Notice of Entering Into a Compact With the Government of the Republic of El Salvador, 76440-76486 [E6-21222]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 71, Number 244 (Wednesday, December 20, 2006)]
[Notices]
[Pages 76440-76486]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-21222]



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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 El Salvador; Notice

Federal Register / Vol. 71, No. 244 / Wednesday, December 20, 2006 / 
Notices

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 MILLENNIUM CHALLENGE CORPORATION

[MCC FR 06-21]


Notice of Entering Into a Compact With the Government of the 
Republic of El Salvador

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 (MCC) is publishing a summary and the complete 
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 El Salvador. Representatives of the 
United States Government and the Government of the Republic of El 
Salvador executed the Compact documents on November 29, 2006.

    Dated: December 8, 2006.
William G. Anderson Jr.,
Vice President & General Counsel (Acting), Millennium Challenge 
Corporation.

Summary of Millennium Challenge Compact With the Government of the 
Republic of El Salvador

I. Introduction

    In 1992, El Salvador entered into the peace accord that ended a 
decade of civil conflict. The conflict cost over 70,000 lives and left 
nearly two-thirds of the country's population in poverty. During the 
war, human capital formation lagged, public investment was deferred, 
and deterioration of the natural resource base accelerated. The 
northern zone of El Salvador (the ``Northern Zone'') fared the worst; 
its mountainous territory served as a primary staging ground for the 
conflict, thereby increasing violence and instability in the area and 
causing an exodus of large numbers of the region's inhabitants. Despite 
the significant national economic growth that followed the peace 
accord, progress has stagnated in recent years and the poverty rate in 
the Northern Zone (53 percent) remains higher than the national average 
(34 percent). Today, approximately 450,000 of the country's 2.33 
million poor people reside in the Northern Zone.
    Overcoming these obstacles and unifying the Northern Zone with the 
rest of the country have become national priorities. The Northern Zone 
serves as a primary source of water, energy, biodiversity and other key 
resources for El Salvador and neighboring countries in Central America. 
Halting, and indeed reversing, the deterioration of these resources, 
and ensuring more sustainable approaches to economic development, 
comprise strategic goals. The population of the Northern Zone requires 
a comprehensive development program to enable it to fully participate 
in El Salvador's growth, the benefits of regional integration, and the 
economic opportunities brought about by the recently signed Central 
America-Dominican Republic-United States Free Trade Agreement.
    The five-year, $460.94 million Compact provides an historic 
opportunity to fulfill these goals and transform El Salvador's economic 
development.

 II. Program Overview, Budget, and Impact

    The program supported by the Compact (the ``Program'') is comprised 
of three strategic and interdependent projects: (1) Human development; 
(2) productive development; and (3) connectivity.

                                        Multi-Year Financial Plan Summary
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                                                                         (USD millions)
                   Component                   -----------------------------------------------------------------
                                                  Year 1     Year 2     Year 3     Year 4     Year 5     Total
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Human Development Project.....................      $5.62     $23.18     $24.04     $21.02     $21.22     $95.07
Productive Development Project................      13.55      18.28      20.76      22.01      12.87      87.47
Connectivity Project..........................      16.44      82.79     111.58      18.80       3.95     233.56
Accountability................................       2.85       5.65       6.67       4.27       4.82      24.26
Program Administration........................       4.35       4.07       4.18       4.03       3.95      20.59
                                               -----------------------------------------------------------------
    Total estimated MCC Contribution..........      42.82     133.97     167.22      70.12      46.81     460.94
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    The Program is projected to directly alleviate the poverty of over 
150,000 Salvadorans and enhance the livelihoods and welfare of over 
850,000 people in the target area. It is expected that as a result of 
the Program, incomes in the region will increase by 20 percent over the 
five-year term of the Program, and by 30 percent within ten years of 
the start of the Program.\1\ Increased investment, trade, and 
productivity in the Northern Zone are expected to have spillover 
benefits for the country as a whole, as well as for the entire Central 
American region.
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    \1\ Without the Program, income in the Northern Zone is expected 
to increase by only 2 percent over the period of the Program and by 
4 percent within 10 years of the start of the Program.
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A. Human Development Project
    This project is based on the foundations and ongoing work achieved 
in two existing Government of El Salvador (``GOES'') programs--the 
Solidarity Network and the National Education Plan 2021. It is divided 
into two broad activities:
     Education and Training will support both formal and non-
formal technical training programs, secondary and post-secondary 
technical and vocational education with related infrastructure and 
equipment; over 27,000 people will benefit directly; and
     Community Development will provide improved access to 
potable water systems for 90,000 people and improved sanitation 
services for over 50,000. Electricity coverage in the Northern Zone 
will increase from 70 percent to no less than 97 percent, benefiting 
235,000 individuals. Through construction and improvement of community 
infrastructure (e.g., tertiary roads, improved drainage, small bridges) 
over 130,000 people will have greater access to markets, employment, 
and facilities supporting health and education.

