Notice of Entering Into a Compact With the Government of the Republic of Cape Verde, 42624-42671 [05-14195]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 70, Number 141 (Monday, July 25, 2005)]
[Notices]
[Pages 42624-42671]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-14195]



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Part II





Millennium Challenge Corporation





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Notice of Entering into a Compact With the Government of the Republic 
of Cape Verde; Notice

Federal Register / Vol. 70, No. 141 / Monday, July 25, 2005 / 
Notices

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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 05-12]


Notice of Entering Into a Compact With the Government of the 
Republic of Cape Verde

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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SUMMARY: In accordance with section 610(b)(2) of the Millennium 
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium 
Challenge Corporation is publishing a detailed summary and text of the 
Millennium Challenge Compact between the United States of America, 
acting through the Millennium Challenge Corporation, and the Government 
of the Republic of Cape Verde. Representatives of the United States 
Government and the Republic of Cape Verde executed the Compact 
documents on July 4, 2005.

    Dated: July 14, 2005.
Jon A. Dyck,
Vice President & General Counsel, Millennium Challenge Corporation.

Summary of the Millennium Challenge Compact With the Republic of Cape 
Verde

I. Introduction

    Since gaining its independence from Portugal in 1975, Cape Verde 
has achieved an annual growth rate of approximately 6%. In addition, a 
major asset of Cape Verde is its strong record in terms of democratic 
governance, stability, transparency, and lack of corruption. Cape 
Verde, however, relies heavily on large inflows of foreign assistance 
and remittances, which together represent roughly 25% of GDP. 
Recognizing that reliance on such flows is not sustainable, Cape Verde 
has created a long-term development strategy predicated on moving from 
aid-dependency to self-sustaining, private-sector led economic growth, 
focused around services. Meanwhile, Cape Verde continues to have high 
levels of poverty and unemployment, which are partly attributable to a 
lack of obvious economic growth opportunities and a scarcity of 
resources, particularly water. Only 10% of the land is arable and 
roughly 83% of rainfall is lost through evaporation and runoff. 
Agricultural productivity is low and approximately 85% of the country's 
food is imported--70% in the form of food aid.
    Cape Verde conducted a comprehensive consultative process that 
identified key impediments to economic growth: severe water scarcity, 
lack of adequate infrastructure, weak institutional support for the 
private sector, and an insufficiently trained work force. To address 
these impediments, Cape Verde requested MCC support to:
     Increase agricultural productivity on the islands of Santo 
Ant[atilde]o, Fogo, and S[atilde]o Nicolau by (i) improving water 
management, (ii) improving agribusiness development services, and (iii) 
increasing access to credit and capacity of financial institutions;
     Integrate internal markets and reduce transportation costs 
by: (i) improving road infrastructure on the islands of Santiago and 
Santo Ant[atilde]o, and (ii) upgrading the Port of Praia; and
     Develop the private sector by improving the investment 
climate and reforming the financial sector.
    This MCC-funded program in Cape Verde (the ``Cape Verde MCA 
Program'') comprises a solid investment in a country that has 
relatively limited opportunities. The expected impact of the three 
projects in the program is an increase in annual income to $10 million 
in Year 5 and over $22 million in Year 10. This corresponds to 
approximately 1.2% and 2.2% of annual GDP respectively, assuming a real 
GDP growth rate of 4% per annum.
    The product of a strong consultative process, the MCA Program will 
complement the efforts of various multinational and bilateral donors 
working in Cape Verde. This program conforms with MCC's goal to be a 
major donor and have a large economic impact in Cape Verde.

II. Program Activities, Costs and Performance

    The proposed program is summarized in the table below:

                              Program Costs
                              [$ millions]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
1. Watershed Management and           ................              10.8
 Agricultural Support...............
    (a) Water Management............               6.8  ................
    (b) Agribusiness Development....               3.6  ................
    (c) Credit......................               0.4  ................
2. Infrastructure...................  ................              78.7
    (a) Port........................              53.7  ................
    (b) Roads and Bridges...........              25.0  ................
3. Private Sector Development.......  ................               7.2
    (a) Partnership to Mobilize                    5.0  ................
     Investment.....................
    (b) Financial Sector Reform.....               2.2  ................
4. Monitoring and Evaluation........  ................               4.9
5. Program Administration and         ................               8.4
 Control............................
    (a) Program administration......               5.8  ................
    (b) Fiscal control and                         1.0  ................
     procurement management.........
    (c) Enhanced transparency                      1.1  ................
     initiative.....................
    (d) Audits......................               0.5  ................
                                     -------------------
        Total.......................  ................               110
------------------------------------------------------------------------

1. Watershed Management and Agriculture Support ($10.8 million)

    Cape Verde forms part of the semi-desert Sahelian ecology, with its 
erratic, low rainfall and degraded soils. MCC will fund investments 
that increase the capture, storage and distribution of rainfall water, 
thus enabling poor farmers to irrigate their fields and increase 
agricultural productivity. Increases in irrigated land and reliability 
of water supply will facilitate a shift from low-value, rain-fed 
agriculture to higher value-added crops that are grown more intensively 
(e.g., from two to three annual crop cycles). This project includes the 
following:
     Water Management and Soil Conservation (``Water 
Management''): Construction of reservoirs, dikes, terraces, check dams 
and other

[[Page 42625]]

structures to capture water and recharge water tables.
     Agribusiness Development Services (``Agribusiness 
Development''): Applied technical and field research; training for 
farmers and extension agents; improvements in agricultural extension 
centers and farm demonstration sites; building capacity in export 
requirements; packing sheds; and centers for inspection and 
certification.
     Access to Credit (``Credit''): Provision of credit for 
drip irrigation, working capital, and agribusiness investment in the 
three watershed areas and technical assistance to increase capacity of 
financial institutions in the provision of financial services.
    Improved watershed management will reduce or in some cases reverse 
erosion, thus preserving the value of land and water. Increased 
economic vitality in rural areas will create opportunities and reduce 
migration to urban centers. Continued growth in the tourism industry 
should provide a strong demand pull for the agricultural production by 
the project.

