be
assessed and reported at the intervals to be specified in the M&E Plan
or as otherwise agreed by the Parties from time to time. The Parties
expect that additional indicators will be identified during the
implementation of the Property Regularization Project.
The following summarizes the contemplated Property Regularization
Project Activities:
(a) Activity: Institutional Capacity Building
To build the capacity of government institutions in Le[oacute]n for
recording property rights and providing related services for property
transactions in Le[oacute]n, MCC Funding will be used to:
(i) Expand the technical and administrative capacity of the
Technical Secretariat of Proyecto de Ordenamiento de la Propiedad
(PRODEP)\3\ by hiring staff, procuring equipment and funding other
operational expenses necessary to implement activities (b)-(d) below;
---------------------------------------------------------------------------
\3\ PRODEP, constituted by decree as a technical secretariat of
the Ministry of Finance and Public Credit, was developed, and is
supported, by the World Bank. PRODEP is responsible for, among other
things, implementing donor programs to modernize Nicaragua's land
registry and cadastral systems and to regularize land rights.
---------------------------------------------------------------------------
(ii) Provide technical assistance and training to registry and
cadastral officials and technical staff hired or assigned to work on
the Project; and
(iii) To the extent necessary to implement activities (b)-(d)
below, locate, equip and staff (1) the Le[oacute]n regional offices of
the property registry, the cadastre, the office of alternative conflict
resolution, the land titling agency, several municipal governments and
(2) the national cadastre office in Managua.
(b) Activity: Cadastral Mapping
To provide an accurate and current physical description of all
property in Le[oacute]n, MCC Funding will be used to:
(i) Clarify municipal and urban administrative boundaries;
(ii) Prepare base maps on which parcel boundaries will be
demarcated;
(iii) Perform parcel-by-parcel demarcation and mapping; and
(iv) Publish mapping results to enable owners and occupants to
review demarcated parcel boundaries and request clarification and/or
corrections, if needed.
(c) Activity: Land Tenure Regularization
To achieve accurate, registered and secure land titles or other
valid property records for property owners in Le[oacute]n, MCC Funding
will support:
(i) The gathering of legal and other information about each parcel,
training of fieldwork teams, and consultation with local authorities in
Le[oacute]n;
(ii) A promotion and information campaign to educate Le[oacute]n
residents about the benefits of participating in the regularization
process; and
(iii) Administrative and legal actions to facilitate land title
clarification and registration and conflict mediation.
(d) Activity: Database Installation
To integrate physical and legal descriptions of property and to
develop a land information system, MCC Funding will be used for:
(i) Procurement and installation of SIICAR, a modern network of
interconnected registry and cadastral databases that link
municipalities in Le[oacute]n to other databases;
(ii) Initial operation of SIICAR in Le[oacute]n, including quality
control; and
(iii) Technical assistance and training on the use of SIICAR in
Le[oacute]n.
(e) Activity: Protected Area Demarcation
To enable the protection of environmentally sensitive areas and
regularize land rights within such areas, MCC Funding will be used to:
(i) Demarcate and legally record the boundaries of four (4)
environmentally-sensitive protected areas in Le[oacute]n;
(ii) Provide assistance to communities to implement land use
management plans for the protected areas;
(iii) Conduct outreach and education regarding these activities;
and
(iv) Coordinate and supervise sub-activities (i)-(iii) above.
(f) Activity: Analysis and Communications
MCC Funding will support the development of policies, strategies
and technical measures to promote participation in, and the use and
sustainability of, the improved property registration system,
including:
(i) Implementation of a communications strategy about the overall
objectives and approach of the Project;
(ii) Final development and implementation of PRODEP's draft gender
strategy to improve awareness of women's rights in the regularization
process;
(iii) Further development, in consultation with local communities,
of a property tax strategy to prevent inappropriate taxation of
regularized property rights and to improve municipal land tax
administration;
(iv) Analysis of the impact of an improved property registration
system on land markets;
(v) Clarification of the land tenure situation in the indigenous
community in Le[oacute]n and development of an appropriate approach to
land tenure regularization in this community;
(vi) Development of a Project environmental plan to monitor
potential negative impacts of the Project; and
(vii) Analysis of other potential administrative, technical and/or
policy reforms related to topics such as secured lending, mechanisms
for land acquisition and access, financial sustainability of the
modernized registry and cadastre, and a national land policy framework.
The expected results from, and the key benchmarks to measure
progress on, these activities are set forth in Annex III.
3. Beneficiaries
The Property Regularization Project will directly benefit anyone
who has a
[[Page 44450]]
property interest in land in Le[oacute]n and particularly the poor, who
historically have had a limited ability to resolve land tenure
irregularities. The Parties anticipate that roughly 40% of the
beneficiaries of the Project will be women who, jointly or
independently, have land rights. Residents and businesses in the area
will benefit from an improved investment climate resulting from
increased land tenure security and lower property-related transaction
costs.
4. Coordination With USAID and Other Donors
USAID[bs]Nicaragua does not currently fund work on
property rights regularization in Nicaragua. In the recent past, the
mission supported policy-related research on land market development
and on property registration with the Nicaraguan Ministry of
Agriculture and the Inter-American Institute for Cooperation on
Agriculture. USAID in Washington (Bureau for Latin America and the
Caribbean) supports the exchange of information to help countries in
the region achieve property registration goals set at the Summit of the
Americas and has engaged with the Government of Nicaragua as part of
this effort. The extension of PRODEP under this Compact complements
USAID/Nicaragua's economic growth programs to diversify the rural
sector in Nicaragua.
Despite past interventions by the World Bank, Inter-American
Development Bank, USAID, Danish International Development Agency,
United Nations Development Programme and other donors, Nicaragua still
faces serious land tenure problems. To address these problems, the
Government, through PRODEP, seeks to improve the legal and
institutional framework for property rights. To strengthen consensus
for reforms, PRODEP benefits from an inter-ministerial advisory
committee.
Current funding from the World Bank and the Nordic Development Fund
has allowed PRODEP to operate its program in Chinandega (in addition to
Estel[iacute] and Madriz). Additional funding is required to meet the
pressing property regularization needs of Le[oacute]n to facilitate
achievement of the Compact Goal. The Property Regularization Project
will complement World Bank and Nordic Development Fund programs by
providing the funds necessary for PRODEP to expand its efforts and
operate in Le[oacute]n. Finally, MCC-supported monitoring and
evaluation will complement efforts to track progress in Nicaragua on
land tenure security and land market development indicators that are
currently under development with European Union support.
5. Sustainability
The sustainability of the Project's results depends on the extent
to which people use the improved registration system and fiscal
capacity of the registry, cadastre and titling services. The incentives
for people to use and pay for services as well as the quality and costs
of services will need to be appropriate to the local context. Several
recent policy reforms that have been formally adopted (e.g., new
cadastre and registry laws) or that are in process of being adopted
(e.g., tenure regularization law) will bring about new institutional
relationships and operational practices that will more effectively
facilitate the process for keeping property records up-to-date. The
Government's ability to maintain modern, computerized land records and
maps and a well-trained staff will depend on both an adequate public
budget and the Government's ability to set and collect fees for
services. The World Bank suggests that incorporating up-to-date records
for the 70% of all properties that are currently either unregistered or
incorrectly registered will create a vastly expanded number of users.
More accessible, reliable and efficient services will likely increase
the willingness of these users to use the system and to pay for
services. The new registry law will provide an autonomous budget for
the registry so that it can more rationally project its costs and
revenues and set fees and budget accordingly. The Project includes
specific support for training, technical assistance and analysis of
policy, fee structures and other measures to help ensure
sustainability.