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B. Productive Development Project
    This project includes provision of technical assistance, training, 
and financial services to farmers to help them shift from basic grains 
to higher value crops and to micro, small and medium businesses to make 
efficient, productivity improving investments. It is expected to lead 
to increases in net income for 55,000 beneficiaries, and is organized 
into three activities:
     Production and Business Services will provide technical 
assistance to farmers and business development services to micro, small 
and medium enterprises, all on a cost-sharing basis;
     Investment Support will provide investment capital on 
market terms to competitively selected applicants for commercially-
viable activities by the private sector; and
     Financial Services will provide credit guarantees and 
technical assistance to financial institutions to generate increased 
lending activity by banks and non-bank financial institutions to 
farmers and rural enterprises. In addition, crop insurance will help 
mitigate risks for small producers in the Northern Zone.
C. Connectivity Project
    This project addresses the issue of the Northern Zone's physical 
isolation with two activities:
     The Northern Transnational Highway includes the design, 
construction, and rehabilitation of a 289-kilometer two-lane secondary 
road, forming a transportation corridor from Guatemala to Honduras 
across the Northern Zone of El Salvador. More than 80 percent of the 
highway span involves rehabilitation; new roads are expected to 
comprise approximately 50 kilometers; and
     The Connecting Road Network includes paving and 
improvement of 240 kilometers of unpaved roads that will enable 
increased access to markets, health, and education services, and 
integrate the Northern Zone with national and regional highway systems.
    Increased connectivity is expected to lead to new economic 
opportunities for rural households, lower transportation costs, and 
decrease travel times to markets and social service delivery points for 
upwards of 600,000 beneficiaries.

III. Program Management

    Through an act of its legislature, the GOES will create Fondo del 
Milenio (``FOMILENIO'') to serve as the accountable entity for the 
Program. FOMILENIO will be governed by an independent board of 
directors (the ``Board'') which will make strategic decisions, provide 
oversight, and ultimately be responsible for the results of the 
Program. The Board will be comprised of seven voting members--four 
members designated by GOES, one private-sector member, and two 
representatives of nongovernmental organizations. The Board also will 
benefit from the participation of an advisory council, consisting of 
members of the National Development Commission and other stakeholders. 
An executive director will manage the day-to-day activities of 
FOMILENIO and will be supported by key officers, technical staff, and 
administrative personnel.
    FOMILENIO will engage line ministries, other public agencies, a 
second-tier development bank, and contractors/consultants for direct 
execution of the Program activities. However, as the accountable 
entity, FOMILENIO will remain responsible for the successful 
implementation of the Program. The financial management unit within 
FOMILENIO and the Ministry of Finance will share the financial 
management responsibilities for the Program. FOMILENIO will utilize 
outside procurement and fiscal oversight agents. As a governmental 
entity, FOMILENIO will be subject to GOES audit requirements as well as 
audits required by the Compact.

IV. Other Highlights

A. Consultative Process
    The National Development Commission has led a public dialogue on a 
new vision for El Salvador's development. As a result of this dialogue, 
the National Development Commission produced a shared national 
development strategy, known as the Plan of the Nation, setting forth a 
vision for development of each of the five regions of El Salvador, 
including the Northern Zone. In response to the Plan of the Nation, and 
based on local, regional, and national level consultations, GOES 
created a plan for developing the Northern Zone (the ``Northern Zone 
Investment Plan'').
    To develop their proposal for Millennium Challenge Account 
(``MCA'') assistance, GOES refined the Northern Zone Investment Plan 
based on input received in a series of consultations with various 
stakeholders and interested parties. Consultations included local 
mayors, private-sector representatives, academic experts, international 
donors, multilateral development organizations, sector specialists, and 
the general public. In total, GOES held more than 50 formal workshops 
and informal discussions with over 2,200 Salvadorans. GOES, through 
FOMILENIO, plans to continue engaging civil society, local government, 
and other key constituencies in oversight and guidance through Program 
implementation. It will do this via private sector and civil society 
representation on the Board, and through ongoing participation by the 
National Development Commission, local mayoral commission, government 
representatives, and other stakeholders on FOMILENIO's Advisory 
Council.
B. GOES Commitment and Contribution to the Program
    GOES has demonstrated substantial commitment to the Compact 
development process since first becoming eligible for MCA assistance in 
November 2005. Under the guidance of a high-level oversight commission, 
and with the leadership of the executive director of the MCA-El 
Salvador team, GOES presented a comprehensive proposal just over five 
months after becoming eligible. The President and other high-level 
officials have been directly engaged in developing the Program, 
providing the political leadership necessary for its success. Recent 
progress on policy reform, and ongoing efforts by GOES to strengthen 
rule of law, administration of justice, and other relevant areas, 
contributed to El Salvador being re-selected as an MCA-eligible country 
in November of 2006.
    Pursuant to Section 609(b)(2) of MCC's legislation applicable to a 
lower middle income country receiving Compact funds, GOES will make an 
appropriate contribution, relative to its national budget and taking 
into account prevailing economic conditions, towards meeting the 
objectives of the Compact. The GOES contribution will be in addition to 
the government's spending allocated towards such objectives in the 
country's budget for the year immediately preceding the establishment 
of the Compact. GOES expects to make a qualifying contribution to the 
Northern Zone Investment Plan of approximately $327 million over the 
five-year term of the Compact. In addition, GOES invested over $1.7 
million in proposal preparation and has committed another approximately 
$9 million to fund up-front feasibility, design and environmental 
impact studies related to the Connectivity Project.
C. Sustainability
    MCC is requiring assurances from GOES that it will provide the 
staffing, equipment and other recurrent costs of new (and, in some 
cases, existing)