2. Infrastructure ($78.7 million)

    Cape Verde consists of ten separate islands, which inhibits the 
development of a common national market, increases the costs of 
production, and hinders the flow of resources between the more 
prosperous islands and the more rural, poorer islands. Economic 
activities such as tourism, manufacturing, and agricultural production 
are severely constrained by inadequate roads, ports, and inter-island 
transportation services. The following projects will be supported:
     Upgrade and Expansion of the Port of Praia (``Port''): Due 
to the complexity and scope of the port expansion plan, this project is 
intended to be done in two phases. Phase I involves improving quayside 
and off-terminal container handling facilities; providing for a second 
access road and breakwater; and initiating certain preparatory 
activities--geotechnical studies, cargo/passenger market studies, 
feasibility studies, and environmental impact assessments--that are 
needed for long-term expansion. Phase II will include extending the 
quay and creating space for a new two-berth specialized terminal 
container storage area.
     Roads and Bridges (``Roads and Bridges''): This project is 
designed to achieve basic connectivity and improve mobility on two 
targeted island networks. This will be done by: (i) Rehabilitating two 
heavily traveled east-west axes on Santiago; (ii) reconstructing three 
rural roads linking isolated agricultural and fishing communities to 
the main network; and (iii) ensuring all-weather and reliable access to 
two major towns by constructing a series of bridges in Santo 
Ant[atilde]o.
    Improvements to the Port of Praia, which handles half of the island 
nation's cargo and facilitates the movement of people to and from the 
population center of Cape Verde, are intended to maximize the existing 
operational capacity and productivity, given the existing constraints, 
followed by longer-term investments to create new infrastructure and 
facilities to alleviate the Port's inherent berth, space, and geometry 
problems. The prime objective of the road investments is to ensure a 
continuous network linking the population with social services, 
employment opportunities, local markets, and ports and airports.

3. Private Sector Development ($7.2 million)

    The primary goal of Cape Verde's long-term economic transformation 
strategy is to become less dependent on remittances and donor aid by 
developing a competitive, private-sector driven economy through a focus 
on priority sectors such as tourism, financial services, transportation 
services, and fisheries. Successfully implementing the economic 
transformation strategy will require cross-cutting investments to 
strengthen human capital; promote financial sector reform; upgrade 
capacity within the private sector and the policy-making apparatus; and 
improve infrastructure. In addition, financial institution competition 
is weak and depositors have few options to hold savings. Accordingly, 
this project includes the following:
     Partnership to Mobilize Investment (``Partnership to 
Mobilize Investment''): The International Finance Corporation (``IFC'') 
and the Government of Cape Verde will finance an analysis of the 
priority sectors to identify the constraints to private sector 
investments and the design of potential interventions to eliminate 
those constraints. Based on this analysis, MCC will fund the selected 
interventions such as policy reforms and/or projects (including 
physical infrastructure and other tangible assets) to address 
vocational training and education, human resource development, 
infrastructure, access to financial services, and entrepreneurship 
development. MCC will fund these interventions based on specific 
investment criteria, including meeting an economic rate of return 
(``ERR'') hurdle rate of 10%, having clearly identified target 
outcomes, and being consistent with MCC's Environmental Guidelines.
     Financial Sector Reform (``Financial Sector Reform''): MCC 
funding will support microfinance institutions by providing technical 
assistance that will allow them to take advantage of expanded deposit-
taking powers and to ease the transition to a new regulatory 
environment. In addition, technical assistance will be provided to help 
the Ministry of Finance and Planning design new auction procedures for 
the government securities market and the necessary supporting 
infrastructure, e.g., a registry of security ownership.

4. Program Monitoring and Evaluation ($4.9 million)

    A monitoring and evaluation plan (``M&E Plan'') is being developed 
for the Cape Verde MCA Program to measure progress toward achieving the 
program objectives. A series of indicators will be used to track 
implementation, improve program management, and evaluate the impact of 
the Program on increasing economic growth and reducing poverty. 
Indicators will be disaggregated by gender, income level and age, to 
the extent practicable.
    The key indicators and expected results for each Project are listed 
below:

     Watershed Management and Agriculture Support Project: Increase
           Agricultural Productivity in the Intervention Areas
------------------------------------------------------------------------
                                      Baseline              Year 5
------------------------------------------------------------------------
Increase in profits and wages    0.................  1.5
 for farmers and agribusinesses
 (million dollars).
 Productivity of horticulture    9.................  24
 crops (tons per hectare).
Area irrigated with drip         9.................  121
 irrigation (cumulative
 hectares).
 Aquifer level.................  To be determined    >Baseline.
                                  by the National
                                  Water Institute
                                  before
                                  implementation
                                  begins.
------------------------------------------------------------------------


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  Infrastructure Project: Increase Integration of Internal Markets and
                       Reduce Transportation Costs
------------------------------------------------------------------------
                                             Baseline         Year 5
------------------------------------------------------------------------
Port:
    Volume of goods shipped between              137,995         220,741
     Praia and other islands (tons).....
    Tons of general cargo handled per                 20              35
     hour...............................
Containers handled per hour.............            8.66              11
Roads and Bridges:
    Savings on transport costs from                    0             1.9
     asphalt roads and bridge
     improvements (million dollars).....
    Percentage of beneficiary population             52%             65%
     who take at least 5 trips per month
    Kilometers of roads rehabilitated                  0              63
     (cumulative).......................
------------------------------------------------------------------------


       Private Sector Development Project: Develop Private Sector
------------------------------------------------------------------------
                                       Baseline            Year 5
------------------------------------------------------------------------
Partnership to Mobilize
 Investment:
    GDP contribution from priority               0  To be determined
     sectors--tourism, financial                     after specific
     services, transport,                            activities have
     fisheries (escudos).                            been identified.
    Increase of public and private               0  To be determined
     investment in priority                          after specific
     sectors (escudos).                              activities have
                                                     been identified.
Financial Sector Reform:
    Volume of deposits in micro-                0%  3%.
     finance institutions as
     percentage of total deposits.
    Percentage of government                    0%  8%.
     securities held outside of
     financial institutions and
     government agencies.
------------------------------------------------------------------------

