TRANSFORMING MARKET SYSTEMS ACTIVITY FIFTH …

TRANSFORMING MARKET SYSTEMS ACTIVITY FIFTH QUARTERLY PROGRESS REPORT Quarter 3 – FY 2019

April – June 2019

Transforming Market Systems Activity Quarterly Report April – June 2019

TRANSFORMING MARKET SYSTEMS ACTIVITY FIFTH QUARTERLY PROGRESS REPORT Quarter 3 – FY 2019

April – June, 2019

This report covers activities under USAID IDIQ Contract No. 72052218D00001

Task order No. AID-522-TO-18-00001

SUBMITTED TO:

Office of Economic Growth Contract Officer’s Representative U.S. Agency for International Development E-mail: SUBMITTED BY:

Chief of Party E-mail:

July 31, 2019

DISCLAIMER

This report is made possible by the support of the American people through the United States Agency for International Development (USAID). The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.


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CONTENTS CONTENTS ................................................................................................................................... ii

Abbreviations ...................................................................................................................................iii

Section I: BACKGROUND ............................................................................................................. 1

Section II: SUMMARY .................................................................................................................... 2

Section III: PROGRESS BY ACTIVITY COMPONENT ............................................................. 3 COMPONENT 1 ................................................................................................................................................... 3 VALUE-ADDED AGRICULTURE ....................................................................................................................... 3 COMPONENT 2: .................................................................................................................................................. 5 TOURISM AND CREATIVE INDUSTRIES.......................................................................................................... 5 COMPONENT 3: .................................................................................................................................................. 8 ENTREPRENEURSHIP ........................................................................................................................................ 8 COMPONENT 4: ................................................................................................................................................ 10 BUSINESS ENABLING ENVIRONMENT ......................................................................................................... 10

INCLUSION, BEHAVIOR CHANGE, AND ORGANIZATIONAL CAPACITY DEVELOPMENT ................................................................................................................................................................. 12

Social Inclusion ..................................................................................................................................................... 12

Section IV: MONITORING, EVALUATION AND LEARNING ............................................. 13 Monitoring & Evaluation System ............................................................................................................ 13

Market Systems Diagnostic .................................................................................................................................... 13 Monitoring Systems ............................................................................................................................................... 13 Participant Reporting............................................................................................................................................. 14

Collaboration, Learning, and Adapting ................................................................................................... 15 Pause and Reflect ‘Year 2 Action Planning’ ............................................................................................................. 15 Pause and Reflect ‘Year 1 Lessons Learned and Pivots’ ............................................................................................ 15 Staff Learning ....................................................................................................................................................... 16 External Collaboration .......................................................................................................................................... 17

Section V: PROGRAM MANAGEMENT .................................................................................... 18 Contractual deliverables ......................................................................................................................................... 18 Partnership and Innovation Fund (P&IF) ............................................................................................................... 19

Section VI: LOOKING FORWARD ............................................................................................. 20

Section VI: FINANCIAL INFORMATION ................................................................................ 22

ANNEX 1 – TMS IN NUMBERS ................................................................................................ 24

ANNEX I1 - COMMUNICATIONS ............................................................................................ 25


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ABBREVIATIONS

ALPROSA Almacenadora de la Producción AGRTOTECH Congress on Technological Innovation for the Agricultural Sector ANDE Aspen Network Developing Entrepreneurs AMCHAM American-Honduran Chamber AMHON Association of Municipalities of Honduras BEE Business Enabling Environment CANATURH Honduran National Chamber of Tourism CCICH Chamber of Commerce and Industry of Choloma CIES Center for Economic and Social Research CLA Collaboration, Learning and Adapting CNI National Investment Council COHEP Consejo Hondureño de la Empresa Privada COMSA Café Orgánico Marcala, S.A. COR Contracting Officer Representative COHONDUCAFE Fundación de la Compañía Hondureña de Café CTLC La Ceiba Chamber of Tourism DO Development Objective EFISolutions Efficient Solutions FNAMP Honduran anti-gang Task Force GALI Global Accelerator Learning Initiative IDB Interamerican Development Bank IDIQ Indefinite Delivery, Indefinite Quantity IFAD International Fund for Agricultural Development IIES Institute for Social and Economic Research IHT Honduran Institute of Tourism INALMA Inversiones Amalgamadas S.A. LGBTI Lesbian, Gay, Bisexual, Transgender, Intersex ME&L Plan Monitoring, Evaluation, and Learning Plan MESCLA M&E Support for Collaborative Learning and Adapting MICE Meetings, Incentives, Conventions and Exhibitions MIPYME Micro, Pequeña y Mediana Empresa MSME Micro, Small and Medium Enterprises OPTURH Honduras Inbound Tour Operators Association OIJ International Youth Organization for Ibero-America P&IF Partnership and Innovation Fund SME Small and Medium Enterprises SNA Social Network Analysis TMS Transforming Market Systems Activity UNAH National Autonomous University of Honduras UNDP United Nations Development Program UNICEF United Nations Children’s Fund USAID United States Agency for International Development VAA Value-added Agriculture


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SECTION I: BACKGROUND Through Indefinite Delivery, Indefinite Quantity (IDIQ) Contract No. 72052218D00001, dated April 13, 2018, the United States Agency for International Development (USAID) awarded ACDI/VOCA the Transforming Market Systems Activity (TMS, or, the Activity) with an ordering period through April 12, 2023 and a performance period through April 12, 2025.

The purpose of the Transforming Market Systems IDIQ is to foster competitive, resilient, and inclusive market systems that provide increased economic opportunities (jobs and income) that incorporate poor, marginalized Hondurans and reduce incentives to migrate.

TMS prioritizes investments based on U.S. Government strategic interests, objectives, and ongoing investments, as currently defined in the USAID/Honduras Country Development Cooperation Strategy (CDCS) and as based on continuing learning being undertaken on U.S. Government efforts to counter illicit migration to the United States.