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facilities and infrastructure investments necessary for the 
sustainability of the Program. The education and training activity will 
include strong private-sector involvement and will engender local and 
civil society ownership. As part of the technical assistance activity, 
an assessment will be made of alternative revenue sources needed to 
cover recurring costs. These elements will support more sustainable 
impact of this activity.
    Selection criteria for the water and sanitation and community 
infrastructure activities under the Human Development Project will 
stipulate a minimum level of community contribution to investment in 
and maintenance of new infrastructure. Municipalities and/or community-
level entities will be responsible for system operation and 
maintenance. System designs will reflect lowest cost alternatives in 
order to reflect users' ability to pay tariffs for operation and 
maintenance costs. For the rural electrification and water and 
sanitation activities, user fees that correspond with system operation 
and maintenance needs will be applied.
    The Productive Development Project will provide support to 
encourage alliances, joint ventures, and other collaborations between 
more established enterprises and smaller/disadvantaged organizations 
and individuals. In addition to technical assistance provided to micro, 
small, and medium sized enterprises, support will be provided to 
financial institutions to enable them to better serve new clients. 
These activities are expected to accelerate start-up of productive 
activities, and improve prospects for success and sustainability.
    Sustainability of MCC investments in transportation infrastructure 
is contingent upon proper and effective road maintenance. El Salvador 
possesses substantial road maintenance capabilities in the Fondo de 
Conservaci[oacute]n Vial. Disbursement of MCC funding for the 
Connectivity Project will depend on the satisfaction of conditions 
related to road maintenance of all roads within the Connectivity 
Project for the life of such roads.
D. Environment and Social Impacts
    Environmental and social sustainability of the Program will be 
enhanced through oversight, ongoing public consultation and 
institutional capacity building. A strategic environmental assessment 
funded by the World Bank will be performed in the Northern Zone to 
address the project components and the need to strengthen land use 
plans. To address the lack of institutional capacity for effective 
monitoring and oversight, GOES will commit to increasing environmental 
staff in the implementing and regulatory entities and creating an 
inter-departmental task force, focused on the Northern Zone 
investments, in the Ministry of Environment and Natural Resources. GOES 
will also strengthen the environmental management system to help in the 
enforcement of land use plans and participation of Salvadoran 
communities in the sustainable management of natural resources. MCC is 
providing funding for training in environmental management to further 
improve the institutional capacity.
    The Connectivity Project is classified as Category A under MCC's 
Environmental Guidelines. An environmental impact assessment, 
environmental management plans, resettlement action plans, and HIV/AIDS 
awareness plans will be undertaken and funded by GOES. GOES and MCC 
also have conducted multiple consultations with non-governmental 
organizations in El Salvador and in the U.S. to review concerns and 
ensure they are adequately addressed in advance of implementation.
    As part of the Human Development Project, classified as Category B 
under MCC's Environmental Guidelines, the education and training 
activity will require a gender assessment to address issues of access 
and meaningful participation. The community development activity will 
require selection criteria for provision of community services that 
take into account environmental sensitivity and social impact 
considerations and site-specific environmental analysis as needed.
    The Productive Development Project, classified as Category D under 
MCC's Environmental Guidelines, will adhere to guidelines contained in 
an operations manual that defines environmental and social/gender 
requirements. Specifically, potentially adverse environmental impacts 
may result from new or expanded activities supported by the Project. To 
address these and other potential impacts, technical assistance will 
involve the dissemination of environmental sustainability principles, 
and selection criteria for eligible proposals will include 
environmental sensitivity and social impact considerations.
E. Donor, Multilateral, and Interagency Coordination
    The Program was developed in collaboration with a wide variety of 
donors and multilateral finance institutions. Several Program 
components will build upon activities pioneered by other donors (such 
as the Inter-American Development Bank's rural roads program, and the 
U.S. Agency for International Development's water and sanitation and 
rural productivity projects). MCC worked with the European Union and 
the Japanese International Cooperation Agency as it reviewed proposed 
transportation infrastructure activities. MCC also worked closely with 
the World Bank to ensure proper coordination on the strategic 
environmental assessment, and on matters related to land tenure, land 
administration, and protected areas management.
    To further advance understanding of the proposed Program, MCC held 
numerous meetings with representatives from various U.S. Government 
agencies. MCC looked primarily to USAID and the U.S. Department of 
State for information on the development context in El Salvador. For 
insight into the integrity of GOES financial management systems, MCC 
received detailed reviews and recommendations from USAID's Regional 
Inspector General's office in El Salvador. On specific technical 
issues, MCC met with specialists from the U.S. Department of 
Agriculture, Federal Highway Administration, Inter-American Foundation, 
U.S. Department of Justice, and the Army Corps of Engineers. MCC also 
held meetings with key representatives from the U.S. Commercial 
Service, U.S. Trade Representative, U.S. Trade and Development Agency, 
Export-Import Bank of the United States, and the Overseas Private 
Investment Corporation. These sessions provided useful context to the 
Compact development process and alerted MCC staff to potential 
challenges and opportunities for positive collaboration.