5. Program Administration and Control ($8.4 million)

    MCA-Cape Verde will be an independent entity, responsible for 
management and oversight of the implementation of the program, the 
legal form of the entity to be agreed upon by the MCC and GOCV. It will 
be overseen by a Steering Committee composed of (i) voting 
representatives from government, the private sector, and non-
governmental organizations (``NGOs'') that will make key strategic 
decisions, provide oversight to management, and monitor progress and 
(ii) non-voting observers including a MCC representative and 
representatives from the private sector or NGOs. A Stakeholders' 
Committee comprised of representatives from central and municipal 
government as well as the private sector and civil society will provide 
feedback and recommendations to the Steering Committee in an advisory 
capacity.
    The Government of Cape Verde has very strong financial management 
and procurement practices and will take the lead on these issues. 
Procurement and contract management will be carried out under the broad 
oversight and authority of the Steering Committee, through a 
Procurement Review Commission using World Bank guidelines. Cape Verde's 
Ministry of Finance and Planning will serve as the fiscal agent and as 
an independent control mechanism, and will be the sole signatory to the 
permitted bank account. While the Ministry of Finance and Planning will 
not charge a fee for services rendered, MCC will help build its 
institutional capacity by covering the cost of additional equipment and 
software necessary to provide these fiscal agent services as well as to 
improve program management and the reporting capacity for the 
monitoring and evaluation of the program. This support will help 
improve the government's existing financial management system.
    As another element of capacity building, MCC will work with Cape 
Verde to establish a transparent e-procurement system for all levels of 
government. Extending this system government-wide will allow suppliers, 
government officials, and the public to have access to the rules 
governing procurement; insight into the procurement transactions 
themselves; and a transparent record of competition and results of 
solicitations. In addition, the Government of Cape Verde has undertaken 
a process to enact and implement unified procurement legislation that 
will consolidate existing procurement rules into a single transparent 
system. Funding for technical assistance to support this effort will 
help draft appropriate legislation and regulations as well as to train 
individuals involved in the procurement system at all levels of 
government. The combination of unified procurement procedures and the 
establishment of completely electronic procurement transactions and 
documentation will result in one of the most transparent and efficient 
procurement systems in the developing world.

III. Other Highlights

1. Consultative Process

    Cape Verde has a strong history of consultation, and the ideas in 
the MCC proposal build on previous priority-setting efforts and 
development strategies that have been evolving since 1996, including 
the ``Grand Options'' Plan, the National Development Strategy, the 
Economic Transformation Strategy, the Agricultural Development 
Strategy, and the Growth and Poverty Reduction Strategy Paper. An 
extensive series of consultations was held regarding the MCC proposal, 
which has led to widespread support in the relevant communities 
including the opposition political party's support. Cape Verde was the 
first MCC-eligible country to post its Proposal on the Internet (http:/
/www.virtualcapeverde.net).

2. Economic Analysis

    A summary of the estimated economic rates of return is included in 
the table below:

------------------------------------------------------------------------
                                                              ERR  (per
                          Project                               annum)
------------------------------------------------------------------------
Watershed Management and Agriculture Support...............          10%
Roads and Bridges..........................................           14
Port.......................................................           23
Financial Sector Reform....................................           11
------------------------------------------------------------------------

    These ERRs were arrived at through the following methodologies. The 
Watershed Management and Agriculture Support Project considers the 
increase in income that results from the

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horticulture and fruit production made possible by the investments in 
watershed management. The ERR of the Roads and Bridges project measures 
the reduction in vehicle operating costs from improving existing roads 
and laying new ones, as well as the increased earnings resulting from 
new bridges connecting areas previously cut-off during rainy periods. 
For the Port project ERR, improvements to the port infrastructure are 
assumed to prevent a slowdown in growth in the tourism sector that 
would otherwise result from congestion and higher transportation costs 
at the port; additionally, benefits from the concession paid by the 
private operator, and tax collections, are included. The Partnership to 
Mobilize Investment project will require among the investment criteria 
that the intervention meet an ERR hurdle rate of at least 10%. Finally, 
the ERR of the Financial Sector Reform project is based on published 
econometric estimates of the impact of an improved financial sector on 
GDP growth. These estimates are conservative, as there are several 
potential positive externalities that have not been included in the 
calculations.

3. Government Commitment and Effectiveness

    The Government of Cape Verde has exhibited a high degree of 
commitment to and ownership of this program, culminating in the fact 
that the MCA-Cape Verde Steering Committee's will have four cabinet 
members and the Chief Advisor to the Prime Minister. As part of the 
program, the Government of Cape Verde is taking such concrete steps as 
establishing a Road Maintenance Fund to ensure sustainable maintenance 
financing; committing to privatize the operations of the country's 
ports by the first half of 2006; and funding $500,000 for the design/
evaluation phase of the Partnership to Mobilize Investment project.

4. Sustainability

Watershed Management and Agriculture Support Project
    The Ministry of Agriculture, Environment and Fisheries, the 
National Water Institute, and municipalities will receive technical 
assistance to build their capacity to improve soil and water 
management, through appropriate water pricing. The Government of Cape 
Verde has committed to establishing a water fee policy that reflects 
the economic cost (i.e., scarcity) of the resource, in consultation 
with the local communities. This commitment is a major policy 
breakthrough that no other donor has been able to achieve. In the first 
year of implementation, training and technical assistance centering on 
best practices will facilitate the establishment of realistic fee 
protocols and lead to actual collection and more rational water usage. 
The water user fees will be established as the farmers participating in 
the program realize the benefits of improved access to water and new 
technologies, allowing for higher value-added crops and resulting in 
higher incomes. As part of a national strategy, higher value crops will 
primarily meet growing tourism demand and related domestic markets.
    Services will be demand-driven and designed to meet specific needs 
of the targeted beneficiaries in the watersheds. As farmers in the 
watershed areas increase their commercial activities, their ability to 
pay for services will increase. This will enable the Ministry of 
Agriculture, Environment and Fisheries to maintain the training and 
extension services provided to agricultural producers. The Ministry 
will implement a ``fee for services'' policy, charging fees for 
training, quality inspections and certifications. Through the life of 
the Compact, farmers who adopt drip irrigation will receive both the 
training and credit necessary for successful adoption and sustained use 
of the new technology.
Infrastructure Project
    Port: The introduction of private sector participation in 
operations is a critical element to the sustainability of the Port 
activities. The Government has agreed to pursue privatization and 
commence the process to bring in private sector operators. Improved 
operating margins resulting from more efficient operations and the 
privatization of port operations, together with the institutional 
reorganization supported by the World Bank, will also improve the long-
term sustainability for port services.
    Roads and Bridges: The creation and ongoing funding of a Road 
Maintenance Fund is designed to address long-term maintenance and, 
hence, sustainability of the roads sector. It will finance maintenance 
with the proceeds of a fuel levy (and potentially other charges on 
heavy vehicles) the Government has agreed to introduce. In the first 
year, the amount committed to be collected will be approximately $3.75 
million. This amount will increase annually in subsequent years.
Private Sector Development Project
    The Private Sector Development Project is oriented toward local 
capacity building. Technical assistance by its nature is provided to 
enhance institutional sustainability of the recipient institutions. 
MCC's support for the Partnership to Mobilize Investment project is 
designed to complement the Government of Cape Verde's efforts to 
strengthen economic policy-making capabilities of Cape Verdean 
officials. In the case of the Financial Sector Reform project, the 
technical support directed to the microfinance institutions will assist 
them to reduce their reliance on donor funds for growth, while allowing 
them to offer new financial products. Technical support provided to the 
Ministry of Finance and Planning to help develop the primary market for 
Government securities will lay the groundwork for developing new 
financial institutions and products.