Task Order No. 1 of the IDIQ (No. AID-522-TO-18-00001), dated April 16, 2018, covers the development of the Activity’s Monitoring, Evaluation, and Learning Plan (ME&L Plan), the execution of actions under this ME&L Plan, and implementation of all Collaboration, Learning and Adapting (CLA) activities, including analyses, studies and pilots throughout the life of the IDIQ. This Task Order also covers the implementation of an Inception Phase, comprised of a series of formative consultations, assessments, and analyses with the purpose of developing Life of Activity Action Plans for priority economic sectors and their corresponding strategic areas for intervention, including improvements in the business enabling environment, with an emphasis on actions where USAID can have a competitive advantage. Task Order No. 1 was amended on October 29, 2018 to incrementally fund the contract.

This document presents the quarterly progress of TMS covering the third quarter of fiscal year 2019 (the fifth quarter of Activity implementation), encompassing activities from April 1 to June 30, 2019.

“164 participants from 34 different countries, 62 unique organizations and 48 distinct projects convened in Cape Town for the second annual Market Systems Symposium April 19-21. Three intensive days of market systems development dialogue, capacity-building, networking, and exchange.”


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SECTION II: SUMMARY This quarter was marked by political instability and a financial realignment. The Honduran government experienced strong opposition to proposed sectoral reforms on education and health sectors, which triggered widespread demonstrations and civil unrest that also reflected general disapproval of the administration and frustration over economic struggles and the plight of the average Honduran. Simultaneously, the U.S. government announced cancellation of funding obligations of FY 2017 and FY 2018 funding for Northern Triangle assistance programs. These events have had significant impacts on the TMS Activity. The political crisis in Honduras has a direct impact on TMS’s objectives, especially in relation to tourism promotion and initiatives to attract foreign investment. The notification on incremental funding reduction resulted in the reduction of anticipated activities under TMS’s Year 2 Work Plan (May 2019 – April 2020), a freeze on new hires and reduction in current staffing. The TMS team had to either suspend or significantly reduce its investment in a number of co-created interventions which had been developed with public and private stakeholders and strategized in Life of Activity Action Plans. TMS prioritized a discrete set of carefully selected strategic interventions to position TMS as USAID/Honduras’s most relevant tool for to address the drivers of illegal migration. Despite these difficulties, the spirit and momentum behind co-creation continues to carry the TMS Activity forward. TMS has been able to leverage partner’s funding and know-how to collaborate to adjust to the new reality and embark on a strategy to meet short-term targets. The most significant developments and accomplishments resulting from TMS implementation during the reporting period include the following:

v Launched four key alliances with agro-processing anchor firms with high potential to create jobs for youth who would otherwise migrate.

v Built on partnerships with the Honduran National Chamber of Tourism (CANATURH), the Association of Honduran Inbound Operators (OPTURH), and the National Tourism Council to launch interventions to accelerate the tourism industry.

v Activated three core alliances aimed at bolstering entrepreneurship and employment opportunities with a focus on technology, on-line innovation, and financial products, and continued to nurture the entrepreneurship and impact investment ecosystem.

v Secured influential private sector and local government partner commitments to make important and foundational steps to improve Honduras’ business enabling environment.

v Featured TMS in several prominent learning and knowledge-sharing forums holding true to principles of CLA and to advance the frontier of market systems development.


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SECTION III: PROGRESS BY ACTIVITY COMPONENT

COMPONENT 1 VALUE-ADDED AGRICULTURE This quarter, TMS teamed-up with several anchor firms which are demonstrating innovative approaches and business models to amplify what can be scaled-up and

replicated. TMS focused on firms with high potential to create jobs for youth who would otherwise migrate to find employment opportunities in the U.S. TMS prioritized partnerships with firms that can quickly diversify production and/or develop new products within its existing production lines, based on the emphasis of accelerated employment creation. Among those with which TMS co-created interventions in the past quarter are: INALMA, a processing company specializing in production of “ready-to-eat” frozen plantain, cassava, and sweet potato products. This company has been in business for over 30 years and has more than 1,200 employees, exporting products with their own brand name and that of food giants such as GOYA Foods Inc, catering to the Latin American, U.S., and European markets. TMS and INALMA have designed and will implement a new fee-based incentive brokerage mechanism that is expected to result in expanded production and to enable technical assistance and finance needed by producers to increase cultivation. TMS is leveraging the production networks established by previous USAID agricultural investments to grow INALMA’s supply base while generating a reliable market for those producers. The intervention includes support to the creation of a new line of plantain, cassava, and sweet potato flours for the specialty-gluten free consumer market segment. These flours will be made from produce that does not meet frozen food quality standards, simultaneously building redundancy in INALMAs supply chain while supporting diversification into new high-value product markets. This is expected to reduce dependency on imports from Guatemala and Nicaragua and facilitate local procurement, which will create on-farm and off-farm employment opportunities for Hondurans. COMSA is a premier organic coffee cooperative in Central America with over 1,500 members, exporting specialty coffee to the United States and Europe. It has about 290 direct employees and another 600 indirect employees in the different value-added processes. COMSA also has world-renowned certifications such as the Starbucks Best Practice Seal, UTZ/Rain Forrest Alliance and Bird Friendly certifications. TMS and COMSA are developing a microenterprise model focused on youth entrepreneurs to further strengthen and expand COMSA’s supply chain. This model is designed to accelerate and invest in youth entrepreneurs to provide specialized services to family-owned farmers such as planting, pruning, fertilizing, harvesting, and pest control based on a lean business model based on cost-effectiveness and skilled quality of services. This in turn is expected to facilitate greater farm-level labor specialization leading to better quality beans, faster production cycles, and improved care of farms – a virtuous cycle to result in increased profits and higher demand by farms for specialized services by youth. TMS’s value-addition to the partnership is the entrepreneurial skills training and coaching with COMSA leverage its on-the-ground extension staff and supplier networks. In June, TMS facilitated a training of 14 COMSA team members (6 women, 8 men) among them 7 youth in the use of the "CANVAS Model" a tool that validates new ventures and will support TMS’s interventions with COMSA.