Millennium Challenge Compact Between the United States of America 
Acting Through the Millennium Challenge Corporation and the Government 
of the Republic of El Salvador

Table of Contents

Article I. Purpose and Term
    Section 1.1 Compact Goal; 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

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    Section 2.6 Bilateral Agreement
Article III. Implementation
    Section 3.1 Creation of the ``Fondo del Milenio''
    Section 3.2 Responsibilities
    Section 3.3 Fundamental Objectives
    Section 3.4 Board and Management Generally
    Section 3.5 Board
    Section 3.6 Executive Director
    Section 3.7 Patrimony and Budget
    Section 3.8 Oversight and Control
    Section 3.9 Audits
    Section 3.10 Reglamento
    Section 3.11 Implementation Framework
    Section 3.12 Government Responsibilities
    Section 3.13 Government Deliveries
    Section 3.14 Government Assurances
    Section 3.15 Implementation Letters; Supplemental Agreements
    Section 3.16 Procurement; Awards of Assistance
    Section 3.17 Policy Performance; Policy Reforms
    Section 3.18 Records and Information; Access; Audits; Reviews
    Section 3.19 Insurance; Performance Guarantees
    Section 3.20 Domestic Requirements
    Section 3.21 No Conflict
    Section 3.22 Reports
Article IV. Conditions Precedent; Deliveries
    Section 4.1 Conditions Prior to Entry Into Force and Deliveries
    Section 4.2 Conditions Precedent to MCC Disbursement 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
    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

    Schedule 2.1(a)(iii) Description of Compact Implementation 
Funding

Annex I: Program Description

    Schedule 1: Human Development Project
    Schedule 2: Productive Development Project
    Schedule 3: Connectivity 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 El Salvador (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 El Salvador as eligible to present to MCC a proposal 
for the use of Millennium Challenge Account (``MCA'') assistance to 
help facilitate poverty reduction through economic growth in El 
Salvador;
    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 in May 2006 (the ``Proposal'');
    Whereas, the Proposal focused on interrelated objectives of 
supporting knowledge and skills development, expanding community 
infrastructure, developing productive potential, and improving 
connectivity in the northern zone of El Salvador (the ``Northern 
Zone'') as important national priorities to foster national integration 
and sustainable economic and social development;
    Whereas, MCC has evaluated the Proposal and related documents and 
determined that the Proposal is consistent with core MCA principles and 
includes a coherent structure of integrated activities that will 
advance the progress of El Salvador towards achieving lasting economic 
growth and poverty reduction;
    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 El Salvador's 
progress towards economic growth and poverty reduction (the 
``Program''); and
    Whereas, the Parties agree that the Government shall establish, in 
accordance with Article III and Annex I, Fondo del Milenio 
(``FOMILENIO''), the entity that shall be responsible for the oversight 
and management of the implementation of this Compact on behalf of the 
Government;
    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 Compact Goal; Objectives

    The goal of this Compact is to advance economic growth and poverty 
reduction in the Northern Zone of El Salvador (the ``Compact Goal''). 
The Parties have identified the following project-level objectives 
(collectively, the ``Objectives'') to advance the Compact Goal, each of 
which is described in more detail in the Annexes attached hereto:
    (a) Increase human and physical capital of residents of the 
Northern Zone to take advantage of employment and business 
opportunities (the ``Human Development Objective'');
    (b) Increase production and employment in the Northern Zone (the 
``Productive Development Objective''); and
    (c) Reduce travel cost and time within the Northern Zone, with the 
rest of country, and within the region (the ``Connectivity 
Objective'').
    The Government expects to achieve, and shall use its best efforts 
to ensure the achievement of, the Compact Goal and these Objectives 
during the Compact Term.

