Poverty Reduction in Honduras A Background Paper

Evaluation Briefs provide summaries of key findings. Evaluation Working Papers provide additional background information and data. FIDE Fundación para la Inversión y Desarrollo de Exportaciones (Foundation for Investment and Development of Exports) FINSA Fundación Internacional para la Asistencia Comunitaria (International Foundation for Community Assistance) FONAPROVI Fondo Nacional para la Producción y la Vivienda (National Fund for Production and Housing) FOPRIDEH Federación de Organizaciones Privadas de Desarrollo de Honduras (Honduran Federation of Private Development Organizations) FUNDEMUN Fundación para el Desarrollo Municipal (Municipal Development Foundation) GTZ Deutsche Gesellschaft für Technische Zusammenarbeit (German international assistance agency) Executive Summary H onduras, one of the poorest countries in Latin America, has been focusing on strategies to reconstruct and transform its economy since the devastating impact of Hurricane Mitch in 1998. Honduras began its democratization process in 1981, and elections have been held regularly since then. In 2001, the government completed a Poverty Reduction Strategy Paper (PRSP) in response to the World Bank and International Monetary Fund's (IMF) Heavily Indebted Poor Country (HIPC) initiative. The PRSP maps out a medium-term expenditure framework for poverty reduction programs. USAID Honduras has operated a program of about $31 million annually (excluding an emergency supplement of $293 million provided by Congress after Hurricane Mitch). USAID Honduras's program emphasized, in order of funding importance, health and education, economic growth and natural resources management, decentralization and municipal government, and democratic governance. Over half of the regular assistance monies in the portfolio are allocated every year to the delivery of health and education services to poor people. However, two-thirds of the Hurricane Mitch reconstruction program was allocated to the improvement of key physical infrastructure. This assessment examines the USAID Honduras portfolio through the lens of USAID's Bureau for Policy and Program Coordination's conceptual framework for comparing USAID's sustainable development approach with the poverty reduction paradigm evolving in the World Bank, the IMF, and other development aid agencies. The poverty reduction approach looks first to identify who is poor, where they live, and what causes their poverty , and then gives top priority to interventions that address improvements in their quality of life. However, poverty reduction is not USAID's overar-ching goal. This assessment asks whether USAID is nevertheless engaged in poverty reduction programming , whether it has modified its assistance strategy to be consistent with the PRSP approach, whether it has supported the PRSP process, and whether it can enhance the poverty reduction impact …