6. Policy and Legal Reform
(a) Performance Criteria.
The Parties have identified the following policy, legal and
regulatory reforms and actions that the Government shall pursue in
support, and to reach the full benefits, of the Property Regularization
Project, the satisfactory implementation of which will be conditions
precedent to certain MCC Disbursements as provided in the Disbursement
Agreement:
(i) Legislation that modernizes tenure regularization and clarifies
the legal basis for solving irregularities in tenure regularization;
(ii) Measures to safeguard the Project from any laws, regulations
or policies that may undermine the results of the Project, including
those that (i) undermine private land ownership or impede transparent,
clear transfer of land title, (ii) result in inappropriate taxation of
regularized property rights, (iii) constitute political manipulation
during the tenure regularization process, and (iv) result from the
inappropriate or illegitimate use of supplementary titles (titulo
supletorio); and
(iii) Legislation that maintains the integrity of the four (4)
environmentally-sensitive protected areas in Le[oacute]n demarcated
under the Project.
(b) Indicative Goals.
To improve its level of performance under the policy criteria
identified in Section 607 of the Act and the MCA Eligibility Criteria,
the Government will pursue the following legislative and policy
reforms:
(i) Legal, regulatory and administrative reforms to improve access
to secured lending, including relevant aspects of the legal, regulatory
and administrative framework for secured transactions.
Schedule 2 to Annex I--Transportation Project
This Schedule 2 generally describes and summarizes the key elements
of a transportation project that the Parties intend to implement in
furtherance of the Transportation Objective (the ``Transportation
Project''). Additional details regarding the implementation of the
Transportation Project will be included in the Implementation Plan and
in relevant Supplemental Agreements.
1. Background
High transportation costs are a significant impediment to economic
growth in Nicaragua. Even as regional commercial agendas such as DR-
CAFTA promise to create a more competitive environment for trade, the
cost and efficiency of the country's transportation network continues
to hold back its true productive capacity. With an average truck speed
of 20 kilometers per hour, this inadequate infrastructure has driven
transportation costs in the region to twice that of comparable
transportation costs in the United States.
Consequently, the PRSP and NDP propose an ambitious plan to
strengthen the Nicaraguan transportation network. This fits within the
broader strategy developed in the Plan Puebla-Panama (``PPP'') to
create a reliable Mesoamerican network of highways known as the
International Network of Mesoamerican Highways. This network comprises
two main corridors on the Atlantic and the Pacific (the ``Atlantic
Corridor'' and ``Pacific Corridor,''
[[Page 44451]]
respectively) and a series of complementary routes. Under this
initiative, member countries have pledged to work toward harmonizing
transportation regulations and standards, modernizing customs
procedures and border crossings, and strengthening airport security.
The Atlantic and Pacific Corridors are vital to the integration of
Central America and will have a significant economic impact on this
region by creating an efficient connection between the production
centers in Central America and major port facilities on the Atlantic
and Pacific Oceans.
The 3,150 kilometer Pacific Corridor links Mexico, Guatemala,
Honduras, El Salvador, Nicaragua, Costa Rica and Panama. In Nicaragua,
the Pacific Corridor connects the Honduran border at Guasaule to the
Costa Rican border and major production and consumption centers in and
around the cities of Managua, Leon and Chinandega. The World Bank, the
Central American Bank for Economic Integration, and the Nordic
Development Fund have financed the construction of a modern
transportation route from the Honduran border to the town of Izapa,
approximately 58 kilometers from the capital of Managua. This remaining
58 kilometer stretch of road between Izapa and Nejapa (the ``N-I
Road'') on the outskirts of Managua is the final section needed to
create an effective trade corridor linking producers and consumers in
Managua to markets north in neighboring Honduras and El Salvador and
linking producers in Leon and Chinandega to Managua and markets south.
The current poor condition of the N-I Road has forced commercial
traffic to be routed through highly populated centers along Lake
Managua, negatively impacting service levels, maintenance, and safety.
Many productive areas in Nicaragua are connected to the main road
arteries by unpaved secondary roads, whose uneven surfaces prohibit
rapid transit, cause high vehicle operating costs, and damage
transported goods, thereby undermining the competitiveness of the
producers who must use them. These roads are also expensive to
maintain, requiring periodic re-grading following the rainy season. For
these reasons, the paving of selective secondary roads is a sound
investment which contributes to the economic potential of the areas
they serve.
2. Summary of Project Activities
The Transportation Project is designed to reduce transportation
costs between Nicaraguan production centers and national, regional and
global markets. The key activities of the Transportation Project
include:
N-I Road. The improvement of the 58 kilometer N-I Road.
Secondary Roads. The upgrade of key secondary routes to
improve the access of rural communities to domestic, regional and
global markets.
Technical Assistance. The provision of technical
assistance to MTI and the Nicaraguan Road Maintenance Fund (Fondo de
Mantenimiento or ``FOMAV'').
The M&E Plan (described in Annex III) will set forth anticipated
results and, where appropriate, regular benchmarks that may be used to
monitor implementation progress. Performance against these benchmarks
and the overall impact of the Transportation Project will be assessed
and reported at the intervals to be specified in the M&E Plan or as
otherwise agreed by the Parties from time to time. The Parties expect
that additional indicators will be identified during the implementation
of the Transportation Project.
The following summarizes the contemplated Transportation Project
Activities.
(a) Activity: N-I Road
MCC Funding will support the following activities in connection
with the improvements to the N-I Road:
(i) Final feasibility study, environmental impact assessment, and
design;
(ii) Construction along the N-I Road, including building (A)
appropriate base, sub-base and drainage structures, (B) a high-quality
paved surface, and (C) entrance and exit lanes in appropriate places;
(iii)Environmental mitigation measures, as may be appropriate;
(iv) Signage and other safety improvements;
(v) Supervision of construction activities; and
(vi) Compensation for individuals, residences and businesses
affected by the rehabilitation of the N-I Road consistent with the
World Bank Policy on Involuntary Resettlement.
(b) Activity: Secondary Roads
MCC Funding will fund the paving of key secondary roads with the
most cost-effective and appropriate surfacing technique, which roads
will be selected from among a portfolio of proposed roads by MCA-
Nicaragua, with MCC approval, subject to the conditions that each
selected road must:
(i) Have been included in the medium-term investment plan of MTI;
(ii) Be located in Leon and/or Chinandega;
(iii) Conform to the Environmental Guidelines;
(iv) Conform to the World Bank policy on Involuntary Resettlement,
where relevant;
(v) Be fully designed to the satisfaction of MCA-Nicaragua and MCC
and have technical construction plans that are capable of being
completed during the Compact Term;
(vi) Reasonably conform to the priorities of the local development
councils in Leon and Chinandega;
(vii) Be properly documented to the satisfaction of MCA-Nicaragua
and MCC, including a description of the location of the proposed road,
the type of construction, the estimated cost, a technical and economic
assessment, land acquisition required, and the status of any necessary
environmental permits and other requisite licenses; and
(viii) Be projected ex ante to achieve an economic rate of return
of not less than eight percent (8%), computed on the basis of a benefit
stream from decreased vehicle operating costs.
(c) Activity: Technical Assistance to MTI and FOMAV
MCC Funding will fund technical assistance to build the sustainable
operational capacity of MTI and FOMAV, an autonomous agency that was
created within MTI in 2000 with funding from the World Bank and the
Inter-American Development Bank (``IDB''). FOMAV is primarily
responsible for all Nicaraguan maintainable roads, as classified by
MTI.
The expected results from, and the key benchmarks to measure
progress on, these activities are set forth in Annex III.