Section 1.2 Projects

    The Annexes attached hereto describe the component projects of the 
Program, 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 (i) each Party has completed its domestic 
requirements for entry into force of this Compact (including as set 
forth in Section 3.20) and (ii) all conditions set forth in Section 4.1 
have been satisfied by the Government and MCC (``Entry into Force''). 
This Compact shall remain in force for five (5) years from Entry into 
Force, unless earlier terminated in accordance with Section 5.4 (the 
``Compact Term''). Notwithstanding the foregoing, Sections 2.1(a)(iii), 
3.1 to 3.10, 3.16 and 3.20 shall provisionally apply prior to Entry 
into Force in accordance with the terms and conditions set forth in 
each such Section and shall remain in full force

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and effect throughout 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 Four Hundred Sixty Million Nine Hundred and Forty Thousand 
United States Dollars (US $460,940,000) (``MCC Funding'') during the 
Compact Term to enable the Government to implement the Program and 
achieve the Objectives.
    (i) Subject to Sections 2.1(a)(ii), 2.2(b) and 5.4(b), the 
allocation of MCC Funding within the Program and among and within the 
component Projects shall be as generally described in Annex II or as 
otherwise agreed upon by the Parties from time to time.
    (ii) If at any time MCC determines that a condition precedent to an 
MCC Disbursement has not been satisfied, MCC may, upon written notice 
to the Government, reduce the total amount of MCC Funding by an amount 
equal to the amount estimated in the applicable Detailed Budget for the 
Program, Project, Project Activity or sub-activity for which such 
condition precedent has not been met. Upon the expiration or 
termination of this Compact, (A) any amount of MCC Funding not 
disbursed by MCC to the Government shall be automatically released from 
any obligation in connection with this Compact, and (B) any amounts of 
MCC Funding disbursed by MCC to the Government as provided in Section 
2.1(b)(i), but not re-disbursed as provided in Section 2.1(b)(ii) or 
otherwise incurred as permitted pursuant to Section 5.4(e) prior to the 
expiration or termination of this Compact, shall be returned to MCC in 
accordance with Section 2.5(a)(ii).
    (iii) Notwithstanding any other provision of this Compact and 
pursuant to the authority of Section 609(g) of the Millennium Challenge 
Act of 2003, as amended (the ``Act''), upon the conclusion of this 
Compact (and without regard to the satisfaction of all of the 
conditions for Entry into Force required under Section 1.3), MCC shall 
make available Nine Million Two Hundred and Eighteen Thousand United 
States Dollars (US$ 9,218,000) (``Compact Implementation Funding'') to 
facilitate certain aspects of Compact implementation as described in 
Schedule 2.1(a)(iii) attached hereto; provided, however, such Compact 
Implementation Funding shall be subject to (A) the limitations on the 
use or treatment of MCC Funding set forth in Section 2.3, as if such 
provision were in full force and effect, and (B) any other requirements 
for, and limitations on the use of, such Compact Implementation Funding 
as may be required by MCC in writing; provided, further, that any 
Compact Implementation Funding granted in accordance with this Section 
2.1(a)(iii) shall be included in, and not additional to, the total 
amount of MCC Funding; and provided, further, any obligation to provide 
such Compact Implementation Funding shall expire upon the expiration or 
termination of this Compact or five (5) years from the conclusion of 
this Compact, whichever occurs sooner and in accordance with Section 
5.4(e). Notwithstanding anything to the contrary in this Compact, this 
Section 2.1(a)(iii) shall provisionally apply, prior to Entry into 
Force, upon execution of this Compact by the Parties and ratification 
thereof by the Asamblea Legislativa and completion of the corresponding 
Publication Period, and this Section 2.1(a)(iii) shall remain in full 
force and effect throughout the Compact Term.
    (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 a Supplemental Agreement to be entered into 
by MCC, FOMILENIO and the Government (or a mutually acceptable 
Government Affiliate) setting forth the specific terms and conditions 
of MCC Disbursements and Re-Disbursements and the procurement policies 
and procedures for the Program (the ``Disbursement 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 the Disbursement Agreement or as otherwise provided in any 
other Supplemental Agreement.
    (c) Interest. Unless the Parties agree otherwise in writing, any 
interest or other earnings on MCC Funding that accrue (collectively, 
``Accrued Interest'') shall be held in a Permitted Account and shall 
accrue in accordance with the requirements for the accrual and 
treatment of Accrued Interest as specified in Annex I or any 
Supplemental Agreement. On at least 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) Currency. The Government shall ensure that all MCC Funding that 
is held in any Permitted Account shall be denominated in the currency 
of the United States of America (``United States Dollars'') prior to 
Re-Disbursement.