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and during investment scouting visits to INALMA and ALPROSA

COPRISA is a leading Guatemalan agro-processor and investor which TMS is working to bring to Honduras. TMS made contact with of COPRISA, a fresh and frozen vegetable exporting company, at the Agritrade Fair in Antigua, Guatemala (March 21–23). Subsequently, who is also of the Guatemala Exporters Association, visited Honduras May 7-11. During his visit, and

, Coprisa’s , met thirteen agro-processing enterprises in San Pedro Sula, Tegucigalpa, La Esperanza and Choluteca. This included Monty Farms, the largest sweet potato exporter in Honduras, INALMA, ALPROSA, a lemon fresh fruit and juice exporter, Antar, and CUASA, both large-scale exporters of okra (vegetable with long, green pods). The COPRISA group also met business groups such as Cadelga and Karim’s to discuss investment in agro-parks based on opportunities to export frozen and fresh fruit to new markets in the United States, Canada, Europe, and Japan. expressed interest in short-term investments in snow-peas, blueberries, fresh and processed lemon, and in building the first frozen fruit/vegetable agro-park in Honduras in alliance with Karim’s group. TMS and Coprisa continue working together to narrow down the most feasible opportunities within these value chains and discuss business opportunity plans with Honduran counterparts. These visits are part of an overall TMS strategy to support investor visits to stimulate growth in national anchor firms that will result in increased on- and off-farm employment opportunities.


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COHONDUCAFE. TMS is part of a groundbreaking coffee alliance with food giant Nestlé, the International Youth Organization for Ibero-America (OIJ), the United Nations Development Program (UNDP), and Honduras’s CoHonducafe Foundation. The strategy of the alliance is two-fold: renew youth’s interest via increasing employment opportunities in agriculture and increase Honduran coffee quality to achieve better international prices. The initiative will support 25,000 youth to enroll in 15 model training centers located in Honduras’s coffee growing areas. These model training sectors will equip youth with skills and training focused on coffee drying practices at the farm-level and the introduction of affordable, proven solar dryers. This will revitalize coffee production and value-added practices, such as solar drying, in Honduras, enabling small coffee producers to break into new local and international markets while creating jobs for youth. The first training center was inaugurated on June 24 in la Libertad, Comayagua. The training curriculum covers production, cupping, barista, nutrition, and leadership topics. As part of the partnership alliance with CoHonducafe, TMS will strengthen youth trainees as entrepreneurs to ensure that technical practice is supported by a viable business model. Through better quality and renewed youth incentives, this partnership aims at creating at least 10,000 new and better jobs with an expected additional revenue from selling dry coffee of $9.5 million over the next four years.

COMPONENT 2: TOURISM AND CREATIVE INDUSTRIES

During the quarter, TMS collaborated with Honduran National Chamber of Tourism (CANATURH) to spearhead a strategic vision and the development of regional tourism plans to set an agenda for the next three years for tourism development in Honduras. This included launching the first steps of this agenda including initiatives to improve the social media presence of tourism enterprises to expand market share; ensure responsible tourism by recognizing, addressing and preventing child exploitation and sexual tourism; and supporting efforts such as ExpoCopan which continue to serve as important events to drive national tourism. TMS and CANATURH brought together stakeholders at all levels of government (national and municipal) and influential tourism stakeholders including the association of small hotels and tour operators to jointly create a vision for tourism development and a national marketing strategy. Building a collective vision for tourism strategy is key to breaking down the siloed initiatives of individual tourism entities. The tenants of this strategy are to increase public awareness of attractions in emerging destinations, counter the negative national reputation, and attract a larger and more diverse profile visitors to maximize returns for Honduran tourism businesses. The session built off the groundwork laid at the prior national tourism meeting which TMS facilitated in February 2019 which included a participatory identification of root causes and constraints to the tourism sector. During the workshop, TMS facilitated definition and prioritization of the following most important tourism markets and segments for Honduras:

High quality of Honduran dry parchment coffee discussion


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• Tier 1- North America (US, Canada) Central America (Guatemala, El Salvador, Costa Rica and Panamá);

• Tier 2- South America (Colombia, Perú, Brazil), Europe (Spain, Germany, UK); and

• Tourism segments- Cruise ship stop-over tourists, flashpackers, nature tourists, voluntourism, and sun and beach tourists.

Building off this momentum, TMS facilitated a third workshop in San Pedro Sula to dive deeper into the constraints in which each local chamber operates. TMS facilitation exercises supported CANATURH to identify concrete activities to further develop tourism destinations and to strengthen services provided to destination enterprises. Twenty-eight (28) individuals participated (18 women, 10 men) representing 11 regional chambers of tourism and several private enterprises participated in this strategic workshop. The workshop embodied Collaboration, Learning and Adaptation (CLA) principles and strategies to support more effective collaboration and action. Based on a shared recognition of the importance of social inclusion and non-exploitative practices, TMS facilitated a fourth workshop with CANATURH to spot and prevent child commercial sexual exploitation. The ‘train the trainers’ workshop in Tegucigalpa had 7 participants (5 women, 2 men, 4 of them youth) trained program coordinators on legal frameworks, guidelines, tools and platforms to spot, prevent, and address child sexual exploitation. This included introducing CANATURH participants to codes of conduct, tools for how to recognize child exploitation, strategies to minimize opportunities for sexual tourism, and instructions for what to do when exploitation is suspected. This initiative is being coordinated with UNICEF to ensure compliance with best practices and perspectives for how Honduras can prevent child commercial sexual exploitation. These strategies will be integrated into all destination development interventions. The next step towards promoting Honduran tourism is to advance a national marketing strategy that is inclusive of all Honduran destinations. As an informative statistic, 90 percent of tourist visits to Honduras are researched and booked on-line yet the web-based presence of Honduran