3. Beneficiaries
The principal beneficiaries of the Transportation Project are
expected to be (i) users of the improved roads, due to decreased
transportation costs to markets and social service delivery points
(e.g., hospitals, schools), and (ii) employees and owners of urban and
rural businesses that rely on the Nicaraguan road network. The
Transportation Project also promises to have a significant economic
impact in the greater Central American region since it constitutes a
key component of the Pacific Corridor.
4. Coordination With USAID and Other Donors
(a) Coordination during Project Development. In developing the
Transportation Project, the Parties investigated the work of the donors
described below in an effort to ensure that the Transportation Project
[[Page 44452]]
complements, and does not duplicate, replace or harm such work.
A national plan for transport developed by MTI serves as the basis
for donor-funded road projects in Nicaragua. A number of multi-lateral
and bilateral donors and lenders are active in the sector--IDB, World
Bank, Central American Bank for Economic Integration, Denmark, Spain,
and Japan, among others.
The World Bank is in the process of preparing its fourth loan
related to the Nicaraguan road sector, which is expected to total an
additional $70-75 million. In addition to funding civil works for
construction and maintenance of highways, the Bank has funded training
of MTI and micro-enterprises to perform road maintenance. The Bank's
Program for Sustainable Institutional Strengthening of the Road Sector
seeks to institutionally strengthen MTI to improve the quality of road
construction, the reliability of resources allocated to the sector,
road safety, and environmental management. A proposed World Bank loan
is expected to include conditions relating to road maintenance, local
counterpart funds, and social studies.
In 2003, the World Bank and IDB began funding FOMAV to strengthen
its capacity and to better ensure the sustainability of road
investments. IDB is conditioning new projects under its ongoing PPP
Highway Project to Promote Competitiveness on the Government's
contributing money to FOMAV. In addition, IDB chairs, along with the
Minister of Transport and Infrastructure, the Infrastructure
Coordinating Council, a body that coordinates infrastructure policies
and donor activities in Nicaragua.
(b) Coordination during Project Implementation. In an effort to
ensure that the Compact activities are adequately coordinated with the
activities of other donors and financial institutions involved in road
funding in Nicaragua, the Parties and other donors will coordinate in
the construction of various sections of the Pacific Corridor, including
drafting clauses into their agreements to ensure regular meetings to
conduct oversight and to monitor progress.
5. Sustainability
The implementation of the Transportation Project is designed to
support the development of local capacity by providing Nicaraguan
professionals and institutions with experience in implementing the
Program, while maintaining tight fiduciary risk controls. This design
is expected to add to Nicaragua's soft infrastructure--the human
capital base that is essential for the successful design, management
and oversight of public and private projects. While most procurement
for the Transportation Project will be managed by a private firm that
will be selected through an international competitive bidding process,
local staff will be involved in each step of the process.
Both the World Bank and IDB have, in recent years, funded programs
to build the capacity of MTI to manage the transportation sector, make
sound transportation investments (e.g., analytical capabilities,
economic evaluation, etc.), provide maintenance, and expand the
participation of the private sector in providing transportation
services (e.g., maintenance contracting). Under this Project, MCC will
provide additional technical assistance to MTI and FOMAV to build upon
these earlier donor efforts.
Effective road maintenance will be the key to financial
sustainability of the Transportation Project. The present condition of
many primary and secondary roads in Nicaragua is below most acceptable
standards due primarily to a lack of adequate funding and the lack of
proper maintenance standards. Although FOMAV has not secured funds for
2006 or beyond to discharge its road maintenance responsibilities, MTI
and the Ministry of Finance are considering several proposals to create
permanent funding for FOMAV, and the Government has agreed to fund road
maintenance in the amount of $15 million in year 2006, increasing to
$35 million in year 2010. Funding from MCC for the Transportation
Project shall depend on the satisfaction of conditions for ongoing road
maintenance and the funding thereof set forth in relevant Supplemental
Agreements.
The key to ensuring environmental and social sustainability of the
Program and this Project is ongoing public consultation to ensure
optimal design and implementation and to ensure full country-ownership
of the Program. The Technical Secretariat will include an Environmental
and Social Impact (``ESI'') Specialist whose job will be to ensure that
environmental and social mitigation measures (including resettlement
and gender issues) are followed for all Project Activities in
accordance with the provisions set forth in the Compact and other
documents. The ESI Specialist also will serve as the point of contact
for comments and concerns of Project-affected parties regarding the
implementation of all segments of the Compact, and lead the effort to
find feasible resolutions to those problems. The ESI Specialist will
convene periodic public meetings to provide implementation updates and
to identify and address public concerns.
6. Policy and Legal Reform
The Parties have identified the following policy, legal and
regulatory reforms and actions that the Government shall pursue in
support, and to reach the full benefits, of the Transportation Project,
the satisfactory implementation of which will be conditions precedent
to certain MCC Disbursements as provided in the Disbursement Agreement:
(a) Legislation to ensure sustainable maintenance of the national
road network, including adequate funding. Funding targets will be
agreed upon in the Disbursement Agreement, and shall include adequate
funding to FOMAV for road maintenance in accordance with generally
accepted technical standards.
(b) Local governments to provide adequate funding for sustainable
maintenance of the secondary roads that MCC Funding is used to improve.
Funding targets will be agreed upon in the Disbursement Agreement, and
shall include adequate funding for road maintenance in accordance with
generally accepted technical standards.
(c) Legislation on national road safety and enforcement of such
legislation.
Schedule 3 to Annex I--Rural Business Development Project
This Schedule 3 describes and summarizes the key elements of a
rural business development project that the Parties intend to implement
in furtherance of the Rural Business Development Objective (the ``Rural
Business Development Project''). Additional details regarding the
implementation of the Rural Business Development Project will be
included in the Implementation Plan and in relevant Supplemental
Agreements.
1. Background
Despite a comparative advantage in the production, processing and
marketing of agricultural products, more than 70% of the rural
population in Leon-Chinandega is poor. Producers, suppliers, service
providers, processors, and marketing agents frequently work in
isolation or are absent in the region. Women generally are less likely
than men to participate in agricultural organizations, receive
technical assistance or credit or plant higher profit-yielding crops,
despite their significant presence as producers. The region also
suffers from pronounced deforestation and inadequate irrigation for
farming and other productive activities, especially the poor
[[Page 44453]]
communities in the Northern Highlands and in the peninsula of
Cosiguina.
The Rural Business Development Project will support services that
help develop higher-profit agriculture and agribusiness enterprises.
The Project will particularly focus on reaching poor farmers who
require more help in making the transition into these businesses. In
addition, the Project will help sustain these enterprises by linking
and coordinating businesses throughout the farm to market value chain--
producers, entrepreneurs, buyers, service providers, and investors.
Investments in public goods such as applied research and investment
promotion promise to attract investment and expand productivity in the
region. Grants will support activities to improve water supply to
facilitate higher-value, sustainable agriculture and forestry in the
upper watershed areas of the region. This will help poor families that
live in the degraded upper watersheds and, in the long term, protect
business developed downstream from damages caused by environmental
degradation on the hillsides.
2. Summary of Project Activities
MCC Funding will be used to increase profits and wages in farms and
non-farm businesses in Leon-Chinandega through the following
activities:
Rural Business Development Services. Expand higher-profit
agriculture and agribusiness by providing business development
services, disseminating market information, developing improved
production techniques, and managing the two Project Activities
described below;
Technical and Financial Assistance. To help small- and
medium-size farms and agribusinesses transition to higher-profit
activities, provide technical and financial assistance to these
enterprises, including support that will directly offset certain costs
of small farms; and
Grants to Improve Water Supply for Farming and Forest
Production. Based on a watershed management action plan, provide grants
to improve the water supply for irrigation and facilitate higher value,
sustainable agriculture and forestry in the upper watershed areas of
the region.