5. Environment and Social

Watershed Management and Agriculture Support Project Screening 
Category: B
    Overall, this project is expected to be environmentally beneficial. 
The development of watershed management plans to include re-
forestation, soil stabilization, livestock management, and water 
management will improve the overall quality of the environment and 
reduce runoff and soil erosion. Possible negative impacts could come 
from unsustainable water usage leading to depletion of reservoirs due 
to inadequate water pricing. Conditions to disbursements will be 
designed to ensure sustainable management of the watersheds.
Roads and Bridges Screening Category: B
    This project is assessed a ``Category B'' with potentially adverse 
environmental impacts that are site-specific and largely mitigable. The 
improvements are all planned on existing alignments and do not directly 
affect protected areas or identified sensitive natural habitats. An 
Environmental Impact Study was completed for the World Bank, for which 
MCC contracted the U.S. Army Corps of Engineers to perform a technical 
review. In accordance with World Bank guidelines, contractors will be 
required to carry out an HIV/AIDS Awareness Program developed by the 
Cape Verde Committee to Fight HIV/AIDS. The Compact will also require 
adherence to road-specific environmental management plans.
Port Screening Category: A
    The environmental impacts of most of the short-term upgrade 
activities should be mainly positive; the development and 
implementation of an Environmental Management and

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Monitoring Plan should reduce the environmental impacts of the current 
port operations. However, there are potentially significant negative 
impacts from the new access road and breakwater at the Port of Praia, 
and the longer term upgrade activities including the quay extension, 
dredging, and reclamation. An Environmental Impact Assessment (``EIA'') 
of the Port Master Plan was conducted in 2004. MCC Disbursements under 
this project will be conditioned upon the development of an 
environmental management and monitoring plan and a full EIA--to include 
gathering of environmental baseline data and public consultation--
before disbursements for major civil works. The Compact budget includes 
funds to put in place an environmental management and monitoring plan, 
as well as completing the EIA.
Partnership To Mobilize Investment
    While it is not possible in advance to assess the potential 
environmental impacts of possible follow-on investments under this 
project, the Compact requires that projects funded will have to adhere 
to MCC environmental guidelines, which require screening and 
appropriate analysis in advance of any funding decision.

6. Donor Coordination

    Donor coordination has been particularly strong in Cape Verde, and 
includes parallel financing and policy reform harmonization. MCC is 
working on projects that leverage off many donors, particularly the 
World Bank, IFC, and other U.S. Government agencies. While all of the 
projects benefit from the expertise of other donors, some particular 
highlights include:
     The proposed MCC investment in transportation 
infrastructure benefits from the project-preparation activities funded 
by the World Bank. MCC was able to leverage off the World Bank's 
institutional-sustainability and capacity strengthening efforts for the 
road sector and its support for the privatization of port operations.
     The Partnership to Mobilize Investment project will use 
the expertise of the IFC to identify specific obstacles to investment 
at the sectoral level. This project will leverage existing support from 
the U.S. Trade and Development Agency in transportation services, and 
may also involve investment by other multilateral and bilateral donors. 
It is also designed to help investors to take advantage of 
opportunities under AGOA.
     The Financial Sector Reform project complements the 
efforts of the World Bank to strengthen the capacity of the Bank of 
Cape Verde to improve bank supervision, including for microfinance 
institutions.

7. Summary

    The Cape Verde MCA Program will:
     Increase access to water and agribusiness development 
services for 70,000 people in farm households on the islands of Santo 
Ant[atilde]o, Fogo, and S[atilde]o Nicolau.
     Institute an appropriate water fee policy, a major 
breakthrough that no other donor has been able to achieve.
     Reduce transportation costs and improve access to markets, 
schools, and health facilities to over 60,000 people on the islands of 
Santiago and Santo Ant[atilde]o.
     Increase efficiency of container handling by 130% in the 
Port of Praia.
     Improve business climate nation-wide and increase 
investment in priority sectors.
     Establish a completely electronic procurement transaction 
and documentation system, resulting in one of the most transparent and 
efficient procurement systems in the developing world.
    The Cape Verde MCA Program will assist Cape Verde in achieving its 
overall development goal of transforming its economy from one of aid-
dependency to one of competitive, private sector-led growth.

Millennium Challenge Compact Between the Government of the Republic of 
Cape Verde and the United States of America Acting Through the 
Millennium Challenge Corporation

Table of Contents

Article I. Purpose and Term
    Section 1.1 Objectives
    Section 1.2 Projects
    Section 1.3 Entry into Force; Compact Term
Article II. Funding and Resources
    Section 2.1 MCC Funding
    Section 2.2 Government Resources
    Section 2.3 Limitations on the Use or Treatment of MCC Funding
    Section 2.4 Incorporation; Notice; Clarification
    Section 2.5 Refunds; Violation
Article III. Implementation
    Section 3.1 Implementation Framework
    Section 3.2 Government Responsibilities
    Section 3.3 Government Deliveries
    Section 3.4 Government Assurances
    Section 3.5 Implementation Letters; Supplemental Agreements
    Section 3.6 Procurement; Awards of Assistance
    Section 3.7 Policy Performance; Policy Reforms
    Section 3.8 Records and Information; Access; Audits; Reviews
    Section 3.9 Insurance; Performance Guarantees
    Section 3.10 Domestic Requirements
    Section 3.11 No Conflict
    Section 3.12 Reports
Article IV. Conditions Precedent; Deliveries
    Section 4.1 Conditions Prior to the Entry into Force and 
Deliveries
    Section 4.2 Conditions Precedent to MCC Disbursements or Re-
Disbursements
Article V. Final Clauses
    Section 5.1 Communications
    Section 5.2 Representatives
    Section 5.3 Amendments
    Section 5.4 Termination; Suspension
    Section 5.5 Privileges and Immunities
    Section 5.6 Attachments
    Section 5.7 Inconsistencies
    Section 5.8 Indemnification
    Section 5.9 Headings
    Section 5.10 Interpretation; Definitions
    Section 5.11 Signatures
    Section 5.12 Designation
    Section 5.13 Survival
    Section 5.14 Consultation
    Section 5.15 MCC Status
    Section 5.16 Language
    Section 5.17 Publicity; Information and Marking
Exhibit A: Definitions
Exhibit B: List of Certain Supplemental Agreements
Annex I: Program Description
    Schedule 1--Watershed Management and Agricultural Support 
Project
    Schedule 2--Infrastructure Project
    Schedule 3--Private Sector Development Project
Annex II: Summary of Multi-Year Financial Plan
Annex III: Description of the M&E Plan

Millennium Challenge Compact

    This Millennium Challenge Compact (the ``Compact'') is made between 
the United States of America, acting through the Millennium Challenge 
Corporation, a United States Government corporation (``MCC''), and the 
Government of the Republic of Cape Verde (the ``Government'') (referred 
to herein individually as a ``Party'' and collectively, the 
``Parties''). A compendium of capitalized terms defined herein is 
included in Exhibit A attached hereto.

