USAID/El Salvador -- strategic objective no. 1 : expanded access and economic opportunity for rural families in poverty -- results package no. 5 : economic policy environment supporting greater equity -- decentralization and rural poverty reduction activity no. 519-0442 -- new activity document

The activity will be implemented under the Mission"s Strategic Objective No. 1, aimed at expanding access and economic opportunity for poor rural families. Efforts under the rural infrastructure and services component will be in two areas. To promote the decentralization of public finance, the activity will: (a) offer TA and training in the areas of tax policy for local governments; (b) help fiscal institutions not being assisted under the Mission"s Democracy Strategic Objective, such as the Ministry of Finance (MOF), develop systems, regulations, and policies related to revenue- sharing and local revenue sources; and (c) train public officials from both the municipalities and other fiscal institutions -- e.g., the MOF, the Salvadoran Municipal Development Institute (ISDEM), and the National Municipal Association (COMURES) -- on public infrastructure planning and finance. While the primary focus will be on secondary cities and rural municipalities, the activity will also support targets of opportunity that could have a demonstration effect or set a precedent for all municipal governments. The activity will offer training, TA, and seminars to promote the development of private financial mechanisms for infrastructure. The activity will also collaborate with the Mission"s Water Sector Strategic Objective in the areas of water policy, decentralization, and privatization of water delivery infrastructure. The second component, which will complement a World Bank project to increase economic competition in El Salvador, will undertake efforts in three areas. (1) The activity will promote civil society mechanisms to enhance consumer protection. Examples of potential activities include: civil society collaboration with the Ministry of Education to include consumer issues in the public school curriculum; institutional strengthening of El Salvador"s nascent consumer advocacy groups; development of mechanisms for mediation and conflict resolution; and policy dialogue on competition and consumer issues of relevance to the Mission"s rural poverty strategy. (2) The activity will continue Mission support of El Salvador"s efforts to deregulate privatized public power and telecommunications utilities. Possible activities include providing TA for rural access mechanisms (with USAID/Guatemala and Global Bureau collaboration) and training regulators and the public in their roles under a deregulated public utilities environment. (3) The activity may also promote competition in rural financial markets, especially those serving the microfinance sector. Possible areas of activity include changes to banking laws, the role and independence of the Central Bank and the Superintendency of the Banking System, and the privatization of state-owned lenders. Over its 5-year life, the activity may also undertake other efforts to combat rural poverty, in such areas as fiscal policy, pension reform, and research on rural poverty and the barriers to competition.