TMS providing technical assistance to CANATURH

Government and pr vate sector com ng together to create a nat ona tour sm deve opment strategy


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tourism businesses is less than half of that of neighboring countries.1 Low visibility and little information translates into lost opportunities to bring new visitors to Honduras. To bring Honduran tourism sector into the digital age, CANATURH and TMS designed a training course called “Web Presence and Social Media: Growing Your Business” to launch in July 2019. This course targets specific behaviors expected to have immediate returns, such as on-line booking, social media presence, proactive engagement with customers, web-based advertising, photography and reputation management. In a fifth workshop in June, TMS and CANATURH presented the training modules to over 40 representatives of the tourism private sector, CANATURH board of directors, municipal authorities, and Chamber of Commerce of Puerto Cortés and Omoa. The expected change is that as tourism enterprises apply web-based practices, their on-line presence will improve, they will attract more visitors, expand into international markets and increase sales that will in turn is expected to facilitate a virtuous cycle of growth. An integral part of the national tourism strategy is promotion of Honduran destinations to build market demand for international arrivals to Honduras. A strategic actor towards in this respect are U.S. and Canadian travel agents. In partnership with the Association of Honduran Inbound Operators (OPTURH) and the National Tourism Council, TMS is partnering to develop webinars and presentations about Honduran destinations. The first of these launched on June 26, the first webinar in the series under the title “The Honduras Vacation Experience” had 607 registrations with 298 individuals from 258 tour operators from the U.S., Canada, and other countries participating in the session. To continue to build domestic demand for tourism and highlight emerging destinations, TMS supported the 6th annual ExpoCopan Fair in Santa Rosa de Copán. The fair is a cultural and gastronomic event to promote Santa Rosa de Copán as a cultural destination, with a special emphasis on the excellence of its coffee industry. The fair took place during the first week of May and the organizers indicated that they had over 42,000 visitors, a reported five percent increase from prior year and with a reported 100 percent occupancy rate in all hotels for the week. TMS sponsorship was $3,500 towards the participation of local vendors in the event. National revenue authorities reported an impact in local tax revenue estimated at 65 million Lempiras, or approximately $2.7 million with an estimated additional economic effect estimated at 35 million Lempiras, or approximately $1.4 million, from ExpoCopan.

1 Trip Advisor, 2019

Facilitating discussion with tourism stakeholders.

Over 42,000 people visited Santa Rosa de Copan during ExpoCopan


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COMPONENT 3: ENTREPRENEURSHIP During this quarter, TMS launched several initiatives with entrepreneurship ecosystem actors to create the conditions to support small and growing businesses to thrive and

grow. Younger, smaller and growing businesses create more jobs than other enterprise profile in Honduras (see the TMS Market Systems Diagnostic). TMS’s strategy to support this profile enterprise includes partnering with a technology firm to promote e-commerce solutions, supporting emerging entrepreneurship networks and searching for solutions to the difficult problems that threaten the survival and growth of small and informal businesses. TMS initiated its partnership with Sube Latinoamerica, a company that specializes in financial technologies (fintech) and e-commerce solutions, and CAEX Logistics, a transportation company that represents UPS in Honduras. One of the major challenges facing smaller enterprises is how to connect with and distribute products and services to customers without a large brick-and-mortar retail or wholesale distribution networks. To overcome the challenge of scale, the TMS and Sube initiative called “E-commerce for All” seeks to enable e-commerce as a solution to facilitate online marketing and transactions by MSMEs. TMS conducted outreach through six business service providers (Business Development Centers) and Chambers of Tourism and Chambers of Commerce in Santa Barbara, Copan Ruins and Santa Rosa de Copán to link Sube with a network that could promote the platform. This included facilitating a partnership with CAEX logistics to train MSMEs on requirements and procedures to ship their products outside of Honduras. CAEX Logistics will develop an on-line training a module to discuss the major flaws and common mistakes when shipping abroad. Further trainings of these partners begin in July to become agents to promote the Sube platform to MSMEs in their networks. A key enabler to the development of digital financial services is a supportive legal and institutional framework established by the Central Bank. To this end, TMS has partnered with the Honduran Central Bank and the National Banks and Insurance Commission to fulfill a public commitment made last February to advance financial innovation in Honduras (FinTech). Through this partnership TMS is working with both entities in joint initiative to reform the digital commerce law and create a national financial inclusion policy. Initial actions include the development of a baseline study identify existing Fintech enterprises operating in Honduras and gather their perspectives so that any reform in regulations is done in a manner that establishes a more level playing field between large enterprises and small start-ups and facilitates investment.

Events play an important role in entrepreneurship systems in driving technology adoption, promoting innovation, and facilitating business linkages. In May, TMS supported 33 influential decision-makers from nine business development services organizations (7 from Choloma, 12 from Tegucigalpa, 10 from Copán, 5 from Intibucá, and 5 from Santa Barbara) to attend the fifth edition of Think Digital Academy, the largest digital marketing training event in Central America. The event was attended by 700 individuals.


