Background

On May 6, 2004 the Millennium Challenge Corporation (Millennium Challenge Corporation, MCC)  selected 16 countries around the world eligible from a list of 70 candidate countries. For Latin America, only three countries were declared eligible: Bolivia, Honduras and Nicaragua.

The selection of eligible countries by the MCC was based on countries demonstrating firm advancement in three fundamental areas: improvement of the governance; investment in people and economic freedom. In this sense, the selection of Honduras as an eligible country signifies a strong international recognition of its advances in these three areas,  each of which is measured by objective indicators form various agencies and multilateral organizations from around the world.

In order to receive financial assistance under the Millennium Challenge Account (MCA), Honduras, like other countries, had to submit a proposal of high quality in which it identified its obstacles to economic growth, the programs and measures that will contribute to their solution and, with it, to the reduction of the poverty, as well as the institutional and legal structure that would to ensure the transparent and efficient use of the resources.

Honduras submitted its Proposal to MCC in August 2004. The programs contained in this proposal have as frame of reference the Poverty Reduction Strategy (PRS) and their Implementation Plan for 2004-2006, both widely consulted with civil society and recognized by the international development community.

The objective of the MCA Program is to promote accelerated and inclusive economic growth, supporting the goal of the Poverty Reduction Strategy (PRS) of Honduras, that is to increase annual real GDP growth to at least 4.5%  on a sustainable basis and to reduce the indices of poverty and extreme poverty by 1.6 percentage points annually. To this end, the Program supports interventions to eliminate obstacles of growth in urban and rural areas and to strengthen the central logistical corridor of the Honduran economy.

In the 2003 the poverty index was 63.5% and that of extreme poverty, 44.7%. The goal of the PRS for 2015 is to reduce those indices to 42% and 25%, respectively.  In order to reach the goals of the PRS, it is estimated that real economic growth will have to be 4.5% - allowing per capita growth of 2.2%. At the same time, it will be necessary to increase the “elasticity” between growth and poverty reduction to ensure that poor households share the benefits of growth and that income distribution is improved.