The M&E Plan (described in Annex III) will set forth anticipated
results and, where appropriate, regular benchmarks that may be used to
monitor implementation progress. Performance against these benchmarks
and the overall impact of the Rural Business Development Project will
be assessed and reported at the intervals to be specified in the M&E
Plan or as otherwise agreed by the Parties from time to time. The
Parties expect that additional indicators will be identified during
Project implementation. Estimated amounts of MCC Funding for each
Project Activity for the Rural Business Development Project are
identified in Annex II of this Compact. The following summarizes the
planned Rural Business Development Project Activities.
(a) Activity: Rural Business Development Services
To assist farms and businesses in developing higher-profit
enterprises, MCC Funding will be used to support rural business
development services that MCA-Nicaragua provides in Leon-Chinandega,
subject to review and approval by MCC. In addition to setting up and
equipping an office of MCA-Nicaragua in Leon-Chinandega (the ``Rural
Office'') that will provide these services, MCC funds will support the
following Rural Office activities:
(i) Collection and dissemination of information about market demand
for products that could be supplied from Leon-Chinandega and
identification of farms and businesses that could produce these
products;
(ii) Development of business plans for farmers and other businesses
(including women-owned enterprises) to meet such market demand, which
plans will identify, among other things, the technical and financial
requirements needed to implement such plans and a specific
implementation strategy and timeframe for doing so;
(iii) Based on the experience and needs of the farms and businesses
supported by the Project, development of policy reform recommendations
needed to help these enterprises grow into higher-profit enterprises;
(iv) Promotion of investment in Leon-Chinandega by (A) stimulating
interest in the region's resources and geographic location, including
through a promotional campaign directed by a specialized public private
agency, Pro-Nicaragua, (B) providing investor services, and (C)
coordinating with other donor program;
(v) Improvement of production techniques through research and
development projects outsourced to local and international universities
and research institutions;
(vi) Monitoring the performance of farms and other businesses that
receive assistance from the Rural Office;
(vii) Management of Project Activities (b) and (c) below by the
Rural Office's expert staff and consultants; and
(viii) Implementation of a gender strategy developed prior to the
implementation of Project Activity (b) below.
The Rural Office will provide the services related to information
dissemination and business plan development to farmers and other
businesses without cost.
(b) Activity: Technical and Financial Assistance
To help farmers and other businesses successfully transition to
higher-profit activities, MCC Funding will help selected small farms
and businesses to obtain specific technical assistance (e.g., agronomic
and business assistance) and funding needed to successfully execute
their businesses plans developed in coordination with the Rural Office.
Technical assistance will include, among other things, training in
complying with sanitary and phytosanitary standards, certification
documentation and bioterrorism regulations, and ensure that businesses
employ environmentally sustainable agricultural practices.
A review committee composed of key Rural Office staff and
specialists from MCA-Nicaragua (including the Rural Business, ESI and
Monitoring and Evaluation Specialists) will (i) develop criteria for
selecting recipients of technical and financial assistance prior to any
MCC Disbursement for the Project, subject to MCC approval, and (ii)
make selections based on such criteria.
The Rural Office will identify independent contractors through a
competitive selection process to provide the technical assistance
funded under this Project Activity. The Rural Office will directly
finance or assist selected farms and businesses to obtain financing
through a network of financial institutions and other donor programs
operating in the region.
(c) Activity: Grants To Improve Water Supply for Farming and Forest
Production
To improve the supply of water for irrigation and encourage
producers to transition to more environmentally sustainable land use in
the upper watershed areas of Leon-Chinandega, MCC funds will support:
(i) Preparation of a watershed management action plan (the
``Watershed Plan'') by a water and natural resource specialist that the
Rural Office will employ and an implementing entity that the Rural
Office engages through a competitive selection process. The Watershed
Plan, which the Rural Office will adopt, subject to MCA-Nicaragua and
MCC approval, will, among other things:
[[Page 44454]]
(1) Analyze the watershed in Leon-Chinandega;
(2) Prioritize sites and potential investments to address problems
that cause water deficiencies, flooding, erosion and other water-
related issues in the region; and
(3) Identify (A) potential risks to other parts of the watershed
that may result from these investments and (B) proposed measures to
mitigate these risks.
(ii) Based on the Watershed Plan, an implementing entity that the
Rural Office engages through a competitive selection process will
solicit proposals for projects in the following investment areas, which
proposals can either be funded by grants using MCC Funding or developed
for funding by other donors:
(1) Investments in site-specific, small-scale irrigation schemes,
soil conservation structures, reforestation activities and other water
management measures; and/or
(2) Investments in higher value farming and/or forestry in this
region. Proposed grants will be supported only if they (A) specifically
fit within the Watershed Plan, (B) clearly demonstrate the potential to
increase income in the community where the investment will be made, and
(C) meet an investment criteria of at least a ten percent (10%)
economic rate of return and an acceptable financial rate of return (at
least eight percent (8%). The implementing entity will select the
projects to be supported with MCC Funding, subject to the approval of
the review committee described in Section 2(b) above, MCA-Nicaragua and
MCC.
To ensure sustainability of the investments made with MCC Funding,
the implementing entity will assist grant recipients to (i) build
community support for a proposed investment, (ii) adopt sound business
management practices for the development and operation of the
investment, and (iii) establish the legal entities and financial
mechanisms necessary to provide for maintenance, replacement and
improvement of investments over time.
The expected results from, and the key benchmarks to measure
progress on, these activities are set forth in Annex III.
3. Beneficiaries
The principal direct Project beneficiaries are expected to be
relatively poor households employed in agriculture or with small farms.
Agribusinesses and other micro-, small- and medium-sized enterprises
also will benefit from new or expanded market opportunities created
under the Project. The Project Activities related to grants for
improving water supply will expand income growth benefits to some of
the poorest households in the region while protecting agricultural
enterprises from future resource degradation.
4. Coordination With USAID and Other Donors
(a) USAID. The Rural Office and USAID will coordinate in four
strategic areas:
(i) Business development activities. The objectives of MCC- and
USAID-supported agribusiness development activities are similar. Both
will support technical assistance to help beneficiaries develop better
business operations, overcome constraints to competitiveness, and work
toward strengthening the linkages in the value chain. However, USAID's
agribusiness development projects are national in scope while the MCC
Project will focus intensively on Le[oacute]n-Chinandega. MCC and USAID
will coordinate closely to ensure their programs operate in a
complementary fashion and benefit the largest possible number of
farmers and agro-entrepreneurs. Together, U.S. Government efforts will
offer a wider array of services and impact a larger client-base by
encouraging implementing partners to coordinate effectively.
(ii) Development Credit Authority (DCA). The DCA guarantee program
encourages banks to lend for the types of agricultural and agribusiness
enterprises that will be supported by the Project. The Rural Office
staff will engage financial institutions that qualify for the DCA
program by encouraging Project farmers and agribusinesses with
``bankable'' business activities to take advantage of financial
services from such financial institutions.
(iii) Advocacy for Policy Reform. The Rural Office will channel
priority policy reform issues from Le[oacute]n-Chinandega into national
dialogue through USAID's partners, thereby magnifying USAID policy
reform efforts.
(iv) SPS Capacity Building (SPSCB). USAID is supporting USDA to
help the Government develop a national fee-based SPS certification
system for a variety of agricultural products such as meats, dairy,
seafood, poultry, fruits and vegetables. The SPSCB will be a strong
Rural Office partner in building up regional capacity in these areas
and increasing the region's export capacity.