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The day-long event featured industry experts with practical experience to teach participants how to generate digital content, develop on-line digital marketing and positioning strategies, and write digital storytelling content. Presenters included national and international influencers such as and

. , a blogger who posts videos under NAS Daily Co. featured a positive messaging video about of Honduras, which became instantly viral. The video entitled “The Label Trap” had more than 2 million views on

Facebook and Twitter within the first 24 hours of publication. This is the most views a positive video about Honduras has ever gotten. spoke about the elements that contributed to making the video viral and how having others tell the story for you increases credibility2. In June, TMS supported the Aspen Network of Developing Entrepreneurs (ANDE) to include Honduras in their Central America Roadshow. TMS worked with ANDE´s Chapter for Central America and Mexico and Citibanamex to present the results of their Global Accelerator Learning Initiative (GALI) in Honduras. GALI is an initiative to gather evidence on the effectiveness of acceleration programs and how differences across programs and models influence entrepreneur performance.3 The event took place at Casa Quinchon in Tegucigalpa and included 23 people participating in the event, 11 women and 12 men, with three of them being youth. This included the representation of 18 different organizations including NGOS, development foundations, private sector, and academia. The event is part of a series of TMS actions to connect the local Honduran entrepreneurship ecosystem with regional and international initiatives and actors. By creating these linkages and bringing to Honduras the expertise of initiatives such as ANDE – a global network of 280 organizations that propel entrepreneurship in emerging markets, operating in more than 150 countries – it provides an opportunity to grow the entrepreneurial system. The event resulted in discussion on entrepreneurship services in Honduras and where there are lessons to be learned from regional and international initiatives presented by ANDE. In March 2019, TMS launched an action research process to analyze the resilience of Honduran companies to extortion in alliance with University of California at Berkeley

, and University of Chicago According to national newspaper El Heraldo in Honduras a new case of extorsion is

registered every six hours and at least two people are arrested daily under extortion charges4. Initial analysis revealed a high degree of vulnerability to specific profiles of businesses and that in general businesses lack strategies to prevent and address extorsion. Several alliances have been made since the analysis. TMS connected with CCICH to develop the strategy which includes creating a local security network, working with local police and the Fuerza Nacional Anti Maras y Pandillas (FNAMP) to identify and test mechanisms to prevent 2 https://www.facebook.com/nasdaily/videos/305702170341021/ 3 https://www.galidata.org/publications/acceleration-in-central-america/ 4 https://www. aprensa.hn/ n c o/853838-410/honduras-cada-6-horas-detectan-un-nuevo-caso-de-extors %C3%B3n

Participants of 2019 Think Digital Academy


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and report extorsion, and establishing a special task-force to address extorsion in business sectors that are strongly affected, such as transportation. TMS connected CCICH with Mexico City’s Citizen Council which has been working on preventing and addressing extorsion for the last 12 years through a virtual conference to share information on the progress, set-backs, and strategies to reduce extorsion5. The Council is made up 25 councilors appointed by the Mexico City’s Mayor, representatives of the Secretariat of Government and Public Security, the Attorney General's Office, and the Department of Legal Services as government advisers. TMS continued outreach to other USAID activities such as Juntos en Accion, whose Choloma representive shared their experience on crime prevention through strengthening of local organizations.

COMPONENT 4: BUSINESS ENABLING ENVIRONMENT

During the quarter, TMS secured further buy-in of high-level influential private sector and local government partners to TMS’s BEE strategy and made critical first steps towards building a more enabling environment for enterprise. Key partners include the Honduran Council of Private Enterprises (COHEP), the National Investment Council (CNI), the Chamber of Commerce of Tegucigalpa (CCIT), and the Association of Honduran Municipalities (AMHON). TMS’s strategic partner COHEP increased its commitment and sponsorship of an international conference to analyze an integral tax reform for Honduras in September. Based on interest, COHEP expanded the scope from one to two days in Tegucigalpa with an event in San Pedro Sula. This includes the addition of another international expert speaker. This conference will mark an important step in working with the private sector on a major national tax reform. TMS also secured support from CNI and made further steps towards the revision of the national legal framework for investment incentives. CNI committed to be the majority investor in a study together with TMS that will include a legal analysis, country benchmarking, and an economic impact assessment to attract foreign investment in agro-parks in Honduras. TMS continued work with CCIT to set up the Francisco Morazán property registry from the National Property Institute (Centro Asociado) as a function of CCIT. Based on discussions, TMS would finance a feasibility study to evaluate the potential legal, administrative, financial, and technological requirements to transfer this function to the CCIT and CCIT would cover the additional costs for the financial and technology components of the study. CCIT increased its

5 https://consejociudadanodf.org mx

Photo Credit - El Heraldo


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commitment thus allowing TMS to do a much larger study that will now include property registries from La Paz, Nacaome, Choluteca, Comayagua, Siguatepeque, as well as others areas, covering most of Central and South Honduras. This activity is a critical component of the strategy for CCIT to expand the services it currently provides to its members and improve the business environment in the department of Francisco Morazán. TMS further advanced its interventions together with AMHON to strengthen service provision by local governments in DO1 and DO2 ZOI areas. The intervention includes targeted simplification of business licensing and construction permit processes, improving local business competitiveness environments, and rationalizing local tax regimes to reflect local development priorities. AMHON is financing the business enabling environment trainings to its staff, so they can begin their intervention in a DO1 municipality (La Ceiba) and a DO2 one (San Marcos de Ocotepeque). Trainings will focus on how to implement an administrative diagnostic to simplify municipal processes in municipalities of different sizes and administrative complexity. In May, TMS participated in AMHON’s 2019 annual assembly as a guest presenter in Tela, Atlántida. The activity attracted over 400 individuals, including more than 298 Honduran mayors from throughout Honduras, as well as several international donor representatives. High level Honduran government officials and national lawmakers attended the event, including Honduran President, , the President of the Honduran Congress, , and other ministers, who had an opportunity to listen to mayors concerns directly and discussed new initiatives impacting municipalities. TMS provided a 30-minute presentation on the scope of the TMS Activity under its business enabling environment component (BEE) to the plenary, emphasizing a strategic vision and commitment to go beyond process simplification and push to improve local business competitiveness and improve local governments’ capacity to attract more businesses and create more jobs. This is part of a systemic effort to shift the orientation of municipalities towards creating an environment that promotes competitiveness. As a result of this presentation, several municipalities contacted AMHON with interest in participating in TMS efforts. During the month of June, TMS also met with several organizations to introduce the BEE component and develop future possible relationships. Among the most salient meetings were: implementing partners from other USAID DO1 activities working in La Ceiba and Tela; USAID’s Unidos por la Justicia Activity, the Mayor of La Ceiba, and the president of the Atlántida Chamber of Commerce and Industry (CCIA).