Section 2.2 Government Resources

    (a) In accordance with Section 609(b)(2) of the Act, the Government 
shall make a contribution towards meeting the Objectives of this 
Compact. Section 6 of Annex II identifies such contribution.
    (b) 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 effectively to 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.
    (c) If at any time during the Compact Term, the Government 
materially reallocates or reduces the allocation in its national budget 
or any other Salvadoran governmental authority at a departmental, 
municipal, regional or other jurisdictional level materially 
reallocates or reduces the allocation in its respective budget, 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

[[Page 76445]]

Disbursement by an amount equal to the amount estimated in the 
applicable Detailed Budget 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).
    (d) 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 El Salvador 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 Web site 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. The Government shall ensure that the Program, MCC 
Funding, Accrued Interest, and any other Program Asset shall be free 
from any taxes imposed under the laws currently or hereafter in effect 
in the Republic of El Salvador during the Compact Term. This exemption 
shall apply to any use of MCC Funding, Accrued Interest, and any other 
Program Asset, 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, withholdings 
and other levies (each, a ``Tax'' and collectively, ``Taxes''), 
including the following:
    (1) To the extent attributable to MCC Funding, income taxes and 
other taxes on profit or businesses imposed on organizations or 
entities 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 El Salvador, municipal or departmental 
taxes, or any other tax, duty, charge or fee of whatever nature;
    (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 El Salvador 
and who are present in the Republic of El Salvador for purposes of 
carrying out the Program and 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 El 
Salvador, 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 for 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 to, 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 collectively in this Section 2.3(e) as ``goods'') or funds 
introduced into, acquired in, used or disposed of in, or imported into 
or exported from, the Republic of El Salvador 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

[[Page 76446]]

Section 2.3(e), then the Government shall refund to MCC, to an account 
designated by MCC, the amount of such Tax payment within thirty (30) 
days (or such other period as may be agreed in writing by the Parties) 
after the date on which the Government is notified in writing, in 
accordance with procedures agreed to by the Parties, of such Tax levy 
and payment; provided, however, the Government shall apply national 
funds to satisfy its obligations under this Section 2.3(e)(iii) and no 
MCC Funding, Accrued Interest, or any assets, goods, or property (real, 
tangible, or intangible) purchased or financed in whole or in part 
(directly or indirectly) by MCC Funding (collectively, the ``Program 
Assets'') may be applied by the Government in satisfaction of its 
obligations under this paragraph.
    (iv) To implement this Section 2.3(e), the Government may, with the 
consent of MCC and through Implementation Letters, establish some or 
all of the following: (A) A mechanism pursuant to which the Government 
will simultaneously pay the VAT portion of any invoices to be paid, in 
whole or in part, by FOMILENIO; (B) a mechanism pursuant to which, for 
Salvadoran income tax purposes, all payments or transfers made by 
FOMILENIO with MCC Funding are not considered as ``income, profits, 
receipts or revenues'' for the recipients of such payments or transfers 
(renta excluida) and therefore are excluded from the definition of 
income and the monthly estimated income tax payments and from the 
withholding tax regime applicable to providers of goods and services; 
(C) a mechanism pursuant to which the Government will reimburse to MCC 
or FOMILENIO, as appropriate, on a regular and timely basis, Taxes paid 
contrary to the requirements of this Section 2.3(e) due to the 
impracticality of implementing such requirements with respect to 
certain types of Taxes or the amount of such Taxes not being 
susceptible to precise determination; (D) a mechanism for ensuring the 
tax-free importation, use and re-exportation of goods, services or 
personal belongings of individuals (including all providers of goods 
and services) described in Section 2.3(e)(i)(2); and (E) the provision 
by the Government of a tax-exemption certificate to qualified 
individuals. At MCC's request, the Parties shall memorialize, in a 
mutually acceptable Supplemental Agreement or Implementation Letter or 
other suitable document, the foregoing mechanisms and the Government 
shall take any other appropriate action to facilitate the 
administration of this Section 2.3(e). All payments made pursuant to 
this Section 2.3(e)(iv) shall be made with national funds.
    (f) Alteration. No MCC Funding, Accrued Interest or other Program 
Asset shall be subject to any impoundment, rescission, sequestration or 
any provision of law now or hereafter in effect in the Republic of El 
Salvador that would have the effect of requiring or allowing any 
impoundment, rescission or sequestration of any MCC Funding, Accrued 
Interest or other Program Asset. The Government shall ensure the due 
compliance and exact application thereof.
    (g) Liens or Encumbrances. No MCC Funding, Accrued Interest or 
other Program Asset 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. In the event of the imposition of any Lien not 
so approved, the Government shall promptly seek the release of such 
Lien and, if the Lien is not released within thirty (30) days of the 
imposition thereof, shall pay all amounts owed or take all other 
actions necessary to obtain such release; provided, however, that the 
Government shall apply national funds to satisfy its obligations under 
this Section 2.3(g) and no MCC Funding, Accrued Interest or other 
Program Asset may be applied by the Government in satisfaction of its 
obligations under this Section 2.3(g). The Government shall ensure the 
due compliance and exact application thereof.
    (h) Other Limitations. The Government shall ensure that the use or 
treatment of MCC Funding, Accrued Interest, and other 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, unless otherwise agreed by the Parties in writing, that any 
Program Assets and any services, facilities or works funded in whole or 
in part (directly or indirectly) by MCC Funding 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 (except for Supplemental Agreements with Providers defined 
in Section 2.4(b)(ii) below) to which MCC is not a party.
    (b) The Government shall ensure notification of all of the 
requirements set forth in Section 2.3 to any Provider and to all of 
such Provider's relevant officers, directors, employees, agents, 
representatives, Affiliates, and to any of such Provider's contractors, 
sub-contractors, grantees and sub-grantees of any Provider. The term 
``Provider'' shall mean (i) FOMILENIO, (ii) any Government Affiliate or 
Permitted Designee (other than FOMILENIO) that receives or utilizes any 
Program Assets in carrying out activities in furtherance of this 
Compact or (iii) any third party who receives at least US$ 50,000 in 
the aggregate of MCC Funding (other than employees of FOMILENIO) 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.
    (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 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. MCC shall 
use good faith efforts to respond timely to such notification for 
clarification.