Recitals

    Whereas, MCC, acting through its Board of Directors, has selected 
the Republic of Cape Verde as eligible to present to MCC a proposal for 
the use of 2004 Millennium Challenge Account (``MCA'') assistance to 
help facilitate poverty reduction through economic growth in Cape 
Verde;
    Whereas, the Government has carried out a consultative process with 
the country's private sector and civil society to outline the country's 
priorities for the use of MCA assistance and developed a proposal, 
which was submitted to MCC on August 10, 2004 (the ``Proposal'');

[[Page 42629]]

    Whereas, the Proposal focused on, among other things, social 
empowerment, poverty reduction and economic competitiveness;
    Whereas, MCC has evaluated the Proposal and related documents to 
determine whether the Proposal is consistent with core MCA principles 
and includes proposed activities and projects that will advance the 
progress of Cape Verde towards achieving economic growth and poverty 
reduction; and
    Whereas, based on MCC's evaluation of the Proposal and related 
documents and subsequent discussions and negotiations between the 
Parties, the Government and MCC determined to enter into this Compact 
to implement a program using MCC Funding to advance Cape Verde's 
progress towards economic growth and poverty reduction (the 
``Program'');
    Now, therefore, in consideration of the foregoing and the mutual 
covenants and agreements set forth herein, the Parties hereby agree as 
follows:

Article I. Purpose and Term

Section 1.1 Objectives

    The Parties have identified the following objectives (each, an 
``Objective'' and together, the ``Objectives'') of this Compact, each 
of which is (i) key to advancing the goal of economic growth and 
poverty reduction in Cape Verde (the ``Compact Goal'') and (ii) 
described in more detail in the Annexes attached hereto:
    (a) Increase agricultural production in the intervention zones (the 
``Watershed Management and Agricultural Support Objective'');
    (b) Increase integration of the internal market and reduce 
transportation costs (the ``Infrastructure Objective''); and
    (c) Develop the private sector (the ``Private Sector Development 
Objective'').
    The Government expects to achieve, and shall use its best efforts 
to ensure the achievement of, these Objectives during the Compact Term.

Section 1.2 Projects

    The Annexes attached hereto describe the specific projects and the 
policy reforms and other activities related thereto (each, a 
``Project'') that the Government will carry out, or cause to be carried 
out, in furtherance of this Compact to achieve the Objectives and the 
Compact Goal.

Section 1.3 Entry Into Force; Compact Term

    This Compact shall enter into force on the date of the last letter 
in an exchange of letters between the Principal Representatives of each 
Party confirming that all conditions set forth in Section 4.1 have been 
satisfied by the Government and MCC (the ``Entry into Force''). This 
Compact shall remain in force for five (5) years from the Entry into 
Force, unless earlier terminated in accordance with Section 5.4 (the 
``Compact Term'').

Article II. Funding and Resources

Section 2.1 MCC Funding

    (a) MCC's Contribution. MCC hereby grants to the Government, 
subject to the terms and conditions of this Compact, an amount not to 
exceed One Hundred Ten Million Seventy-Eight Thousand and Four Hundred 
Eighty-Eight United States Dollars (USD $110,078,488) (``MCC Funding'') 
during the Compact Term to enable the Government to implement the 
Program and achieve the Objectives.
    (i) Subject to Sections 2.1(a)(ii), 2.2(b) and 5.4(b), the 
allocation of the MCC Funding within the Program and among and within 
the Projects shall be as generally described in Annex II or as 
otherwise agreed upon by the Parties from time to time.
    (ii) If at any time MCC determines that a condition precedent to an 
MCC Disbursement has not been satisfied, MCC may, upon written notice 
to the Government, reduce the total amount of MCC Funding by an amount 
equal to the amount estimated in the applicable Detailed Financial Plan 
for the Program or Project activity for which such condition precedent 
has not been met. Upon the expiration or termination of this Compact, 
(A) any amounts of MCC Funding not disbursed by MCC to the Government 
shall be automatically released from any obligation in connection with 
this Compact and (B) any amounts of MCC Funding disbursed by MCC to the 
Government as provided in Section 2.1(b)(i), but not re-disbursed as 
provided in Section 2.1(b)(ii) or otherwise incurred as permitted 
pursuant to Section 5.4(e) prior to the expiration or termination of 
this Compact, shall be returned to MCC in accordance with Section 
2.5(a)(ii).
    (b) Disbursements.
    (i) Disbursements of MCC Funding. MCC shall from time to time make 
disbursements of MCC Funding (each such disbursement, an ``MCC 
Disbursement'') to a Permitted Account or through such other mechanism 
agreed by the Parties under and in accordance with the procedures and 
requirements set forth in Annex I, the Disbursement Agreement or as 
otherwise provided in any other relevant Supplemental Agreement.
    (ii) Re-Disbursements of MCC Funding. The release of MCC Funding 
from a Permitted Account (each such release, a ``Re-Disbursement''), 
shall be made in accordance with the procedures and requirements set 
forth in Annex I, the Disbursement Agreement or as otherwise provided 
in any other relevant Supplemental Agreement.
    (c) Interest. Unless the Parties agree otherwise in writing, any 
interest or other earnings on MCC Funding that accrue or are earned 
(collectively, ``Accrued Interest'') shall be held in a Permitted 
Account and accrue or be earned in accordance with the requirements for 
the treatment of Accrued Interest as specified in Annex I or any 
relevant Supplemental Agreement. On a quarterly basis and upon the 
termination or expiration of this Compact, the Government shall return, 
or ensure the return of, all Accrued Interest to any United States 
Government account designated by MCC.
    (d) Conversion; Exchange Rate. The Government shall ensure that all 
MCC Funding that is held in the Permitted Account(s) shall be 
denominated in the currency of the United States of America (``United 
States Dollars'') prior to Re-Disbursement; provided, that a certain 
portion of MCC Funding may be transferred to a Local Account and may be 
held in such Local Account in the currency of the Republic of Cape 
Verde prior to Re-Disbursement in accordance with the requirements of 
Annex I and any relevant Supplemental Agreement between the Parties. To 
the extent that any amount of MCC Funding held in United States Dollars 
must be converted into the currency of the Republic of Cape Verde for 
any purpose, including for any Re-Disbursement or any transfer of MCC 
Funding into a Local Account, the Government shall ensure that such 
amount is converted consistent with Annex I, including the rate and 
manner set forth in Annex I, and the requirements of the Disbursement 
Agreement or any other Supplemental Agreement between the Parties.
    (e) Guidance. From time to time, MCC may provide guidance to the 
Government through Implementation Letters on the frequency, form and 
content of requests for MCC Disbursements and Re-Disbursements or any 
other matter relating to MCC Funding. The Government shall apply such 
guidance in implementing this Compact.

