El Salvador and the Millennium Challenge Corporation Sign $461 Million Agreement to Strengthen Rural Communities, Support Small Farmers, and Improve Roads

Washington, D.C. – In a ceremony witnessed by senior leaders of El Salvador and the United States, the two countries signed a $461 million development agreement today aimed at reducing poverty in the Central American nation.

Ambassador John Danilovich, CEO of the Millennium Challenge Corporation and Eduardo Zablah, Technical Secretary to the Presidency of El Salvador signed the Compact. Salvadoran President Antonio Saca and U.S. Trade Representative Susan Schwab, a member of MCC’s Board of Directors, witnessed the signing.

The five-year Compact with El Salvador seeks to stimulate economic growth and poverty reduction in the country’s northern region where more than 50 percent of the population live below the poverty line. The grant will improve the lives of approximately 850,000 Salvadorans through strategic investments in education, public services, agricultural production and rural business development, and transportation infrastructure. This is the eleventh Millennium Challenge Compact completed to date and the third in Latin America. Compacts with Honduras and Nicaragua signed last year are now in the implementation phase. All three countries are signatories to the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR).

“El Salvador is making considerable strides to build peace and prosperity for its citizens and to foster regional integration and trade throughout the CAFTA-DR region and the hemisphere,” said Ambassador Danilovich. “This Compact furthers El Salvador’s economic development and positions the country as an active contributor and beneficiary of the ever-emerging opportunities in the region,” he added. “Sound economic policies, solid democratic institutions responsive to the needs of the people, enhanced human capital, and improved infrastructure are the basis for sustained economic growth, poverty eradication and employment creation. This agreement is a testament to El Salvador’s strong commitment to good governance and to building the necessary institutional framework for aid to be used effectively. President Saca is a valued partner in the fight against poverty, and I applaud his leadership. MCC looks forward to building on this partnership as we begin implementation,” said Ambassador Danilovich.

The first of three components, the $95 million human development project, is designed to support formal and non-formal education as well as expand access to water, sanitation, and electricity that will benefit poor communities. Second, the $87 million productive development project seeks to help poor farmers and small and medium sized enterprises successfully transition to higher-profit activities, generating new investment, expanding markets and sales, and creating new jobs and increased incomes for the poor. Finally, the $234 million transportation project includes the design, construction, and rehabilitation of the Northern Transnational Highway and a network of connecting roads that will connect rural households to national and regional markets and decrease shipping costs and travel times. The Compact also includes $45 million for program administration and monitoring and evaluation.

Since its establishment in 2004, MCC has signed Compacts totaling almost $3 billion with eleven nations: Madagascar, Honduras, Cape Verde, Nicaragua, Georgia, Benin, Vanuatu, Armenia, Ghana, Mali, and El Salvador. MCC is also actively engaging with other eligible countries in Compact negotiations.

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Millennium Challenge Corporation (MCC), a United States government corporation designed to work with some of the poorest countries in the world, is based on the principle that aid is most effective when it reinforces good governance, economic freedom, and investments in people that promote economic growth and elimination of extreme poverty.