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August 17, 2006
Should We Expect More from Middle Income Countries?
Posted by Sarah Rose at 09:15 AM
The MCC is in final negotiations with El Salvador, one of two lower middle income countries (LMICs) deemed eligible in FY2006. Over the last year, we've heard bits and pieces of feedback from NGOs on the ground. Together with a review of the actual proposed compact (pdf), here's what I think is worth watching and discussing:
1. Donor coordination appears strong...at least on paper. A donor coordination framework on page 6 of the proposal nicely lays out the compact's plan to develop the North Zone and includes how funding responsibilities will be shared among MCA, the government, and other donors. It’s noteworthy that the government offers counterpart funding for every aspect of the compact (except M&E).
2. Road to growth, but with poverty reduction? El Salvador is another road-dominated compact, namely a highway to the North Zone and a network of connecting roads. While in theory highways and rural roads can better connect the poor to growth--and infrastructure in developing countries has been under-funded over the last decade-- there is no evidence that El Salvador conducted a real poverty impact assessment that evaluates exactly who will be served, how many people will actually benefit, and if the roads will serve their needs (what kind of access is most important to the people it is designed to serve? Schools? Health facilities? Markets? And will the roads actually provide this connectivity?) There is some concern that those who will benefit most from the road system will be the big Canadian mining companies and other multinationals with interests in the area.
3. Adequate consultative process? Since El Salvador is using MCA money to partially fund a pre-developed strategy for the development of the North Zone, the government claims the consultations actually started back in 1998. True that it is not the best use of resources to completely replicate a prior process, but it is necessary (and required!) that a country consult with stakeholders about the MCA compact specifically regarding prioritization, beneficiaries, etc. The government held its MCA-specific consultations between January and March of 2006, but some NGOs on the ground are saying that these meetings were disingenuous, without reflection that their input was accepted or not (either by being included in the proposed compact or by being provided with rationale for rejection through feedback to consulted groups). We're interested in hearing from anyone else who has some input about El Salvador's consultations. Were they legitimately “consultative”? What kind of weight do you think prior (non-MCA) consultations can be given as a basis for the MCA consultative process? This is a complicated issue, but, like in Tanzania, I think that at a minimum the MCC should raise the existing bar on consultation in countries.
These questions about the El Salvador compact are not new in a general sense. We've brought up the same issues with other compact countries over the last year or so. But should we expect more of LMICs? You'd think that they'd be in a better position than the lower income countries to manage the development process, but are they really?
My last big question relates to the MCA's longer term strategy of engaging LMICs. Since MCC is limited by law from allocating more than 25% of its annually appropriated funds for LMIC compacts, the El Salvador compact--estimated at $446 million--will preclude other compacts for 2006. It's not a problem this year as there were only two eligible countries, but what are the implications for future years? Namibia will probably qualify again, as will several more presumably. Even in the best situation, 25% of $3 billion (and that's being optimistic since Congress has yet to approve an amount this high!) is only $750 million. This is highly unlikely to be enough for multiple transformative compacts, particularly when we may be looking at Jordan and Ukraine being deemed eligible next year.
We hope you'll keep an eye on both of these processes as they develop – both El Salvador and LMIC compacts more generally. Let us know what you think.
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Comments
Not only are there concerns that the proposed highway will fail to benefit Salvadoran farmers living in the area targeted by MCA funds, but also that projected mining activities facilitated by the highway will in fact work at cross purposes to the goals of the MCC.
Shouldn't the MCC be taking this into consideration as it finalizes its compact with El Salvador?
Over the past year, the Salvadoran government has awarded 30 licenses for metal exploration and 1 license for metal exploitation (extraction) to mining companies from Canada, the U.S., and Australia. The majority of the licenses cover mining activities in the northern states of Santa Ana, Chalatenango, Cabañas, San Miguel, Morazán, and La Unión--the very same states targeted by MCA funds.
Meanwhile, El Salvador's proposal to the MCC includes agricultural reactivation and ecoturism in the northern region. The proposal specifically notes the "transcendental importance" of environmental stewardship to the success of the compact, given the need to "assure the preservation of the Lempa River basin" and create green zones in the region.
Yet the mining activities will do just the opposite.
How’s that?
1) Water pollution: Most mining activities will occur in the Lempa River basin. Not only does the Lempa River provide water to the northern region of El Salvador, but it also supplies an estimated 30% of the drinking water for the capital city. Salvadorans use the Lempa River for human and livestock consumption, for bathing, and for watering their crops. The cynanide-based process needed to separate mineral from rock will pollute the Lempa River and secondary rivers flowing from it, and will threaten the health of humans using the river's water.
2) Water shortages: El Salvador suffers from chronic water shortages, yet it is estimated that 200,000 liters of water a day will be needed for the mineral extraction process. Water shortages could become a source of conflict and social upheaval.
3) Increased deforestation: In 2005, the UN Development Program ranked El Salvador as the most highly deforested country in the world. Open pit and/or subterranean mining will destroy precious trees and woods.
Is it sensible for the MCC to fund projects in El Salvador that depend upon clean water access, forests/green spaces, and productive land for agricultural projects, while mining activities taking place in the same area put these natural resources—and overall success of the project--at risk?
The irony is that El Salvador stands to gain very little financially from mining. Only 2% of profits generated would go to the government. Any jobs created would be short-term and few.
An increasing segment of Salvadoran society would like to see the Salvadoran government halt mining activities before they do any harm--it's not too late, since no actual exploitation has taken place (the one company with an exploitation license has not begun exploitation). The Minister of Environment and Natural Resources and the Catholic Episcopal Conference have publicly expressed their opposition. Notably, the Comision Nacional de Desarrollo (CND)--the body that carried out the MCA proposal consultation—has connected its own opposition to mining specifically to the incompatibility of mining activities with the success of the MCA proposal.
Should the MCC express to the Salvadoran government its concerns about mining before it’s too late? The development goals delineated in El Salvador’s MCA compact proposal will have little chance of success if mining activities move forward.
Posted by: Tara Carr-Lemke at August 25, 2006 05:59 PM