Use and strengthen the existing institutions, policies, and procedures of the government of El Salvador. Building the capacity of the Salvadoran government to, for example, conduct a strategic environmental assessment—noteworthy in a country that previously neglected its natural resource base— demonstrates leadership and will increase the long-term sustainability of national growth and poverty reduction. The Ministry of Public Works and Transportation (MOP) is similarly gaining substantive experience in managing a suite of infrastructure projects that are larger in monetary value and scale than any previous single program. Historically MOP has implemented construction and rehabilitation of less than 150 kilometers of roads per project; the connectivity project is 290 kilometers for the northern highway and 240 kilometers for the connecting road networks. At the conclusion of the compact, MOP will have developed a cadre of experienced project managers who can implement large scale domestic transportation projects critical to sustained economic growth and poverty reduction. This practical knowledge and institutional growth can be used should GOES desire to continue improving connectivity to foster future economic growth through large transportation projects. The MCC should maximize its efforts to utilize and strengthen GOES institutions to ensure long-term sustainability.
Continue to innovate through streamlined, accountable, country-specific procedures. The experimentation of a sliding-scale type of oversight system (in which countries are subject to fewer review processes and formal approvals as they prove their capacity for implementation and management strength) is well suited to El Salvador given its relatively strong fiduciary systems and the fact that some decentralization of decisions and lessening of requirements has already begun.[1] The reduction of translation requirements and devolution of some decisions to the field are positive steps in the direction of rationalizing oversight and management. However, the current approval process has the potential to delay implementation.[2] In a typical case, a document must be sent to Washington sector leads (who also work on several other countries and have competing priorities) for clearance, then back to the resident country team for approval, then to the legal counsel in Washington for sign-off, before it is finalized via formal letters to Fomilenio from MCC’s legal staff. This sometimes lengthy chain of approvals is formalized in an MCC approvals matrix which is the same for all compact countries.
Attempts to streamline this process have occurred in the past but not on a country-by-country basis. The adjustment of the matrix for a given compact, in coordination with improved communication between Washington and field staff, could minimize project implementation delays. Success in this area is important to justify the MCC model—whereby increased country ownership leads to diminishing levels of MCC supervision as implementation progresses. If practices remain closer to traditional U.S. government assistance programs, with overburdened oversight and reporting requirements, more people will likely be needed in field offices to keep implementation apace, which goes against the "small footprint" oversight model of the MCC. The "small footprint" model was designed to support two fundamental principles of the MCC: the notion that MCC countries were selected because they were better governed (hence, were less risky countries in which to invest) and the longer-term focus on measuring outcomes and impact instead of expenditures. This tension regarding risk tolerance and country ownership can also be seen in the realm of procurement (see below).
Promote non-governmental and indirect capacity building as part of "MCC effect." Country capacity is being fostered in areas other than San Salvador and with non-governmental actors and institutions.[3] In Ciudad Barrios of the Northern Zone, the local government design of new public spaces such as market areas, sports fields, youth centers, and fairgrounds has begun and signals a new optimism and energy to attract investment with the help of MCC funding. The "good housekeeping"[4] seal of approval provided by the MCC has also influenced talks with large U.S. corporations considering investment in the Northern Zone. Throughout the targeted areas, the disparate political party markers and flags -- red, white, and blue (Arena), red and white (FMLN), and blue and white (PCN) -- are prominent and the increased connectivity between these factions provided by the Northern Longitudinal road is tangible, symbolic, and promising all at once. Such new kinds of political linkages are evidence of indirect capacity building likely not envisioned at the start of the MCC process, which focuses on central government functionality. This grassroots empowerment and local capacity building transcends the history of conflict, fosters innovative ways of attracting investment, and attracts new sources of funding -- like in Cuidad Barrios for fairgrounds and an upgraded market space – which all complement the MCC compact and provide evidence of the multiplier effects of the investment of U.S. taxpayers’ dollars in the Northern Zone of El Salvador. Salvadoran and U.S. companies are exploring investments in solar cells near Ciudad Dolores, where the mayor is excited that the Northern Longitudinal Road construction has enabled him to begin negotiations with alternative energy entrepreneurs for the first time. This empowerment at the local level is not being publicized at present – although stories of benefits are provided via newsletter as tangible successes,[5] evidence of community growth can also be shared to illustrate the effects of MCC's influence which may not be traditionally seen as successes.
Next Section: Procurement: The Unglamorous Issue that Can Make or Break Aid Programs
1. As of 2006, El Salvador was the only country in Central America with an investment grade rating. For more on its recent reforms, see the following IMF report: http://www.imf.org/external/pubs/ft/scr/2006/cr06410.pdf.
2. Since the writing of this report, the MCC has implemented an “oversight model,” which includes a reduction of formal MCC approvals for accountable entities that have proven strong management capacity. Additional details on this model and the method by which the MCC evaluates management capacity is not publicly available. It remains to be seen if the current attempt to implement more streamlined processes will reduce delays in implementation.
3. See the recent "Success Story" from the MCC: http://www.mcc.gov/documents/successstory-072108-makingheadway-elsalvador.pdf.
4. For more information on the MCC Effect see: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=896293 (on governance)
http://www.mca.gov/documents/mcc-workingpaper-corruption.pdf (on corruption)
5. See MCC’s website for more Success Stories from other countries: http://www.mcc.gov/press/successstories/index.php