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INCLUSION, BEHAVIOR CHANGE, AND ORGANIZATIONAL CAPACITY DEVELOPMENT Social Inclusion This quarter, the TMS team completed the Activity’s gender and social inclusion strategy and moved forward with implementation of an active inclusion approach in its four programmatic components. TMS hired former ,

, to revise the Activity’s gender analysis and help complete the strategy with tangible, achievable actions that can be implemented in each component. The strategy emphasized a strong focus on youth, women, returned migrants, and indigenous populations in rural areas, allowing room for measurable results with other vulnerable groups such as members of the LGBTI community and people with disabilities. Actions from the strategy and indicators have been included in both the monitoring, evaluation and learning (ME&L) plan and the annual work plan. The strategy was presented to USAID for approval in June and full implementation is expected to begin in the next quarter. The most salient actions to improve gender equity and social inclusion in this quarter include:

v Design and implement youth-centered microenterprise and entrepreneurship models that

are both tailored and relevant across TMS areas of influence.

v Support international investors to meet with women-owned enterprises such as D’Leite, Antar, and Fincas Uyuca, supporting direct investment in women-owned enterprise

v Train CANATURH members to recognize, prevent and address sexual tourisms and child exploitation as part of its destination development and management strategies.


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SECTION IV: MONITORING, EVALUATION AND LEARNING MONITORING & EVALUATION SYSTEM During the quarter, TMS’s ME&L team completed the analysis and reporting of the baseline Market Systems Diagnostic and developed monitoring systems for its co-creation partners. Market Systems Diagnostic TMS completed analysis of the diagnostic with its partners COHEP and IIES-UNAH of the 28 systems indicators. The descriptive statistics for the diagnostic was published to http://cohep.com/sistemasdemercado/. TMS also completed the white paper for the diagnostic in which logistic and linear regression models were used to identify 17 variables that drive job creation, sales, recovery post-shock or stressor and economic inclusion of women, youth and indigenous persons as employees or entrepreneurs. Those indicators which showed clear directionality and were materially and statistically predictive of the above-noted results will be included in next year’s diagnostic. New variables will be added based on the co-creation process with partners. The anticipated launch of the diagnostic event was rescheduled from June to August due to political events. TMS partners COHEP and IIES-UNAH provided important contributions and actively engaged in the analysis of the findings. This study is the first of its kind for Honduras and is designed to influence stakeholder decisions. The partnership engaged IIES-UNAH to leverage academic expertise and research capabilities to conduct more complex analysis and COHEP to ground-truth them to the country’s reality and amplify their message to key stakeholders. This baseline diagnostic made important progress to revitalizing the convention between COHEP and IIES to develop a market systems observatory for Honduras. The vision of the observatory is to diagnose the drivers of inclusive economic growth and competitiveness in Honduras and supply data needed by economic policy-makers and businesses steer the country towards this vision. Discussions are already underway to iterate this study in 2019 and to expand the partnership with other major stakeholders involved in research and analysis. Monitoring Systems The TMS ME&L team supported the Activity to transition from paper to digital data collection and participant registration systems. This process was supported by the ACDI/VOCA Senior Data Strategist for Information Technology and included the deployment of new software, data quality management processes and training of the TMS technical team. TMS and its partners will see improvements in time effeciency, quality control and reductions in paperwork. Concurrently, the ME&L team worked to lay the groundwork for the launch of monitoring activities with co-creation partners. The team developed a ME&L manual for partners, reconfigured the TMS database and developed flexible systems to accommodate multiple forms of reporting for

TMS, COHEP and IIE-UNAH revising data


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partners. In the next quarter TMS has scheduled ME&L trainings for co-creation partner and will support the roll-out tailored monitoring approaches to ensure data quality based on the right fit according to the scope of intervention and the partner capacities. The TMS ME&L team continued co-development of the ME&L Plan 3.0 with USAID/Honduras and MESCLA. This included revisions and elaboration for measuring indirect participation and results, a revised Theory of Change following the Inception Phase, a new Learning Agenda and further elaboration of complexity-aware monitoring processes. The next version of the ME&L plan is expected to be submitted and approved in the next quarter. Participant Reporting 1,473 participants benefitted as a result of the TMS Activity in Q3 FY2019 through 49 events provided or facilitated by the TMS Activity (see Annex 1). This included 33 technical assistance events, 4 workshops or trainings, 3 conferences and 9 indirect meetings. 287 participants received some form of direct assistance – technical assistance, workshops or sponsorship to attend events – and 1,208 participants received some form of indirect assistance –such as participating in webinars by OPTURH and presentations on business enabling environment reform areas. Participants included 828 individuals and 645 organizations and enterprises. 202 individuals received direct assistance and 639 received indirect assistance. Individual participants included 30 youth and 359 females. 85 organizations received direct assistance and 569 received indirect assistance. Of the 85 organizations receiving direct assistance, 7 were large, 4 medium, 20 small and 14 micro. Information on organization size was not available for 39 organizations. TMS will begin reporting on the self-identification of individuals as returned migrants, indigenous, Afro-descendent or LGBT, as well as the age and sex of enterprise owners in the next quarter. All participants, direct and indirect are uniquely identified in this quarterly report. Participantion was distributed by component: value-added agriculture (58), tourism and creative industries (661), entrepreneurship (92), business enabling environment (662) and multiple or cross-cutting (15). Enterprises and organizations are disaggregated by International Standard Industrial Classifications (ISICs) in the adjacent table and according to municipality in the graphic below.

