US and El Salvador make progress on second MCC compact

The second Millennium Challenge Compact for El Salvador has been held up for a number of reasons. Last year it was Gold Corp and Enel pressuring US congressmen to use the possibility of a second compact to advance their business interests. The US government has also required passage of a new Public Private Partnership law (P3) that opens up additional economic areas to foreign/partnered investment. Senator Leahy and others have been upset with the the limited progress that the Funes/FMLN administration had demonstrated on tackling corruption and money laundering. And many of the communities that live along the coast where the next phase of development is scheduled to take place have been fighting the proposed project although I am not sure whether they have slowed down the passage of FOMILENIO II in any way. Then there were the elections with the US seemingly deciding to wait until they were concluded to move forward.

Another hurdle now seems to be passed. Sixteen Democratic members of Congress sent a letter to Secretary John Kerry, chair of the MCC board, requesting that the US not condition a second compact on a requirement that the Salvadoran government change its seed procurement for its Family Agriculture Plan.

To condition the final approval of the MCC compact on the elimination of a provision that enables local producers to access government procurement mechanisms poses a risk to El Salvador’s national food security efforts. Agriculture and food security are outside the scope of the compact, yet critical to the country’s development. For both of these reasons, elimination of support for small-scale farmers to improve their livelihoods through domestic seed production has no place as a condition for signing the MCC compact with El Salvador.

We believe it is in the best interests of U.S. foreign policy and development policy to desist from conditioning the MCC compact on the Salvadoran government’s seed purchase for the Family Agriculture Plan. We respectfully request your swift action to ensure that the signing and administration of MCC compact will, ultimately, uphold the U.S. development goals of poverty reduction, and independent and sustainable development. In addition, we look forward to your timely response regarding the steps you will continue to take in order to ensure the agreement’s final approval and implementation.

On Tuesday, it was reported that the US and El Salvador had made progress on the second compact.

But on Tuesday, MCC and the U.S. Embassy in San Salvador both set a different tone, both signaling that El Salvador has shown real progress in answering the U.S. demands and it is time to move on.

“We are seeing commitment by El Salvador to complete their action plan,” said MCC spokesman John Gagain, when asked about the issue. “We are pleased that their government has provided assurances that it intends to pursue future corn and bean seed purchases under a mechanism that is transparent, competitive and compliant with Salvadoran law and CAFTA-DR.”

Gagain’s choice of words closely matched draft talking points for the U.S. Embassy on Tuesday. The net impact suggested the administration was cutting its losses after a sometimes embarrassing fight and hoped to steer attention back to the money laundering issue.

The US is more concerned with tackling money laundering in El Salvador. The country's use of the US dollar makes its easier to launder money there. The fact that $4 billion is sent to El Salvador from the US in relatively small amounts doesn't help either. The US also wants El Salvador's help in reducing the number of unaccompanied minors heading north to the US and didn't want the attacks on the country's seed procurement program to undermine those efforts.

The US and Salvadoran governments have not always seen eye-to-eye but have managed to cooperate when they've had to. With questionable proposed investments in coastal and maritime areas, US interference in Salvadoran domestic politics, and El Salvador's limited progress tackling money laundering, corruption, and increasing questions surrounding General Munguia Payes and the gang truce, I'm not sure many people are happy with the second compact. That's doesn't mean it won't help but I can't say anyone is going to be able to point to this second compact as a shining example of the US and Salvadoran government working together to invest in El Salvador's future.