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December 10, 2007
MCC Signs $36m Threshold Program with Peru
Posted by Sheila Herrling at 11:28 AM
On November 30, the MCC signed a $35.6 million Threshold Program with Peru to combat corruption and improve immunization. Peru becomes the 18th country to sign a Threshold Program with the MCC, bringing the total amount committed to the Program to about $400 million.
Interestingly, although Peru failed both the control of corruption and immunization indicators in FY2007, the year it was deemed eligible for the Threshold Program, it now passes both indicators, making it a bit odd to have a program aimed at improving them. Indeed, the indicators now standing in the way of Peru passing the full eligibility performance test are spending on health and education (which are incredibly low) and the recently added Natural Resources Management Indicator (NRMI). And so, as good as I'm sure the program is, the fact that the indicators it targets no longer need improvement to "pass the threshold" bring us back to the broader question of what the Threshold Program's objective is. Is it to provide assistance to get countries over the threshold? Is it technical assistance in key policy areas that are good for development and helpful to countries the MCC doesn't yet want to declare fully eligible? Is it a program to support reformers without an expectation that it will make a substantial difference in the country's ability to pass the indicators at the end of the program? For those interested in our thoughts on what to do with the Threshold Program, read that section iin our recent FY08 MCA Country Selection Round paper.
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Comments
Sheila, I have a bit of a problem with Peru being favored here. It's economy is doing more than well (76 straight months of economic growth, 8.4% in the first 10 months of the year), and it is currently reaping an incredible bonanza from high prices for minerals. Problem is, Peru's president cut a deal with mining companies to incur a "voluntary" 3% tax, which was estimated based on much lower profits than what are now the case. Second, that money is only going into the zones where the mining countries operate, and there is no redistribution throughout the country. There's also a problem of government capacity to execute the budget they already have, at both local and national levels. So why should MCC be interested in Peru, other than the fact that it's currently the US's favorite economic model?
Posted by: David Holiday at December 18, 2007 01:05 PM
The threshold program should be used to assist countries that are close to qualifying for Compact eligibility status to ultimately qualify. MCC should have selected relatively greater numbers of threshold countries in its early stages and used progress on threshold program performance as one measure of a countries ability to compete as for a Compact. MCC should also have used the period of time that a country existed in threshold status to put into place procedures that would have allowed for smooth transition to Compact design and implementation. Threshold should have been viewed as a part of the MCC model as opposed to it being viewed by a great number of persons as a distraction. I was in a position to know.
Posted by: Kevin at January 24, 2008 11:55 AM