Skip to Content

United States Approves $215 Million Investment in Honduras To Increase Trade Capacity and Assist Rural Poor

Washington, DC – U.S. Trade Representative Rob Portman today joined the other members of the Millenium Challenge Corporation (MCC) Board of Directors in approving a $215 million Compact with Honduras. The Compact will help the country maximize trade opportunities in the Central America-Dominican Republic Free Trade Agreement (CAFTA) and will improve lives of the rural poor by fostering economic growth.

"We are combining trade with aid to generate economic growth and reduce poverty," said Ambassador Rob Portman, who serves on the Board of the MCC. "The United States is committed to helping our Central American trade partners like Honduras make the most of the opportunities presented by free trade. An economically sound and democratically secure Central America is in our country’s national interest."

A recent World Bank analysis showed that the implementation of CAFTA will raise the standard of living for the vast majority of the population. When combined with investments in education, rural infrastructure and rural finance, CAFTA will offer new opportunities to the rural poor. The Honduras Compact provides significant funding for such programs.

This compact augments the discussion between the United States, Central America and the Dominican Republic in late April on trade capacity building initiatives in support of the free trade agreement. U.S. assistance stemming from this cooperative effort has increased from approximately $66 million in 2003 to an estimated $80 million in 2004. In addition, the MCC is working to finalize a compact with Nicaragua that also focuses on trade and rural areas. This compact will be presented to the MCC’s Board of Directors for approval in the near future.

Background

This five-year, $215 million "Compact"-- or contract -- with Honduras is the second MCC Compact approved by the MCC Board. The program finances two projects: (1) a rural development project that will increase the productivity and business skills of farmers who own or operate small and medium-size farms and their employees; and (2) a transportation project that will reduce transportation costs between targeted production centers and national, regional and global markets.

In a "first" for any free trade agreement, the Central American-Dominican Republic Free Trade Agreement includes a Committee on Trade Capacity Building in recognition of the importance of such assistance in promoting economic growth, reducing poverty, and taking full opportunity of liberalized trade. The Committee will coordinate activities and ensure that they continue to be designed according to the needs identified by CAFTA countries in their "National Trade Capacity Building Strategies." In the region, such assistance has aimed to improve the benefits to small and medium-sized enterprises, facilitate rural diversification, and improve customs procedures, among other things.

MCC is a government corporation that administers the Millennium Challenge Account (MCA). The MCC Board of Directors is chaired by the Secretary of State, and includes the Secretary of the Treasury as Vice Chairman, the U.S. Trade Representative, the Administrator of the U.S. Agency for International Development, and the MCC CEO. The Board is also to include four independent members selected from lists submitted by the majority and minority leaders of the House of Representatives and the Senate. Christine Todd Whitman and Ken Hackett (Catholic Relief Services) have been selected to date.

The MCC selects countries eligible countries based on their performance in three policy areas: ruling justly, investing in people and economic freedoms. Current eligible countries are: Armenia, Benin, Bolivia, Cape Verde, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Nicaragua, Senegal, Sri Lanka, and Vanuatu. The MCC works with eligible countries to develop "compacts" -- or contracts -- that set forth a commitment between the United States and the developing on a large scale development plan.