MCC, USAID and other U.S. Government agencies will ensure ongoing
coordination and optimization of U.S. Government funding by calling on
their implementing partners to coordinate activity implementation plans
and by continuing to participate in efforts like the trade capacity
building process established in support of DR-CAFTA.
(b) Other Donors. Japan, Sweden, Denmark, other Nordic and European
countries, the European Union, the Inter-American Development Bank and
the World Bank support projects that complement the Rural Business
Development Project, such as grants for productive infrastructure
(rural roads, electrification, irrigation, reforestation, etc.),
competitiveness of the agricultural and light manufacturing sector, and
trade capacity building. The Rural Office will strive to improve
operational-level coordination among donor programs in the region in
relation to rural business development. Specifically, close
collaboration with the IDB's ``Rural Productive Infrastructure'' and
``POSAF'' programs could help improve access to financing for the Rural
Office's clientele. The World Bank's nation-wide technical assistance
project could help strengthen national institutions and expand
technical assistance to agriculture.
5. Sustainability
The Rural Office's primary objective is to increase the economic
viability of farmers and agribusinesses in Le[oacute]n-Chinandega.
Initially, the Rural Office will be established as a subsidiary entity
to MCA-Nicaragua based on the view that the impacts, rather than the
Rural Office itself, must be sustainable. Selection criteria for
activities funded under the Project will include potential for self-
sustaining business models. Similarly, expanded horticultural
production will create economies of scale that reduce the unit costs of
inputs and post-harvesting services. The Project is expected to improve
rural access to finance through its financial literacy campaign and by
promoting ``bankable'' business activities. As bankers understand the
profit potential of new demand from Program farmers, they are likely to
respond by developing the financial products and services needed.
A sustainable capacity to produce and market products from the
region with relatively high earning potential will remain even if the
Rural Office itself does not remain in operation at the end of the
Compact Term. The Rural Office itself, however, may become a
sustainable operation if its services fill a market demand.
The watershed management action plan will provide a basis for
improving environmental sustainability of land uses throughout the
region. The grants to improve water supply will not only allow more
rural households to engage in higher value activities promoted by
[[Page 44455]]
the Rural Office, but will also contribute to the sustainability of
farming and forest production throughout the region over the long term.
Beneficiaries will be assisted in establishing business models that
will pay costs associated with maintaining investments over time.
Environmental and social sustainability of the Program will be
achieved through ongoing public consultation to ensure optimal design
and implementation and to ensure full country-ownership of the Program.
The ESI Specialist within MCA-Nicaragua will ensure that environmental
and social mitigation measures (including for gender issues) are
followed for all Project Activities in accordance with the provisions
set forth in the Compact and other documents.
6. Policy and Legal Reform
(a) Performance Criteria. The Parties have identified the following
policy, legal and regulatory reforms and actions that the Government
shall pursue in support, and to reach the full benefits, of the Rural
Business Development Project, the satisfactory implementation of which
will be conditions precedent to certain MCC Disbursements as provided
in the Disbursement Agreement:
(i) Continue with customs union and tariff harmonization with other
Central American countries; and
(ii) Expedite the approval procedures for the importation of seeds
for planting.
(b) Indicative Goals. To improve its level of performance under the
policy criteria identified in Section 607 of the Act and the MCA
Eligibility Criteria, the Government will pursue the following
legislative and policy reforms:
(i) Improvement in bankruptcy laws so that creditors and debtors
have predictable, equitable and transparent mechanisms for resolving
creditor claims;
(ii) Improvement in the efficiency and predictability of contract
enforcement, including by enacting effective alternative dispute
resolution mechanisms; and
(iii) Legislation governing pledges of moveable and real property
collateral so that (among other things):
(1) Such laws are updated, particularly to eliminate uncertainty
and unnecessarily formalistic requirements;
(2) In the case of moveable property, the law allows for notice-
based perfection of security interests through the filing of a general
description of collateral in an easily-accessible centralized registry;
and
(3) Such laws allow for enforcement of security interests through
extra-judicial self-help and by speedy and reliable judicial processes.
The Government also will consider such other of legal or policy
reforms that the Rural Office identifies as needed to improve
competitiveness of its potential clients and their access to credit.
Annex II--Financial Plan Summary
This Annex II to the Compact (the ``Financial Plan Annex'')
summarizes the Multi-Year Financial Plan for the Program. Each
capitalized term in this Financial Plan Annex shall have the same
meaning given such term elsewhere in this Compact.
1. General. A multi-year financial plan summary (``Multi-Year
Financial Plan Summary'') is attached hereto as Exhibit A. By such time
as specified in the Disbursement Agreement, MCA-Nicaragua will adopt,
subject to MCC approval, a Multi-Year Financial Plan that includes, in
addition to the multi-year summary of anticipated estimated MCC Funding
and the Government's contribution of funds and resources, an estimated
draw-down rate for the first year of the Compact based on the
achievement of performance milestones, as appropriate, and the
satisfaction or waiver of conditions precedent. Each year, at least 30
days prior to the anniversary of the Entry Into Force, the Parties
shall mutually agree in writing to a Detailed Financial Plan for the
upcoming year of the Program, which shall include a more detailed plan
for such year, taking into account the status of the Program at such
time and making any necessary adjustments to the Multi-Year Financial
Plan.
2. Implementation and Oversight. The Financial Plan shall be
implemented by MCA-Nicaragua, consistent with the approval and
oversight rights of MCC and the Government as provided in this Compact,
the Governance Agreement and the Disbursement Agreement.\4\
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\4\ The role of civil society in the implementation of the
Compact (including through participation on the Board of Directors),
the responsibilities of the Government and MCC in achieving the
Objectives, and the process for the identification of beneficiaries
are addressed elsewhere in this Compact and therefore are not
repeated here.
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3. Estimated Contributions of the Parties. The Multi-Year Financial
Plan Summary identifies the estimated annual contribution of MCC
Funding for Program administration, monitoring and evaluation, and each
Project. The Government's contribution of resources to Program
administration, monitoring and evaluation, and each Project shall
consist of (i) ``in-kind'' contributions in the form of Government
Responsibilities and any other obligations and responsibilities of the
Government identified in the Compact, including contributions
identified in the notes to the Multi-Year Financial Plan Summary, (ii)
such other contributions or amounts as identified in notes to the
Multi-Year Financial Plan Summary, and (iii) such other contributions
or amounts as may be identified in relevant Supplemental Agreements
between the Parties or as may otherwise be agreed by the Parties;
provided, in no event shall the Government's contribution of resources
be less than the amount, level, type and quality of resources required
to effectively carry out the Government Responsibilities or any other
responsibilities or obligations of the Government under or in
furtherance of this Compact.
4. Modifications. The Parties recognize that the anticipated
distribution of MCC Funding between and among the various Program
activities and Project Activities will likely require adjustment from
time to time during the Compact Term. In order to preserve flexibility
in the administration of the Program, the Parties may, upon agreement
of the Parties in writing and without amending the Compact, change the
designations and allocations of funds between Program administration
and a Project, between one Project and another Project, between
different activities within a Project, or between a Project identified
as of the entry into force of this Compact and a new Project, without
amending the Compact; provided, however, that such reallocation (i) is
consistent with the Objectives, (ii) does not cause the amount of MCC
Funding to exceed the aggregate amount specified in Section 2.1(a) of
this Compact, (iii) does not cause the Government's obligations,
responsibilities or overall contribution of resources to be less than
specified in Section 2.2(a) of this Compact, this Annex II or elsewhere
in the Compact, and (iv) does not extend the Compact Term.
