While the State Department is the lead force for MCC, the corporation is a quasi-independent foreign aid agency in which Treasury, USAID and the Office of the U.S. Trade Representative also have votes. USTR, for example, aggressively demanded changes in how El Salvador administers a government program to provide corn and bean seeds for poor farmers each year. The argument was that the seeds were being purchased in a manner violating the Dominican Republic-Central America Free Trade Agreement. But the dispute infuriated nonprofits working with many of the farmers and became an embarrassment for the larger MCC effort. Treasury’s concerns were always more pivotal and money laundering is a genuine concern for El Salvador given its vulnerabilities to corruption and drug traffickers. In 2001, El Salvador moved its currency from the colon to the dollar. It is home to a significant number of foreign-owned banks, a transit point for the cocaine smugglers, and it receives an annual flow of remittances from the U.S. estimated near $4 billion. In this regard, El Salvador’s government is not without blame for the slow progress on the assistance package. And Sánchez Cerén, who had served previously as the country’s former vice president, only narrowly won election himself in March. Yet just as Obama has his problems with the U. S. Congress, Sánchez Cerén must contend with factions in his legislative assembly. And for months now, the lack of transparency from Treasury’s end has been extraordinary given that Secy. Jack Lew is the vice chairman of the MCC. In December 2013, the assembly made a first stab at adopting reforms but these were deemed inadequate. In July, Sánchez Cerén helped to push through a second set of tougher reforms, but Treasury was described as still not satisfied with the outcome. One of the major shortcomings was in the area of financial reporting for transactions involving so-called politically exposed persons. This is a term of art — the shorthand is PEP — commonly used to describe individuals who have been entrusted with prominent positions, which might be used for corrupt purposes or to move illicit funds. Over time, the Financial Action Task Force— a Paris-based inter-governmental body established to set international standards — has sought to broaden the scope to include family members and close associates who might be used by an officeholder to move money illegally. The July bill failed to meet this standard. Rather than go back to the assembly a third time, top advisers to Sánchez Cerén first hoped to find a path through rulemaking. But ultimately it was decided that only new legislation would be effective, and a third bill to expand the PEP coverage was passed finally in late August. Treasury still has concerns about the regulatory regime and one open question has to do with rules related to cash smuggling. But this is judged less of political challenge for the assembly compared to the tougher PEP debate. Given the commitments made and desire of others in MCC to move forward, the judgment was made by the administration to have MCC move forward.
Posted on: Sun, 21 Sep 2014 17:12:12 +0000
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