[[Page 42630]]

Section 2.2 Government Resources

    (a) The Government shall provide or cause to be provided such 
Government funds and other resources, and shall take or cause to be 
taken such actions, including obtaining all necessary approvals and 
consents, as are specified in this Compact or in any Supplemental 
Agreement to which the Government is a party or as are otherwise 
necessary and appropriate to effectively carry out the Government 
Responsibilities or other responsibilities or obligations of the 
Government under or in furtherance of this Compact during the Compact 
Term and through the completion of any post-Compact Term activities, 
audits or other responsibilities.
    (b) If at any time during the Compact Term, the Government 
materially reallocates or reduces the allocation in its national budget 
or any other Cape Verdean governmental authority at a departmental, 
municipal, regional or other jurisdictional level materially 
reallocates or reduces the respective budget allocation of the normal 
and expected resources that the Government or such other governmental 
authority, as applicable, would have otherwise received or budgeted, 
from external or domestic sources, for the activities contemplated 
herein, the Government shall notify MCC in writing within fifteen (15) 
days of such reallocation or reduction, such notification to contain 
information regarding the amount of the reallocation or reduction, the 
affected activities, and an explanation for the reallocation or 
reduction. In the event that MCC independently determines, upon review 
of the executed national annual budget that such a material 
reallocation or reduction of resources has occurred, MCC shall notify 
the Government and, following such notification, the Government shall 
provide a written explanation for such reallocation or reduction and 
MCC may (i) reduce, in its sole discretion, the total amount of MCC 
Funding or any MCC Disbursement by an amount equal to the amount 
estimated in the applicable Detailed Financial Plan for the activity 
for which funds were reduced or reallocated or (ii) otherwise suspend 
or terminate MCC Funding in accordance with Section 5.4(b).
    (c) The Government shall use its best efforts to ensure that all 
MCC Funding is fully reflected and accounted for in the annual budget 
of the Republic of Cape Verde on a multi-year basis.

Section 2.3 Limitations on the Use or Treatment of MCC Funding

    (a) Abortions and Involuntary Sterilizations. The Government shall 
ensure that MCC Funding shall not be used to undertake, fund or 
otherwise support any activity that is subject to prohibitions on use 
of funds contained in (i) paragraphs (1) through (3) of section 104(f) 
of the Foreign Assistance Act of 1961 (22 U.S.C. 2151b(f)(1)-(3)), a 
United States statute, which prohibitions shall apply to the same 
extent and in the same manner as such prohibitions apply to funds made 
available to carry out Part I of such Act; or (ii) any provision of law 
comparable to the eleventh and fourteenth provisos under the heading 
``Child Survival and Health Programs Fund'' of division E of Public Law 
108-7 (117 Stat. 162), a United States statute.
    (b) United States Job Loss or Displacement of Production. The 
Government shall ensure that MCC Funding shall not be used to 
undertake, fund or otherwise support any activity that is likely to 
cause a substantial loss of United States jobs or a substantial 
displacement of United States production, including:
    (i) Providing financial incentives to relocate a substantial number 
of United States jobs or cause a substantial displacement of production 
outside the United States;
    (ii) Supporting investment promotion missions or other travel to 
the United States with the intention of inducing United States firms to 
relocate a substantial number of United States jobs or a substantial 
amount of production outside the United States;
    (iii) Conducting feasibility studies, research services, studies, 
travel to or from the United States, or providing insurance or 
technical and management assistance, with the intention of inducing 
United States firms to relocate a substantial number of United States 
jobs or cause a substantial displacement of production outside the 
United States;
    (iv) Advertising in the United States to encourage United States 
firms to relocate a substantial number of United States jobs or cause a 
substantial displacement of production outside the United States;
    (v) Training workers for firms that intend to relocate a 
substantial number of United States jobs or cause a substantial 
displacement of production outside the United States;
    (vi) Supporting a United States office of an organization that 
offers incentives for United States firms to relocate a substantial 
number of United States jobs or cause a substantial displacement of 
production outside the United States; or
    (vii) Providing general budget support for an organization that 
engages in any activity prohibited above.
    (c) Military Assistance and Training. The Government shall ensure 
that MCC Funding shall not be used to undertake, fund or otherwise 
support the purchase or use of goods or services for military purposes, 
including military training, or to provide any assistance to the 
military, police, militia, national guard or other quasi-military 
organization or unit.
    (d) Prohibition of Assistance Relating to Environmental, Health or 
Safety Hazards. The Government shall ensure that MCC Funding shall not 
be used to undertake, fund or otherwise support any activity that is 
likely to cause a significant environmental, health, or safety hazard. 
Unless MCC and the Government agree otherwise in writing, the 
Government shall ensure that activities undertaken, funded or otherwise 
supported in whole or in part (directly or indirectly) by MCC Funding 
comply with environmental guidelines delivered by MCC to the Government 
or posted by MCC on its website or otherwise publicly made available, 
as such guidelines may be amended from time to time (the 
``Environmental Guidelines''), including any definition of ``likely to 
cause a significant environmental, health, or safety hazard'' as may be 
set forth in such Environmental Guidelines.
    (e) Taxation.
    (i) Taxes. As required by applicable United States law and 
consistent with the applicable requirement of Cape Verdean law that 
international cooperation assistance shall be exempt from taxes, the 
Government shall ensure that the Program, any Program Assets, MCC 
Funding and Accrued Interest shall be free from any taxes imposed under 
the laws currently or hereafter in effect in the Republic of Cape Verde 
during the Compact Term. This exemption shall apply to any use of any 
Program Asset, MCC Funding and Accrued Interest, including any Exempt 
Uses, and to any work performed under or activities undertaken in 
furtherance of this Compact by any person or entity (including 
contractors and grantees) funded by MCC Funding, and shall apply to all 
taxes, tariffs, duties, and other levies (each a ``Tax'' and 
collectively, ``Taxes''), including:
    (1) To the extent attributable to MCC Funding, income taxes and 
other taxes on profit or businesses imposed on organizations or 
entities, other than nationals of the Republic of Cape Verde, receiving 
MCC Funding, including taxes on the acquisition, ownership, rental, 
disposition or other use of real or personal property, taxes on 
investment or deposit requirements and currency controls in the 
Republic of Cape Verde, or any other tax, duty, charge or fee of