Section 2.5 Refunds; Violation

    (a) Notwithstanding the availability to MCC, or the exercise by 
MCC, of any other remedies, including under international law, this 
Compact or any Supplemental Agreement:

[[Page 76447]]

    (i) If any amount of MCC Funding, Accrued Interest, or any other 
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, then MCC, upon written notice, may 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 other misused 
Program Asset, in United States Dollars, plus any interest that accrued 
or would have accrued thereon, within thirty (30) days after the 
Government is notified, whether by MCC or other duly authorized 
representative of the United States Government, 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 any other Program Asset may be applied by the 
Government in satisfaction of its obligations under this Section 
2.5(a)(i); and
    (ii) Upon the termination or suspension of all or any portion of 
this Compact or 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, to such account designated by 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, however, 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.
    (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, then 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.

Section 2.6 Bilateral Agreement

    All MCC Funding shall be considered United States assistance under 
the General Agreement for Economic, Technical and Related Assistance 
between the Government of the United States of America and the 
Government of the Republic of El Salvador, dated June 16, 1962, as 
amended from time to time (the ``Bilateral Agreement''). If there are 
conflicts or inconsistencies between any parts of this Compact and the 
Bilateral Agreement, as either may be amended from time to time, the 
provisions of this Compact shall prevail over those of the Bilateral 
Agreement.

Article III. Implementation

Section 3.1 Creation of the ``Fondo del Milenio''

    The Government promptly shall take all necessary and appropriate 
actions to create, or cause to be created, pursuant to a legislative 
decree that develops the provisions of this Article III and is, in form 
and substance, mutually agreeable to the Parties (the ``Law Creating 
FOMILENIO''), an autonomous public entity, with technical character and 
of public interest, named the ``FONDO DEL MILENIO,'' hereinafter also 
known as ``FOMILENIO,'' for so long as there are pending activities, 
rights or obligations with respect to the Compact. FOMILENIO shall have 
legal capacity and with property of its own, with autonomy in the 
exercise of its functions, in the financial and administrative aspects 
as well as in its budget. Its domicile will be in the city of San 
Salvador, Republic of El Salvador but it will be able to establish 
branch offices anywhere in the Republic of El Salvador.

Section 3.2 Responsibilities

    FOMILENIO shall administer its resources efficiently and comply 
with all of the responsibilities and obligations designated and assumed 
by it (i) pursuant to this Compact and Supplemental Agreements, (ii) 
pursuant to the Governing Documents, (iii) in accordance with all 
applicable laws then in effect in El Salvador that do not contravene 
the provisions of this Compact, and (iv) in a timely and cost-effective 
manner and in conformity with sound technical, financial and management 
practices.

Section 3.3 Fundamental Objectives

    The fundamental objectives of FOMILENIO shall be the Compact Goal, 
the Human Development Objective, the Productive Development Objective 
and the Connectivity Objective.

Section 3.4 Board and Management Generally

    (a) FOMILENIO shall have: (i) A board of directors (the ``Board'') 
that shall be responsible for the oversight and supervision of all 
FOMILENIO's activities and shall ensure the execution of FOMILENIO's 
responsibilities and obligations set forth in this Compact and the 
Governing Documents, as well as the compliance of the obligations of 
the Government under this Compact, and (ii) a management unit (the 
``Management'') with day-to-day management responsibility for the 
implementation of this Compact.
    (b) The Board shall appoint, with the approval of MCC, an ad 
honorem Advisory Council (the ``Advisory Council''), which shall be 
independent from FOMILENIO. The composition, roles and responsibilities 
of the Advisory Council shall be those established in Annex I hereto 
and in accordance with the provisions of the Governing Documents.