Organizations and Enterprises (Total) 645

Agricultural and forest production 1

Agro-processing and manufacturing 3 Wholesale, retail trade and distribution 15

Transportation and storage services 3 Accommodation and food services 6

Information and communication (ICT) 5 Financial services 2

Professional activities 8 Support services (incl. tour operators) 256

Government and public administration 306 Education 3

Arts, entertainment and recreation 7 International organizations 5

Other service areas 25

Organizations and individuals participating in TMS activities during the reporting period


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COLLABORATION, LEARNING, AND ADAPTING Pause and Reflect ‘Year 2 Action Planning’ In April, TMS held its second “pause and reflect” workshop in Trujillo to finalize action planning for the Year 2 annual Work Plan. The session included presentations by each of the Component leaders on their respective systems strategy and the specific actions for the next year. Each component presented its prioritized alliances and activities, including timeline output indicators and budget. This event provided an opportunity for the other leads to identify areas for synergy and collaboration. The second function of the workshop was to pivot work plans in response to the notification of limited funding for the year. Team members provided feedback on how to focus and optimize initiatives to have the most impact with a prioritization towards initiatives which would have more immediate effect on job creation for populations prone to migrate. Pause and Reflect ‘Year 1 Lessons Learned and Pivots’ On June 25, the USAID’s MESCLA Activity together with the TMS ME&L team organized a learning workshop to bring together TMS and USAID staff persons to reflect on TMS implementation over the past year, to identify initial assumptions and how they have changed,

TMS Staff during 2nd pause and reflect workshop


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identify significant pivots made and others which were not made but should have been, and the enablers and inhibitors to implementation and pivots. This event included the participation of

and . It was facilitated by of and . The event was both a structured part of TMS

learning processes, specifically to document pivots from the past year, but was also an event to reflect on the aspects of the Inception Phase and future recommendations for USAID. Staff Learning During this quarter, TMS strengthened staff’s capacity on agricultural innovation, market system approaches, shared best practices with USAID’s Collaborative, Learning, and Adapting Team; and held a pause and reflect session to develop the Year 2 Work Plan. As part of TMS strategy to strengthen its organizational capacity, the staff attended the International Congress on Technological Innovation for the Agricultural Sector (AGROTECH) in March. The event was sponsored by the Inter-American Development Bank and local partners, and it was an opportunity for TMS staff to learn about the use, effectiveness, inclusiveness, impact, and challenges of innovative technologies in the agriculture and livestock sectors. This was also an opportunity for TMS to network with livestock companies, academia, donors and producers, see the work they are doing and show them TMS’s impact and scope. TMS continues to provide opportunities to staff to learn about the latest use of technology in order to promote its use among our partners. In April, three TMS staff completed their certification on system thinking approaches. The 7-module, comprised of 50 hours of on-line training was developed by the Omidyar Group and +Acumen, and teaches students how to use system methodologies to resolve complex multifaceted problems. The course allows participants to understand the type of social problems that need to be addressed through system approaches, the steps to follow, and how to create synergies for sustainable social impact. TMS’s , and were among the 120 worldwide participants who began the course on January 22. The course was a combination of system’s theory, case studies, forum’s and team projects that allowed TMS staff to understand how NGO’s, government institutions, and the private sector worldwide have resolved what seemed to be impossible problems. TMS participants shared aspects of the Activity’s inception phase as a case study and were able not only to validate the approach, but also understand how to make various processes more efficient. Given TMS’s goal to increase employment and reduce illegal migration, having additional staff who understands how to work with system approaches is a real asset. TMS plans to continue to support this and similar trainings for its staff in the future.


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External Collaboration This quarter, TMS participated in several forums and exchanges to collaborate and learning with other implementers. In April, TMS’s and participated in the Second Market System Symposium in South Africa. TMS shared content in sessions including: “Exploring New Frontiers: Interconnectedness,” “The Devil's in the Details: Metrics for MSR,” and “Orienting Teams to Systems Thinking.” Resulting from the symposium, TMS initiated planning for a regional market systems conference in Honduras scheduled for December, in alliance with Swisscontact and Horizontal8. The event provides an opportunity for central and south American firms to share their local systems approaches or learn from peer experiences and best practices. The theme of the conference is “Preparing the Region for the Fourth Industrial Revolution”. In June, TMS participated in the USAID LEARN’s “Moving the Needle” International Conference on Collaborating, Learning and Adapting (CLA) to Foster Self-Reliance. The event, organized by USAID’s Office of Learning, Evaluation, and Research in the Bureau for Policy, Planning, and Learning provided an opportunity to learn about CLA approaches to achieve better development outcomes. TMS’s participated in the session “Reimagining What Local Partnerships Look Like.” In April, TMS jointly submitted a case study to USAID’s annual CLA Case Study Competition entitled CLA Through Co-creation - The Engine Powering a Systemic Change Activity together with USAID/Honduras and MESCLA/Dexis. TMS also participated in an exchange on behavior change and market systems development posted to ACDI/VOCA and MesoPartner websites6. TMS participated in a conference USAID Development Innovation Lab (Lab/DI) iDesign team to discuss how TMS has applied the 5Rs framework and systems practice into implementation. Through a USAID MESCLA-funded consultancy with MesoPartners to research and benchmark

6 https://www.acdivoca.org/2019/06/do-behavior-change-market-systems-development-belong-together/ https://www.jenal.org/what-counts-in-the-end-better-behaviour-or-a-better-ability-to-explore-and-learn/

