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10 July 2005

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Forest finance
Governance

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Madagascar

Honduras wins aid pact tied to human rights, anti-corruption efforts

Last month Honduras became to second country to receive aid under the controversial Millennium Challenge Account program when it signed a five-year $215 million funding deal. The Millennium Challenge Account gives grants to countries committed to respecting the rule of law and reducing corruption. The program has received a great deal of criticism for its slowness in distributing funds. So far only Madagascar and Honduras have qualified for aid under the plan, though officials say that aid pacts have been approved and are likely to be signed this summer by Nicaragua and Cape Verde.

According to the terms of the deal, Honduras will use its Millennium Challenge grant funds to improve the productivity of its farmers and upgrade roads to increase rural accessibility. As part of the award, Honduras must continue its commitment to battling corruption and improving the country's economy and legal systems.

Honduras, one of the poorest countries in the Western Hemisphere with an extraordinarily unequal distribution of income and massive unemployment, is nevertheless experiencing a high rate of economic growth. The country is banking on expanded trade under the U.S.-Central America Free Trade Agreement (CAFTA) and on debt relief under the Heavily Indebted Poor Countries (HIPC) initiative according to the CIA World Factbook. GDP per capita stands at around $2,800 using purchasing power parity and most of the country's trade is with the United States. Lately Honduras was placed new emphasis on building its tourist industry and some say the country has the potential to follow in the footsteps of fellow Central American country, Costa Rica, where ecotourism has become one of the most important industries.

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