Section 3.5 Board

    (a) Formation. The Board shall be formed, constituted, governed and 
operated in accordance with the terms set forth in this Compact, the 
Governing Documents, and the Supplemental Agreements.
    (b) Constitution. The Board shall consist of at least seven (7) but 
no more than eleven (11) voting members, and at least two (2) non-
voting observers. The Board members shall be designated in accordance 
with Section 3.5(e). One of the voting members designated by the 
Government in accordance with the Reglamento shall serve as the 
chairman of the Board (the ``Chair'') and legal representative of 
FOMILENIO.
    (c) Ad-honorem Membership. The Board members will exercise their 
functions ad-honorem; therefore, they will not receive any salary, 
wages or other compensations for their work relating to their 
membership on the Board.
    (d) No Delegation; Alternates. The members of the Board shall be 
prohibited from delegating their rights and responsibilities as members 
of the Board other than to their prior-appointed alternates who shall 
be permitted to vote on behalf of such primary member in the case of 
such primary member's absence.
    (e) Appointment of Board Members. The required minimum seven (7) 
voting members of the Board shall be chosen as follows: (i) Four (4) of 
the voting members of the Board, and each of their alternates, shall be 
designated by the Government, subject to the prior receipt

[[Page 76448]]

of a no-objection notice from MCC; (ii) one (1) of the voting members 
shall be a member of the private sector, and such member, and his/her 
alternate, shall be selected and appointed in accordance with the 
procedure set forth in the Reglamento; and (iii) two (2) of the voting 
members shall be representatives of NGOs, and such members, and each of 
their alternates, shall be selected and appointed in accordance with a 
process agreed upon by the Government and MCC. Initially, the voting 
members designated by the Government shall be: (i) The Technical 
Secretary of the President of the Republic of El Salvador; (ii) the 
Minister of Finance; (iii) the Minister of Foreign Affairs; and (iv) 
the Minister of Agriculture. The required minimum two non-voting 
observers of the Board shall be (i) a representative designated by MCC 
(the ``MCC Representative'') and (ii) the Minister of the Environment 
and Natural Resources. In the event that one of the NGO voting members 
is not from an environmentally focused NGO, an additional observer from 
such an organization, subject to the prior receipt of a no-objection 
notice from MCC, shall be appointed. Each non-voting observer shall be 
an ``Observer.'' The Reglamento shall set forth the procedures for 
selection of any additional Board members and any additional Observers 
and the procedures for any change of the Chair and any change in the 
composition of the Board.
    (f) Roles and Responsibilities of the Board. The Board shall:
    (i) Supervise and manage the Program and each of its component 
Projects and Project Activities;
    (ii) Approve the regulations, manuals, instructions, internal 
organization, expenses, budgets and procurements for the execution of 
the Program;
    (iii) Propose to the Government the Executive Decrees which may be 
necessary for the internal organization and operation of FOMILENIO;
    (iv) Approve, execute and implement the necessary Supplemental 
Agreements for the execution of the Program;
    (v) Appoint the Executive Director and define the Executive 
Director's role and responsibilities and delegate to the Executive 
Director the right to execute any agreement previously approved by the 
Board;
    (vi) Request MCC Disbursements that are necessary for the execution 
of the Program; and
    (vii) Carry out any other action that may have been granted by the 
Compact and the Executive Decree(s) specially created for the 
compliance and execution of the Program.

Section 3.6 Executive Director

    The Executive Director of FOMILENIO (the ``Executive Director'') 
shall have the power and authority delegated to the Executive Director 
by the Board.

Section 3.7 Patrimony and Budget

    The patrimony of FOMILENIO will be constituted through the grant of 
MCC Funding from the Government of the United States of America acting 
through MCC pursuant to this Compact. FOMILENIO will have a multi-
annual budget that will be approved as an extraordinary budget by the 
Legislative Assembly of El Salvador (the ``Asamblea Legislativa'').

Section 3.8 Oversight and Control

    FOMILENIO will be subject to oversight and control by the 
Comptroller of the Republic of El Salvador (Corte de Cuentas de la 
Rep[uacute]blica de El Salvador).

Section 3.9 Audits

    FOMILENIO will be subject to financial audits to verify the proper 
investment of its funds and patrimony. For this purpose, FOMILENIO will 
have an internal audit department appointed by the Board. FOMILENIO 
will also be subject to external financial controls in accordance with 
the Compact.

Section 3.10 Reglamento

    The President of the Republic of El Salvador shall issue the 
Executive Decree through which the management, operations, and internal 
organization, among other rules and regulations of FOMILENIO are 
developed and regulated (the ``Reglamento'') consistent with this 
Compact, including Annex I, and the Law Creating FOMILENIO. 
Notwithstanding anything to the contrary in this Compact, Sections 3.1 
through 3.10 shall provisionally apply, prior to Entry into Force, upon 
the execution of this Compact by the Parties and the ratification of 
this Compact by the Asamblea Legislativa and completion of the 
corresponding Publication Period, and this Section 3.10 shall remain in 
full force and effect throughout the Compact Term.

Section 3.11 Implementation Framework

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

Section 3.12 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 
the Supplemental Agreements, (ii) in accordance with all applicable 
laws then in effect in El Salvador, 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 family down to the fourth level of 
consanguinity or the second level of affinity, 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 (including any Government

[[Page 76449]]

Responsibilities or any other respon