The Price for a $277 Million MCC Grant

Since Sanchez Cerén became the President of El Salvador on June 1, his administration has said securing the $277 million Millennium Challenge Corporation (MCC) grant is a top priority. Vice President Oscar Ortiz said they want to get it done within their first 100 days in office, which means within the next three months.

The MCC approved the grant in September 2013, but the US Embassy blocked the release of the funds until the government met conditions such as reforming the Public Private Partnership Law (P3 Law) and restructuring a popular seed program.

The P3 Law facilitates government contracts with private entities to provide public goods and services. The US Embassy made the P3 Law a prerequisite for the MCC funds but they don’t like the law passed by the Legislative Assembly. They don’t approve of the oversight role the Legislature created for itself – a committee that must approve all P3 contracts. The Embassy and business community also don’t like that the law exempts important public goods and services like water, health, education, and public security from public private partnerships.

One of the most vocal opponents of the P3 Law has been El Salvador’s labor movement. Unions fear that public private partnerships will result in a loss of jobs, decrease in wages, and even worse working conditions as private investors maximize profits. Other civil society organizations fear the P3 Law, even with the exemptions, will lead to the privatization of important goods and services – like water, health care, and education.

The US Embassy also doesn’t approve of the Seed Distribution Program operated by the Ministry of Agriculture (MAG). Officials argue the procurement process violates the Central American Free Trade Agreement (CAFTA) because the government only buys seeds from Salvadoran Farming Cooperatives, excluding international seed producers like Monsanto. The program provides thousands of jobs for people working for the cooperatives and ensures that more than 400,000 farmers have quality, non-GMO seeds.

Last week US Ambassador said that the Embassy’s problem was not with the seeds, but with the process. On May 2 Voices wrote an article arguing that the problem was not the seeds or the procurement process, but CAFTA.

The MCC program is popular with a lot of Salvadorans and politicians who see it as free money for development projects. But a growing number of environmentalists, unions, and communities argue that the Embassy’s conditions are too high a price to pay for development projects they don’t want anyway. And many see the conditions as an encroachment on El Salvador’s sovereignty.

Among those who oppose the MCC program outright are environmental groups and communities in the Jiquilisco Bay. MCC funds will support tourism development in the Bay and residents fear it will cause irreparable harm to mangrove forests, nesting grounds for the critically endangered Hawksbill sea turtle, and El Salvador’s most fertile agricultural land. (Voices has written about Tourism on this blog in the past – here are two reports we wrote on tourism in the Jiquilisco Bay).

Roberto Lorenzana, President Sanchez Cerén’s Chief of Staff said two weeks ago that the administration already has a draft Fomelinio Law (in El Salvador the MCC is called Fomelinio) that they will send to the Legislative Assembly soon. It’s unclear what is in the Fomelinio Law, but it likely contains all of the reforms the US Embassy is requiring for release of the MCC funds. Even before he became Chief of Staff, Lorenzana said the new administration is going to open the procurement process to national and international seed producers, in an apparent effort to satisfy the Embassy’s concerns.

While some Salvadorans have spoken out against the second MCC compact, the P3 Law and other neoliberal policies, many have not. The politics of opposing neoliberal economic policies grew more complex when the leftist FMLN party took office in 2009 and again on June 1, 2014. People and groups that organized against privatization, dollarization, CAFTA, and the first MCC compact (all policies adopted by the rightwing ARENA party between 1994 and 2008) have not been as critical since the leftist FMLN party took power. The result is that opposition to these destructive policies is less now that the FMLN is power.

El Salvador will soon get a $277 million grant from the U.S. Millennium Challenge Corporation, but it should be clear – this is not free money.

The 17 farming cooperatives that have been growing seed corn and beans for the MAG’s Seed Distribution Program will pay for the MCC grant when they have to compete with Monsanto and other international seed giants.

Communities that depend on the mangroves for their survival will pay for the MCC grant when developers cut down forest to build resorts and golf courses.

The Salvadoran labor force will pay for the MCC grant when private contractors take over government services and cut jobs and wages to increase profitability.

And all Salvadorans will pay if public goods and services like water, education, and health are contracted out to for-profit entities, especially if there is no oversight in the process.

 

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