Cablegate: France: Mcc Discusses Development Finance

DE RUEHFR #2744/01 1771547
R 261547Z JUN 07





E.O. 12958: N/A


1. (SBU) Maureen Harrington, VP for Policy and International
Relations, and Richard Morford, Managing Director for Donor and
Multilateral Relations at the Millennium Challenge Corporation met
with French development officials Friday, June 15. They discussed
approaches to the private sector, aid effectiveness, MCC's mission
and approach to aid, and potential upcoming Compacts this summer
with Lesotho, Mozambique, and Morocco.


2. (SBU) Ms. Harrington and Mr. Morford met with Luc Rigouzzo, CEO
of Proparco, the private sector development finance arm of the
French Development Agency (AFD). Rigouzzo described its structure
(70% AFD, 30% private ownership) and noted its focus on sub-Saharan
Africa, which accounts for 45% of its activities, with Africa as a
whole accounting for about 60%. He said that Proparco works closely
with several other development finance institutions from other
European countries, including the Netherlands, Germany, and the
European Investment Bank. Harrington and Morford expressed interest
in Proparco's strategies to encourage more private sector investment
and in some of the tools it uses to measure the development impact
of its activities. Mr. Rigouzzo said that Proparco and MCC share
the same agenda in Africa.


3. (SBU) Pierre Jacquet, Chief Economist at the AFD was joined by
Aude Delescluse, desk officer for Morocco; Jacques Moineville,
director for sub-Saharan Africa; Yves Des Rieux, regional desk
officer for Iraq, Jordan, and the Palestinian Territories; and
Christelle Josselin, multilateral banks liaison officer. Ms.
Harrington and Mr. Morford presented the content of potential
upcoming Compacts with Lesotho, Mozambique, and Morocco; Ms.
Delescluse presented AFD's project in Morocco, which will total 150
($195) million annually from 2007-2009 (30 million of which is in
non-sovereign loans).

4. (SBU) Mr. Moineville asked about MCC's policy on donor
cooperation and pooling of funds. Mr. Jacquet pointed out that with
the size of MCC's grants comes a significant structural effect which
should encourage an active role in donor coordination for MCC. Ms.
Harrington responded that MCC does emphasize country ownership of
programs and country responsibility for donor coordination, however,
MCC also works very closely with other donors to ensure coordination
and policy consistency and definitely "thinks of itself as part of
the donor family." She noted that congressionally-mandated
requirements to tie grants to results make budget support
problematic and asked that AFD and other donors make an effort to
keep MCC in the loop in the pre-Compact period before it has
in-country staff.

5. (SBU) Mr. Jacquet asked whether MCC is required by law to work
exclusively with grants, and wondered if loans might be appropriate
in some cases. Ms. Harrington responded that MCC is looking for
ways to better leverage its grants to encourage more private sector
investment. Both MCC and AFD's programs in Mali were discussed
briefly, and Mr. Moineville offered to share the information AFD has
gathered from their long experience working with the Office du
Niger. Moineville and Mr. Jacquet asked why MCC was not supporting
cotton production in Burkina Faso, Benin, and Mali, where AFD was
trying to put together with the World Bank a cotton price-adjustment
mechanism (fond de lissage). Ms. Harrington responded that none of
the mentioned countries included requests for cotton-related
programs in the final drafts of their Compacts. All participants
agreed that follow-up meetings would be beneficial, possibly around
the fall World Bank/IMF meetings, including a workshop to focus on
leverage and approaches to the private sector.

Ministry of Foreign Affairs

6. (SBU) At MFA Harrington and Morford met with Jean-Luc Le Bras
Head of the Africa and Indian Ocean Bureau of the Development
Directorate (DGCID), who was joined by Catherine Corm Kammoun,
regional desk officer for southern Africa and the Great Lakes
region, and Jean-Claude Kohler, whose geographical responsibility
includes Mozambique. They discussed the Compacts scheduled to be
signed with Lesotho and Mozambique, and Le Bras offered to provide
the Ministry's framework agreements on development aid to these
countries. Le Bras questioned the large number of donors already

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present in many countries MCC deals with and wondered if the MCC
would ever consider Compacts with "aid orphans," such as the Central
African Republic. Ms. Harrington clarified MCC's mission of
"reducing poverty through growth" in better performing developing
countries and noted that USAID has many missions, including helping
countries such as the CAR.

7. (SBU) Asked about potential changes after the election of
President Sarkozy, Mr. Le Bras responded that MFA Development would
be maintained in its current form, and that Africa will continue to
be its priority. He said that infrastructure improvement and the
Millennium Development Goals were the focus of AFD; with MFA
Development focused more on higher education and research. The
Mediterranean basin is likely to become a more important focus,
given that it is the gateway for sub-Saharan African migration to
Europe. He noted that the MFA would continue to work toward its
goal of dedicating .7% of GDP to ODA, and concluded that it was
difficult to predict any further changes until the 2008 budget is
passed in July and the new State Secretary for Development was named
(Jean-Marie Bockel, the Socialist mayor and senator from Mulhouse,
was nominated June 19, 2007).


8. (SBU) Ms. Harrington and Mr. Morford briefed Richard Manning,
Chair of the Development Assistance Committee/Development
Cooperation Directorate (DAC-DCD) and James Hradsky, Senior Policy
Analyst with the DCD at the OECD on the status of likely upcoming
Compacts with Lesotho, Mozambique, Morocco, and Tanzania. They
discussed aid effectiveness and the growing impact of MCC's funding
model on recipient countries. Noting that the UK and Netherlands
are cutting staff while raising development outlays, Ms. Harrington
said MCC too is looking to find less staff-intensive ways to
distribute aid. Ms. Harrington described the "MCC effect": fourteen
countries have set up commissions charged with improving their
country's performance on MCC selection indicators, and the
institutions who produce the indicators report "a flood of requests"
for information from candidate countries.

9. (SBU) Mr. Hradsky noted that the DAC peer review had questioned
the 5-year time limit on MCC Compacts, and Ms. Harrington responded
that MCC has approached Congress about the need for an extension of
the time limit. Overall, however, the DAC peer review had been
impressed with MCC's "refreshing" approach, and characterized it as
moving in the direction the international donor community would like
to go. Mr. Hradsky suggested that the DAC could be a useful asset
as MCC's results were scrutinized and its mandate re-examined by

10. (U) This cable was cleared by MCC.

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