[[Page 42631]]

whatever nature, except fees for specific services rendered; for 
purposes of this Section 2.3(e), the term ``national'' refers to 
organizations established under the laws currently or hereafter in 
effect in the Republic of Cape Verde, other than MCA-Cape Verde or any 
other entity established solely for purposes of managing or overseeing 
the implementation of the Program or any wholly-owned subsidiaries, 
divisions, or Affiliates of entities not registered or established 
under the laws currently or hereafter in effect in the Republic of Cape 
Verde;
    (2) Customs duties, tariffs, import and export taxes, or other 
levies on the importation, use and re-exportation of goods, services, 
or the personal belongings and effects, including personally-owned 
automobiles, for Program use or the personal use of individuals who are 
neither citizens nor permanent residents of the Republic of Cape Verde 
and who are present in the Republic of Cape Verde for purposes of 
carrying out the Program or their family members, including all charges 
based on the value of such imported goods;
    (3) Taxes on the income or personal property of all individuals who 
are neither citizens nor permanent residents of the Republic of Cape 
Verde, including income and social security taxes of all types and all 
taxes on the personal property owned by such individuals, to the extent 
such income or property are attributable to MCC Funding; and
    (4) Taxes or duties levied on the purchase of goods or services 
funded by MCC Funding, including sales taxes, tourism taxes, value-
added taxes (VAT), or other similar charges.
    (ii) This Section 2.3(e) shall apply, but is not limited to (A) Any 
transaction, service, activity, contract, grant or other implementing 
agreement funded in whole or in part by MCC Funding; (B) any supplies, 
equipment, materials, property or other goods (referred to herein 
collectively as ``goods'') or funds introduced into, acquired in, used 
or disposed of in, or imported into or exported from, the Republic of 
Cape Verde by MCC, or by any person or entity (including contractors 
and grantees) as part of, or in conjunction with, MCC Funding or the 
Program; (C) any contractor, grantee, or other organization carrying 
out activities funded in whole or in part by MCC Funding; and (D) any 
employee of such organizations (the uses set forth in clauses (A) 
through (D) are collectively referred to herein as ``Exempt Uses'').
    (iii) If a Tax has been levied and paid contrary to the 
requirements of this Section 2.3(e), whether inadvertently, due to the 
impracticality of implementation of this provision with respect to 
certain types or amounts of taxes, or otherwise, the Government shall 
refund promptly to MCC to an account designated by MCC the amount of 
such Tax in the currency of the Republic of Cape Verde, within thirty 
(30) days (or such other period as may be agreed in writing by the 
Parties) after the Government is notified of such levy and tax payment; 
provided, however, the Government shall apply national funds to satisfy 
its obligations under this paragraph and no MCC Funding, Accrued 
Interest, or any assets, goods, or property (real, tangible, or 
intangible) purchased or financed in whole or in part by MCC Funding 
(``Program Assets'') may be applied by the Government in satisfaction 
of its obligations under this paragraph.
    (iv) The Parties shall memorialize in a mutually acceptable 
Implementation Letter or Supplemental Agreement or other suitable 
document the mechanisms for implementing this Section 2.3(e), including 
(A) a formula for determining refunds for Taxes paid, the amount of 
which is not susceptible to precise determination, (B) a mechanism for 
ensuring the tax-free importation, use, and re-exportation of goods, 
services, or the personal belongings of individuals (including all 
Providers) described in paragraph (i)(2) of this Section 2.3(e), and 
(C) any other appropriate Government action to facilitate the 
administration of this Section 2.3(e).
    (f) Alteration. The Government shall ensure that no MCC Funding, 
Accrued Interest or Program Assets shall be subject to any impoundment, 
rescission, sequestration or any provision of law now or hereafter in 
effect in the Republic of Cape Verde that would have the effect of 
requiring or allowing any impoundment, rescission or sequestration of 
any MCC Funding, Accrued Interest or Program Asset.
    (g) Liens or Encumbrances. The Government shall ensure that no MCC 
Funding, Accrued Interest, or Program Assets shall be subject to any 
lien, attachment, enforcement of judgment, pledge, or encumbrance of 
any kind (each a ``Lien''), except with the prior approval of MCC in 
accordance with Section 3(c) of Annex I, and in the event of the 
imposition of any Lien not so approved, the Government shall promptly 
seek the release of such Lien and shall pay any amounts owed to obtain 
such release; provided, however, the Government shall apply national 
funds to satisfy its obligations under this Section 2.3(g) and no MCC 
Funding, Accrued Interest, or Program Assets may be applied by the 
Government in satisfaction of its obligations under this Section 
2.3(g).
    (h) Other Limitations. The Government shall ensure that the use or 
treatment of MCC Funding, Accrued Interest, and Program Assets shall be 
subject to and in conformity with such other limitations (i) as 
required by the applicable law of the United States of America now or 
hereafter in effect during the Compact Term, (ii) as advisable under or 
required by applicable United States Government policies now or 
hereafter in effect during the Compact Term, or (iii) to which the 
Parties may otherwise agree in writing.
    (i) Utilization of Goods, Services and Works. The Government shall 
ensure that any Program Assets, services, facilities or works funded in 
whole or in part (directly or indirectly) by MCC Funding, unless 
otherwise agreed by the Parties in writing, shall be used solely in 
furtherance of this Compact.
    (j) Notification of Applicable Laws and Policies. MCC shall notify 
the Government of any applicable United States law or policy affecting 
the use or treatment of MCC Funding, whether or not specifically 
identified in this Section 2.3, and shall provide to the Government a 
copy of the text of any such applicable law and a written explanation 
of any such applicable policy.

Section 2.4 Incorporation; Notice; Clarification

    (a) The Government shall include, or ensure the inclusion of, all 
of the requirements set forth in Section 2.3 in all Supplemental 
Agreements to which MCC is not a party and shall use its best efforts 
to ensure that no such Supplemental Agreement is implemented in 
violation of the prohibitions set forth in Section 2.3.
    (b) The Government shall ensure notification of all of the 
requirements set forth in Section 2.3 to any Provider and all relevant 
officers, directors, employees, agents, representatives, Affiliates, 
contractors, sub-contractors, grantees and sub-grantees of the 
Government or any Provider. The term ``Provider'' shall mean (i) MCA-
Cape Verde and any Government Affiliate or Permitted Designee involved 
in any activities in furtherance of this Compact or (ii) any third 
party who receives at least USD $50,000 in the aggregate of MCC Funding 
(other than employees of MCA-Cape Verde) during the Compact Term or 
such other amount as the Parties may agree in writing, whether directly 
from MCC, indirectly through Re-Disbursements, or otherwise.