5. Conditions Precedent; Sequencing. MCC Funding will be disbursed
in tranches. The obligation of MCC to approve MCC Disbursements and
Material Re-Disbursements for the Program and each Project is subject
to satisfactory progress in achieving the Objectives and on the
fulfillment or waiver of any conditions precedent specified in the
Disbursement Agreement for the relevant Program activity, Project or
Project Activity. The sequencing of Project Activities and other
aspects of how the Parties intend the Projects to be implemented will
be set forth in the Implementation Plan, including Work Plans for the
applicable
[[Page 44456]]
Project, and MCC Disbursements and Re-Disbursements will be disbursed
consistent with that sequencing.
[GRAPHIC] [TIFF OMITTED] TN02AU05.014
Exhibit A: Notes
\1\ Costs are based on U.S. Army Corp of Engineers' assessment
using a ``rough order of magnitude'' (ROM) cost estimate which
includes all feasibility studies and designs, construction
(including bridges/drainage), procurement, and contingencies. MCC
Funding will be disbursed only upon satisfaction of (i) completion
of a detailed Project management plan and coordination plan by MCA-
Nicaragua in conjunction with the Infrastructure Specialist, and
(ii) other conditions set out in the Disbursement Agreement.
\2\ Actual costs for construction of N-I Road will need to be
fully developed during the feasibility stage of Project execution.
Initial funds will be disbursed for design and feasibility studies.
However, funds for construction will only be disbursed upon
satisfaction of conditions for road maintenance as set forth in
relevant Supplemental Agreements.
\3\ Secondary road cost estimates are based on three candidate
roads that are typical of the secondary roads that could be funded
under the Compact. Actual roads funded may be different based on
selection criteria, but the total amount allotted to this Project
Activity is capped. Local governments shall dedicate adequate
funding for sustainable road maintenance for the secondary roads in
their jurisdictions as set forth in the Disbursement Agreement.
\4\ Amounts shown are U.S. Dollars in millions.
\5\ Although most Project Activities will take place from Year 1
through Year 4 (except for roads), the five-year Compact Term will
allow additional time to ensure that Project Activities are
completed. Monitoring and Evaluation will continue after the
completion of the Project Activities.
\6\ These amounts will be disbursed only upon satisfaction of
obtaining requisite approvals by a review committee within the Rural
Office and MCC as set forth in the Disbursement Agreement.
\7\ The Government will provide in-kind contributions in the
form of staff time and resources towards data collection and other
monitoring and evaluation functions.
[[Page 44457]]
\8\ The Government will provide in-kind contributions in the
form of staff time and resources to work toward the expected results
of this Project.
Annex III--Description of the M&E Plan
This Annex III to the Compact (the ``M&E Annex'') generally
describes the components of the M&E Plan for the Program. Each
capitalized term used but not defined in this M&E Annex shall have the
same meaning given such term elsewhere in this Compact; provided,
however, that the term ``Parties'' in this M&E Annex shall mean MCC and
the Government (or a mutually acceptable Government Affiliate or
Permitted Designee).
1. Overview
The Parties shall formulate, agree to, and the Government shall
implement, or cause to be implemented, an M&E Plan that specifies (i)
how progress toward the Compact Goal, Objectives and Project Activities
will be monitored (the ``Monitoring Component''), (ii) a methodology,
process and timeline for the evaluation of planned, ongoing, or
completed Project Activities to determine their efficiency,
effectiveness, impact and sustainability (the ``Evaluation
Component''), and (iii) other components of the M&E Plan described
below. Information regarding the Program's performance, including the
M&E Plan, and any amendments or modifications thereto, as well as
periodically-generated reports, will be made publicly available on the
MCA-Nicaragua Web site and elsewhere.
2. Monitoring Component
To monitor progress toward the achievement of the Project
Activities, the Objectives and the Compact Goal, the Monitoring
Component of the M&E Plan shall identify (a) the Indicators, (b) the
party or parties responsible, the timeline, and the instrument for
collecting data and reporting on each Indicator to MCA-Nicaragua, and
(c) the method by which the reported data will be validated.
(a) Indicators. The M&E Plan shall measure the results of the
Program using quantitative, objective and reliable data
(``Indicators''). Each Indicator will have one or more expected results
that specify the expected value and the expected time by which that
result will be achieved (``Target''). The M&E Plan will measure and
report four types of Indicators. First, the Compact Goal Indicators
(each, a ``Goal Indicator'') will measure the impact of the Program on
the incomes of Nicaraguans who participate or are covered by the
Program (collectively, ``Beneficiaries''). Second, Objective Indicators
(each, an ``Objective Indicator'') will measure the final results of
the Projects in order to monitor their success in meeting the
Objectives. Third, Outcome Indicators (each, an ``Outcome Indicator'')
will measure the intermediate results of goods and services delivered
under each Project in order to provide an early measure of the likely
impact of the Projects on the Objectives. Fourth, Project Activity
Indicators (each, an ``Activity Indicator'') will measure the delivery
of key goods and services in order to monitor the pace of Project
Activity execution. For each Outcome Indicator, Objective Indicator,
and Goal Indicator, the M&E Plan shall define a strategy for obtaining
and verifying the value of such Indicator prior to undertaking any
activity that affects the value of such Indicator (such value, a
``Baseline''). All Indicators will be disaggregated by gender, income
level and age, to the extent practicable.
(i) Goal Indicator. The M&E Plan shall contain the Goal Indicators
listed in the table below. The Project Activities undertaken by the
Program are expected to increase the incomes of Beneficiaries. The
increase in income that accrues to a group of Beneficiaries as a result
of one or more Project Activities over a period of time constitutes
expected income gains (``Expected Income Gains''). The M&E Plan shall
contain Goal Indicators that shall measure the change in the income of
Beneficiaries attributable to the relevant Projects. MCA-Nicaragua,
with approval from MCC, must define a methodology for estimating an
Expected Income Gain prior to the disbursement of funds for any Project
Activity that may influence that Expected Income Gain. Such a
methodology should measure the difference between the actual income of
Beneficiaries and the estimated value of what their income would have
been without the Program.
Compact Goal: Increased Economic Growth and Reduced Poverty
----------------------------------------------------------------------------------------------------------------
Indicators (All Year numbers are in millions of USD) Year 5 Year 6 Year 10
----------------------------------------------------------------------------------------------------------------
Total Expected Income Gains..................................... $20.94 $48.22 $51.91
Expected Income Gains of N-I Road Upgrade \1\................... $5.73 $6.96 $9.86
Beneficiaries: Users of roads and employees of businesses
that use roads.............................................
Expected Income Gains of Secondary Roads Upgrade \2\............ $8.59 $7.73 $5.07
Beneficiaries: Communities surrounding secondary roads and
users of roads.............................................
Expected Income Gains of Property Regularization \3\............ $3.88 $3.96 $4.21
Beneficiaries: Recipients of registered regularized titles..
Expected Income Gains of Rural Business Development \4\......... .............. $24.52 $27.73
Beneficiaries: Program businesses and employees of program
farmers and businesses.....................................
Expected Income Gains of Rural Business Development \5\......... $2.73 $5.05 $5.05
Beneficiaries: Employees of businesses in value chain.......
Expected Income gains of Improvement of Water Supply for Farming
and Forest Production \6\...................................... This will be estimated at the end of Year 1
after completion of the Watershed Management
Action Plan. All projects financed will
require a minimum economic rate of return of
10% and an acceptable financial rate of return
(at least 8%).
Beneficiaries: Communities sourrounding water supply
project(s).................................................
----------------------------------------------------------------------------------------------------------------
\1\ For the N-I Road, the expected income gains are derived from savings due to reduced vehicle operating costs
and travel time.
