Conclusion

The MCAH is operating in a very risky environment. The disbursement delays, weak government buy-in, poor civil society relations, and intense MCC oversight will make it hard for this program to meet its goals within the five-year timeline of the compact. But despite these formidable challenges, the core MCAH program interventions and policy and planning work are excellent. This combination of factors in Honduras offers a number of lessons that apply broadly to MCC policy and practice.

Entry into force should await establishment of key program structures. The indisputable major lesson from the Honduras experience (which is backed by the Madagascar and Nicaragua experiences) is that the MCC and MCA countries should avoid rushing entry into force. They should instead favor the early establishment of key program structures (such as complete program designs, a baseline staff level, a set of standard operating documents, identification of fiscal and procurement entities, baseline data and evaluation measures, etc.). The MCC is learning this lesson. In the recent cases of Ghana and El Salvador, for example, periods between compact signing and EIF have been longer, and the MCC stuck to its guns on tough conditions precedent in Ghana that Ghana wanted to change. But the MCC will continue to be under pressure from the US Congress to obligate and disburse funds. The Honduras case serves as a reminder of the detrimental implications of bowing to pressures to get programs running too quickly. The MCC can buffer against some of these pressures by having clearer guidance about what, beyond country-specific conditions precedent, countries must have in place before EIF. The MCC should complement this by utilizing available resources to finance design, feasibility, evaluation and limited operational needs critical to operational effectiveness before entry into force in order to fully use the compact time period to deliver program results. The MCC, for instance, allocated a small portion of signed and committed compact funds to Georgia, Armenia and Nicaragua before EIF to help with staffing, legal services, and the conclusion of other activities necessary for entry into force. Resources obligated for compact development to facilitate baseline surveys and project assessments in the months before signing have also proved helpful for countries like Madagascar, Nicaragua, Ghana, Cape Verde and Mali, not only for compact development, but also for making headway toward required pre-EIF steps.

Disbursement is not the only measure of progress. While disbursement delays in Honduras are worrisome, they should not be the only, or even the primary, measure of progress. In fact, the excellent program achievements discussed in this report (that have parallels in other MCA countries) are evidence that the MCC and country programs have a lot to show for themselves despite low disbursement rates. While the MCC will never escape some focus on disbursements as a key measure of progress, the discussion of progress should be wider. MCC observers, including the U.S. Congress, should also consider how much MCA programs have accomplished even before major expenditures have begun. For its part, the MCC could be doing a much better job of measuring and communicating these early accomplishments.

Working through governments is worth it. It would be tempting, in light of the delays in Honduras, to argue that the MCA programs should not work through existing country mechanisms or government structures. This would be a mistake. Some argue that Sefin’s prominent role in the Honduras MCA program has slowed some things down, and the initial selection of Fonaders made it especially hard to manage the political transition. It is also true that in Nicaragua the MCA program sailed through a political transition unscathed partly because it is administered by an independent foundation and the fiscal entity is a consulting firm. But if the MCC is going to live up to its goal of being transformational, it cannot make a practice of skirting government mechanisms. National capacity building and institutional strengthening will be an important part of the MCC legacy. The point here is not that the MCC should always work through existing government entities, though it should always try to partner with them. The MCC should have the flexibility to design program structures according to country conditions and capacities and make these choices based on priorities other than just speed of implementation. The MCC also tries to strengthen government systems by setting policy and planning reforms as triggers for disbursement. This can slow progress in even the most efficiently governed countries. But the unquestionable upside of taking time for these reforms is the improved practices that will yield benefits long beyond the life of MCA compacts.

So, just as disbursement is not the only measure of progress, neither is speed. Again, the MCC could be doing a much better job of measuring and communicating "intangible" achievements, especially in the first year of compacts. The MCC got caught off guard in the first round of countries, not anticipating the need for so much capacity building. By now it should know what to expect in this regard, and be explicit about its interest in supporting government systems and capacities. The MCC now has the opportunity to better define, measure and communicate compact activities that include capacity building, institutional strengthening, improved planning processes, and other intangibles that underlie the success of compact investments.