[[Page 42632]]

    (c) In the event the Government or any Provider requires 
clarification from MCC as to whether an activity contemplated to be 
undertaken in furtherance of this Compact violates or may violate any 
provision of Section 2.3, the Government shall notify, or ensure that 
such Provider notifies, MCC in writing and provide in such notification 
a detailed description of the activity in question. In such event, the 
Government shall not proceed, and shall use its best efforts to ensure 
that no relevant Provider proceeds, with such activity, and the 
Government shall ensure that no Re-Disbursements shall be made for such 
activity, until MCC advises the Government or such Provider in writing 
that the activity is permissible.

Section 2.5 Refunds; Violation

    (a) Notwithstanding the availability to MCC, or exercise by MCC of, 
any other remedies, including under international law, this Compact, or 
any Supplemental Agreement:
    (i) If any amount of MCC Funding or Accrued Interest, or any 
Program Asset, is used for any purpose prohibited under this Article II 
or otherwise in violation of any of the terms and conditions of this 
Compact, any guidance in any Implementation Letter, or any Supplemental 
Agreement between the Parties, MCC may, upon written notice, require 
the Government to repay promptly to MCC to an account designated by MCC 
or to others as MCC may direct the amount of such misused MCC Funding 
or Accrued Interest, or the cash equivalent of the value of any misused 
Program Asset, in United States Dollars, plus any interest that accrued 
or would have accrued thereon, within fifteen (15) days after the 
Government is notified, whether by MCC or otherwise, of such prohibited 
use; provided, however, the Government shall apply national funds to 
satisfy its obligations under this Section 2.5(a)(i) and no MCC 
Funding, Accrued Interest, or Program Assets may be applied by the 
Government in satisfaction of its obligations under this Section 
2.5(a)(i); and
    (ii) If all or any portion of this Compact is terminated or 
suspended and upon the expiration of this Compact, the Government 
shall, subject to the requirements of Sections 5.4(e) and 5.4(f), 
refund, or ensure the refund, to MCC the amount of any MCC Funding, 
plus any Accrued Interest, promptly, but in no event later than thirty 
(30) days after the Government receives MCC's request for such refund; 
provided, that if this Compact is terminated or suspended in part, MCC 
may request a refund for only the amount of MCC Funding, plus any 
Accrued Interest, then allocated to the terminated or suspended 
portion; provided, further, that any refund of MCC Funding or Accrued 
Interest shall be to such account(s) as designated by MCC.
    (b) Notwithstanding any other provision in this Compact or any 
other agreement to the contrary, MCC's right under this Section 2.5 for 
a refund shall continue during the Compact Term and for a period of (i) 
five (5) years thereafter or (ii) one (1) year after MCC receives 
actual knowledge of such violation, whichever is later.
    (c) If MCC determines that any activity or failure to act violates, 
or may violate, any Section in this Article II, MCC may refuse any 
further MCC Disbursements for or conditioned upon such activity, and 
may take any action to prevent any Re-Disbursement related to such 
activity.

Article III. Implementation

Section 3.1 Implementation Framework

    This Compact shall be implemented by the Parties in accordance with 
this Article III and as further specified in the Annexes and in 
relevant Supplemental Agreements.

Section 3.2 Government Responsibilities

    (a) The Government shall have principal responsibility for 
oversight and management of the implementation of the Program (i) in 
accordance with the terms and conditions specified in this Compact and 
relevant Supplemental Agreements, (ii) in accordance with all 
applicable laws then in effect in Cape Verde, and (iii) in a timely and 
cost-effective manner and in conformity with sound technical, financial 
and management practices (collectively, the ``Government 
Responsibilities''). Unless otherwise expressly provided, any reference 
to the Government Responsibilities or any other responsibilities or 
obligations of the Government herein shall be deemed to apply to any 
Government Affiliate and any of their respective directors, officers, 
employees, contractors, sub-contractors, grantees, sub-grantees, agents 
or representatives.
    (b) The Government shall ensure that no person or entity shall 
participate in the selection, award, administration, or oversight of a 
contract, grant or other benefit or transaction funded in whole or in 
part (directly or indirectly) by MCC Funding, in which (i) the entity, 
the person, members of the person's immediate family or household or 
his or her business partners, or organizations controlled by or 
substantially involving such person or entity, has or have a direct or 
indirect financial or other interest or (ii) the person or entity is 
negotiating or has any arrangement concerning prospective employment, 
unless such person or entity has first disclosed in writing to the 
Government the conflict of interest and, following such disclosure, the 
Parties agree in writing to proceed notwithstanding such conflict. The 
Government shall ensure that no person or entity involved in the 
selection, award, administration, oversight or implementation of any 
contract, grant or other benefit or transaction funded in whole or in 
part (directly or indirectly) by MCC Funding shall solicit or accept 
from or offer to a third party or seek or be promised directly or 
indirectly for itself or for another person or entity any gift, 
gratuity, favor or benefit, other than items of de minimis value and 
otherwise consistent with such guidance as MCC may provide from time to 
time.
    (c) The Government shall not designate any person or entity, 
including any Government Affiliate, to implement, in whole or in part, 
this Compact or any Supplemental Agreement between the Parties 
(including any Government Responsibilities or any other 
responsibilities or obligations of the Government under this Compact or 
any Supplemental Agreement between the Parties) or to exercise any 
rights of the Government under this Compact or any Supplemental 
Agreement between the Parties, except as expressly provided herein or 
with the prior written consent of MCC; provided, however, the 
Government may designate MCA-Cape Verde or, with the prior written 
consent of MCC, such other mutually acceptable persons or entities, to 
implement some or all of the Government Responsibilities or any other 
responsibilities or obligations of the Government or to exercise any 
rights of the Government under this Compact or any Supplemental 
Agreement between the Parties (referred to herein collectively as 
``Designated Rights and Responsibilities''), in accordance with the 
terms and conditions set forth in this Compact or such Supplemental 
Agreement (each, a ``Permitted Designee''). Notwithstanding any 
provision herein or any other agreement to the contrary, no such 
designation shall relieve the Government of such Designated Rights and 
Responsibilities, for which the Government shall retain ultimate 
responsibility. In the event that

[[Page 42633]]

the Government designates any person or entity, including any 
Government Affiliate, to implement any portion of the Government 
Responsibilities or othe