\2\ For secondary road upgrading, the expected income gains are calculated based on costs of $30 million per
year in years 1 and 2, and benefits beginning in year 2, with a minimum return of 8% and annual depreciation
of 10%. This estimate will be revised at the end of Year 1 when the roads selected are confirmed and all
design studies and environmental assessments are completed. Income gains are derived from savings due to
reduced vehicle operating costs and travel time.
\3\ Expected income gains are defined as annual increase in property value per manzana * the number of manzanas
registered.
[[Page 44458]]
\4\ Expected income gains are defined as the increase in Value Added to the Firm, calculated as profits + labor
costs, per manzana of a typical horticulture crop minus the value added per manzana of cattle grazing (US$100)
* number of manzanas harvesting this typical horticulture crop. A typical horticulture crop is defined as the
average of plantain, cashew and organic sesame, crops suitable for Nicaragua. Reporting on this indicator does
not begin until Year 6, because tree crops do not produce yields for at least three years after planting.
\5\ Expected income gains are defined as Value Added from Employment, calculated as an average annual wage rate
of $500 * the number of jobs created * 0.5 (0.5 = discount for wages earned of those previously employed).
\6\ Expected income gains will be determined when the specific improvement of water supply activities are
specified, and will require a minimum economic rate of return of 10%. Specific improvement of water supply
activities are expected to be determined by the end of Year 1.
(ii) Outcome and Objective Indicators. The M&E Plan shall contain
the Objective and Outcome Indicators listed in the table below. MCA-
Nicaragua, subject to prior written approval from MCC, may only add
Objective and Outcome Indicators or refine the Targets of existing
Objective and Outcome Indicators prior to any MCC Disbursement or Re-
Disbursement for any Project or Project Activity that may influence
that Indicator, unless the Parties otherwise agree in writing.
Property Regularization Project \1\
[Objective: Increase investment by strengthening property rights]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline \2\ Year 1 Year 2 Year 3 Year 4 Year 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Objective Level Indicators
(Metric of Project success
observable by end of Compact.)
Value of investment on land.. TBD .............. .................... 16% over baseline... .................... 32% over baseline
Value of land (urban) \3\.... $519.00 $529.54 $540.30............. $551.28............. $562.47............. $573.90
Value of land (rural) \3\.... $404.00 $412.21 $420.58............. $429.12............. $437.84............. $446.74
Outcome Level Indicators
(Early indicators of Project
Activities impact on
objectives.)
Time to conduct a land 65 days .............. 15.9% decrease from 29.3% decrease from 40.5% decrease from 50% decrease from
transaction \4\. baseline. baseline. baseline. baseline.
Full cost to conduct a land 6.50% .............. 25% decrease from .................... .................... 50% decrease from
transaction 4, 5. baseline. baseline.
Perception of tenure security TBD .............. 30% increase over .................... .................... 50% increase over
baseline. baseline.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes to Property Regularization Project Table:
\1\ Information in this table is based on survey data from the World Bank PRODEP Project in Nicaragua.
\2\ Final baselines will be established during the initial implementation of the Project.
\3\ Values are reported in constant U.S. Dollars.
\4\ Baselines for time and cost to conduct a land transaction are preliminary.
\5\ Cost to conduct a land transaction targets are expressed as a percent of the value of the transaction.
Transportation Project
[Objective: Reduce transportation costs between Leon and Chinandega and national, regional and global markets]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline Year 5 Year 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Objective Level Indicators (Metric
of Project success observable by
end of Compact.)
Annual average daily traffic R1 2,146.............................. R1 2,639............................. R1 3,416
volume \1, 2.
R2 1,156.............................. R2 1,422............................. R2 1,841
Secondary Roads: TBD.................. Secondary Roads: TBD................. Secondary Roads: TBD.
Gap between farm-gate price TBD................................... ..................................... .....................................
and free-on-board price \3\.
Price of basket of goods \4\.. TBD................................... ..................................... .....................................
Outcome Level Indicators (Early
indicators of Project Activities
impact on objectives.)
Cost per journey (Travel time) Secondary Roads: TBD.................. Secondary Roads: TBD................. Secondary Roads: TBD
\5\.
Cost per journey R1 7.2................................ R1 2.4............................... R1 2.7
(International roughness
index) \6\.
R2 8.3................................ R2 2.4............................... R2 2.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes to Transportation Project Table:
\1\ R1 and R2 represent different sections of the N-I Road being upgraded.
\2\ This information will be a requirement of the secondary roads proposals submitted to the Program. Information will be verified as part of the
secondary roads selection process, prior to disbursement of Project funds.
\3\ Farm-gate prices and free-on-board prices will depend on type of crop grown and will be confirmed by implementing entity(ies) as part of reporting
requirements.
\4\ Price of basket of goods will depend on where secondary roads are upgraded and will be determined when secondary roads are selected.
[[Page 44459]]
\5\ Secondary roads.
\6\ N-I Road.
Rural Business Development Project
[Objective: Increase the value added of farms and enterprises in the region]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline \1\ Year 1 Year 2 Year 3 Year 4 Year 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Objective Level Indicators
(Metric of Project success
observable by end of Compact):
Number of program 0 .............. 720................. 1,800............... 3,090............... 4,720
businesses, including
farms, engaged in higher
profit businesses by year
end.
Number of program manzanas 0 .............. 5 manzanas per Farm. 5 manzanas per Farm. 5 manzanas per Farm. 5 manzanas per Farm.
transitioned to higher-
value crops by year end.
Annual percentage increase 0 .............. 17%................. 17%................. 17%................. 17%
in value added of clients
of business center \2\.
Number of jobs created...... 0 .............. 250................. 1,750............... 3,850............... 7,000
Number of program manzanas 0 .............. 1,500............... 4,000............... 7,750............... 10,000
harvesting higher-value
crops or reforesting under
improvement of water supply
activities \3\.
Outcome Level Indicators (Early
indicators of Project
Activities impact on
objectives):
Number of business plans 0 790 1,340............... 1,830............... 2,280............... 300
prepared by clients with
assistance of Rural
Business Center (year end)
\4\.
Dollars of new investment in
Le[oacute]n and Chinandega.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes to Rural Business Development Project Table:
\1\ Baseline data for each Indicator will be verified prior to undertaking any activity that affects the value of such Indicator.
\2\ Annual percentage increase will be calculated against the baseline value added of client business activity, as reported on intake survey.
\3\ These numbers will be revised at the end of Year 1 after completion of the Watershed Management Action Plan.
\4\ Project will not work with any new businesses in Year 5.
(iii) Activity Indicators. Prior to the disbursement of MCC Funding
for any Project Activity, the Implementing Entity of that Project
Activity must propose a set of Activity Indicators that is approved in
writing by its Project Manager, MCA-Nicaragua and MCC. The M&E Plan
shall be amended to reflect the addition of such Indicators. The table
below shows a notional list of Activity Indicators that the M&E Plan
may contain.
Property Regularization Project
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity Level Indicators Year 1 Year 2 Year 3 Year 4 Year 5 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Property Regularization:
Automated registry-cadastre database installed...... 25% 75% .............. .............. .............. 100%
Number of parcels with a registered title, rural and 1,000 8,754 7,400 3,846 .............. 21,000
urban (total of 21,000 and 22,000, rural and urban, 978 8,250 7,272 5,500 22,000
respectively)......................................
Protected areas demarcated.......................... 0.4 3.6 .............. .............. .............. 4
Number of protected area management plans 1 1 1 1 .............. 4
implemented........................................
Number of conflicts resolved by program mediation... 500 2,000 1,500 .............. .............. 4,000
Number of manzanas covered by cadastral mapping..... 172,288 394,000 174,286 .............. .............. 740,574
--------------------------------------------------------------------------------------------------------------------------------------------------------
Transportation Project
----------------------------------------------------------------------------------------------------------------
Activity Level Indictors Year 3 Year 5 Total
----------------------------------------------------------------------------------------------------------------
N-I Road:
Kilometers of road upgraded........ 0 58......................... 58
Secondary Roads \1\:
Kilometers of road upgraded........ .............. Up to 100.................. Up to 100
----------------------------------------------------------------------------------------------------------------
Notes to Transportation Project Table:
\1\ Kilometers of secondary roads upgraded will be confirmed by the end of Year 1, when design studies and
environmental assessments are completed.
[[Page 44460]]
Rural Business Development Project
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity Level Indicators Year 1 Year 2 Year 3 Year 4 Year 5 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rural Business Development Centers:
Value of TA and support services $344,081..................... $1,376,323 $2,064,485 $3,096,728 .............. $6,881,617
delivered to program businesses \1\.
Improvement of Water Supply for Farming
and Forest Production \2\:
Watershed Management Action Plan..... Completed.
Funds disbursed for improvement of ............................. 1,770,000 2,950,000 4,425,000 2,655,000 11,800,000
water supply for farming and forest
production projects.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes to Rural Business Development Project Table:
\1\ This indicator will be disaggregated by source of funding, including MCA-Nicaragua.
\2\ Indicators will be verified at the end of Year 1, after the Watershed Management Action Plan is completed and projects are developed.
(b) Data Collection and Reporting. The M&E Plan shall establish
guidelines for data collection and a reporting framework, including a
schedule of Program reporting and responsible parties. The Technical
Secretariat shall conduct regular assessments of program performance to
inform MCA-Nicaragua, Project Managers and the MCC of progress under
the Program and to alert these parties to any problems. These
assessments will report the actual results compared to the Targets on
the Indicators referenced in the Monitoring Component, explain
deviations between these actual results and Targets, and in general,
serve as a management tool for implementation of the Program. With
respect to any data or reports received by MCA-Nicaragua, MCA-Nicaragua
shall promptly deliver such reports to MCC along with any other related
documents, as specified in this Annex III or as may be requested from
time to time by MCC. With respect to the Rural Business Development
Project, the Rural Business Development Center will conduct intake
surveys to establish baselines for value added of either farms or firms
or value chains. With the assistance of an on-site data quality
reviewer, the Center will track the same information over time and use
this information for performance evaluations and managing the resources
of the Center.
(c) Data Quality Reviews. From time to time, as determined in the
M&E Plan or as otherwise requested by MCC, the quality of the data
gathered through the M&E Plan shall be reviewed to ensure that data
reported are as valid, reliable, and timely as resources will allow.
The objective of any data quality review will be to verify the quality
and the consistency of performance data across different implementation
units and reporting institutions. Such data quality reviews also will
serve to identify where those levels of quality are not possible, given
the realities of data collection. The data quality reviewer shall enter
into an Auditor/Reviewer Agreement with MCA-Nicaragua in accordance
with Annex I.
3. Evaluation Component
The Program shall be evaluated on the extent to which the
interventions contribute to the Compact Goal. The Evaluation Component
shall contain a methodology, process, and timeline for analyzing data
in order to assess planned, ongoing, or completed Project Activities to
determine their efficiency, effectiveness, impact, and sustainability.
This component should use state-of-the-art methods for addressing
selection bias and should make provisions for collecting data from both
treatment and control groups, where practicable. The Evaluation
Component, which shall contain two types of reports, (a) a Final
Evaluation and (b) Ad Hoc Evaluations, shall be finalized prior to any
MCC Disbursement or Re-Disbursement for specific Project Activities.
(a) Final Evaluation. MCA-Nicaragua, with the prior written
approval of MCC, may engage an independent evaluator to conduct an
evaluation at the expiration or termination of the Compact Term
(``Final Evaluation'') at MCC's election, MCC may engage such
independent evaluator. The Final Evaluation must at a minimum (i)
evaluate the efficiency and effectiveness of the Project Activities;
(ii) estimate, in a statistically valid way, the causal relationship
between the Projects and the Compact Goal; (iii) determine if and
analyze the reasons why the Compact Goal was or was not achieved; (iv)
identify positive and negative unintended results of the Program; (v)
provide lessons learned that may be applied to similar projects; and
(vi) assess the likelihood that results will be sustained over time. To
the extent engaged by MCA-Nicaragua, such independent evaluator shall
enter into an Auditor/Reviewer Agreement with MCA-Nicaragua in
accordance with Annex I.
(b) Ad Hoc Evaluations. Either MCC or MCA-Nicaragua may request ad
hoc or interim evaluations or special studies of Projects, Project
Activities, or the Program as a whole prior to the expiration of the
Compact Term. If MCA-Nicaragua engages an evaluator, the evaluator will
be an externally contracted independent source selected by MCA-
Nicaragua, subject to the prior written approval of MCC, following a
tender in accordance with the Procurement Guidelines, and otherwise in
accordance with any relevant Implementation Letter or Supplemental
Agreement. The cost of an independent evaluation or special study may
be paid from MCC Funding. If MCA-Nicaragua requires an independent
evaluation or special study at the request of the Government for any
reason, including for the purpose of contesting an MCC determination
with respect to a Project or Project Activity or to seek funding from
other donors, no MCC Funding or MCA-Nicaragua resources may be applied
to such evaluation or independent study without MCC's prior written
approval.
4. Other Components of the M&E Plan
In addition to the Monitoring and Evaluation Components, the M&E
Plan shall include the following components for the Program and each
Project and Project Activity, including, where appropriate, roles and
responsibilities of the relevant parties and Providers:
(a) Costs. A detailed cost estimate for all components of the M&E
Plan Plan.
(b) Assumptions and Risks. Any assumptions and risks external to
the Program that underlie the accomplishment of the Objectives;
provided, however, such assumptions and risks shall not excuse
performance of the Parties, unless otherwise expressly agreed to in
writing by the Parties.
[[Page 44461]]
5. Implementation of the M&E Plan
(a) Approval and Implementation. The approval and implementation of
the M&E Plan, as amended from time to time, shall be in accordance with
the Program Annex, this M&E Annex, the Governance Agreement, and any
other relevant Supplemental Agreement.
(b) MCC Disbursement and Re-Disbursement for a Project Activity.
Unless the Parties otherwise agree in writing, prior to, and as a
condition precedent to, any initial MCC Disbursement or Re-Disbursement
with respect to a certain Project or Project Activities, the baseline
data or report with respect to such Project or Project Activity, as
applicable and as specified in the Disbursement Agreement, must be
completed in form and substance satisfactory to MCC. As a condition to
each MCC Disbursement or Re-Disbursement, there shall be satisfactory
progress on the M&E Plan for the relevant Project or Project Activity,
and substantial compliance with the M&E Plan, including any reporting
requirements, as further specified in the Disbursement Agreement.
(c) Modifications. Notwithstanding anything to the contrary in the
Compact, including the requirements of this M&E Annex, MCC and the
Government (or a mutually acceptable Government Affiliate or Permitted
Designee) may modify or amend the M&E Plan or any component thereof,
including those elements described herein, without amending the
Compact; provided, any such modification or amendment of the M&E Plan
has been approved by MCC in writing and is otherwise consistent with
the requirements of this Compact and any relevant Supplemental
Agreement between the Parties.
[FR Doc. 05-15216 Filed 8-1-05; 8:45 am]
BILLING CODE 9210-01-P