TMS’s as panelist for plenary session in the South Africa Market System Symposium


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ME&L practices, tools and approaches for market systems, TMS has engaged to share information and generate knowledge on the landscape for market systems ME&L. Finally, during the quarter, TMS participated in several coordination meetings with representatives of other USAID activities (three DO1, two DO3, one DO2, and a sexual harassment training). Finally, during the quarter, TMS participated in several coordination meetings with representatives of other USAID activities (3 DO1, 2 DO3, 1 DO2, and 1 sexual harassment training). SECTION V: PROGRAM MANAGEMENT

In response to the current funding situation in USAID/Honduras, during the period, TMS realigned several job descriptions and reduced its staff by eliminating three positions:

No. Name Position Date

1 Environmental Specialist May 24, 2019

2 Knowledge Specialist May 24, 2019

3 MIS Specialist May 24, 2019

  In addition, TMS suspended staffing of fourteen new positions contemplated originally as the Activity’s implementation phase was about to start. This quarter, TMS fielded two (2) technical short-term assignments as follows:

No. Staff Date Assignment

1

April 1- July 20, 2019

To develop communications and social inclusion products while TMS’s Communication Officer was on maternity leave. Products included: Writing/Editing of the Q2 and Q3 2019 reports, writing bi-weekly reports, planning, executing and overseeing logistics for high-level visitors, and developing the gender and social inclusion strategy.

2 June 10-14, 2019

To review the Management Information system (MIS) and to stress-test its reporting structure to reflect changes made in the MEL Plan 3.0.

  Contractual deliverables TMS received USAID approval of the Market Systems Assessment Report (MSAR) on June 23 (IDIQ and Task Order 1 required deliverable).


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VAA TOUR EMP BEE ActionReasearch

1 1

5

2

1

2

6 2

4

1

JUNE 2019

COMPLETED IN CO-CREATION IMPLEMENTATION PENDING USAID APPROVAL

Partnership and Innovation Fund (P&IF) Continuing with the co-creation process, TMS worked with partner organizations to develop improved supply chain relationships, more effective tourism management, stronger entrepreneurship and institutional ecosystems, and an improved business enabling environment, aiming at maximum job creation. The TMS portfolio currently has 25 activities as follows:

VAA TOUR EMP BEEAction

ReasearchTOTAL

COMPLETED 0IN CO-CREATION 1 1 2IMPLEMENTATION 5 2 1 8PENDING USAID APPROVAL 2 6 2 4 1 15

7 8 3 4 3 25

PENDING USAID APPROVAL

IN COR REVIEW 0 1 2 1 0 4IN EMMP REVIEW 0 1 2 1 0 4IN DUE DILIGENCE REVIEW 2 6 2 4 1 15


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SECTION VI: LOOKING FORWARD The most salient activities planned for the following quarter are:

v USAID’s approval of activities under review and moving forward with the launch and implementation of additional activities under the TMS portfolio.

v COMSA will launch the first cohort of youth into their agricultural entrepreneurship program. This step includes the identification business strategies for specialized service provision for coffee and the establishment of the seed capital fund.

v INALMA will integrate the first set of yucca producers into their supply chain and TMS will work to identify and support initial agricultural technicians to transition into traders/brokers through special financing line and contracts with INALMA.

v EFI will train the first set of growers for cardamom, ginger and lemongrass and begin installation of dryers and distillery for lemongrass for essential oils.

v CANATURH and TMS will launch web presence and social media workshops in July in Tela, San Pedro, Santa Rosa de Copan, and Tegucigalpa to equip hotels, tour operators and restaurants with foundational digital marketing skills.

v TMS will support the Ministers of Labor and Tourism in the adoption of a special law for the recruitment, placement and hiring of Honduran seafarers in Cruise Industry as the first step to launch the Gente de Mar intervention.

v TMS will identify an online reputation management enterprise with the tour operators’ association OPTURH to further its advance the communications strategy

v In August, TMS and partners will launch the Orange Economy and the first two cultural events. In collaboration with Raiz Capital, TMS will support an urban labs expert from Spain in how to organize pedestrian areas, roads for cars and services in El Centro.

v As part of its E-Commerce for All initiative, TMS together with Sube will train regional business development centers in DO1 and DO2 areas on e-commerce and connect their personnel to become agents for the Sube platform.

v TMS will sign a partnership agreement with Alterna, a Guatemalan entrepreneurship provider to bring its cultivation methodology and initiate operations in Honduras.

v TMS will begin implementation with the Chamber of Choloma (CCICH) and GIZ’s FOPRON program to survey local procurement needs of industries in free trade zones, which will result in the creation a supply chain acceleration program with CCICH.

v Advisors from ACDI/VOCA and TMS will work with the Central Bank and the National Bank and Insurance Commission in partnership with IDB to promote further reforms of the eComm Law and develop the National Financial Inclusion Policy.

v TMS will work with FNAMP and CCICH will support initial trainings to enterprises in the Choloma zone on extortion prevention and reporting.

v TMS will coordinate with a World Bank initiative in San Pedro Sula on a sub-national Doing Business Report as part of the initiative to transform SPS into a smart city.

v Together with COHEP, TMS will sponsor an international conference to analysis and develop a private sector proposal for national tax reform.

v In partnership with AMHON, TMS will conduct administrative diagnostics of municipalities as part of initiative to simplify municipal processes.

v In August, TMS will conduct an event to launch the Market Systems Diagnostic and dashboards together with COHEP and IIES-UNAH.


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v In the next quarter, TMS will develop monitoring systems and ME&L Manuals for each of the approved activities for results reporting in the next quarter

v USAID approval of Version 3.0 of the Monitoring, Evaluation, and Learning Plan


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SECTION VI: FINANCIAL INFORMATION


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ANNEX 1 – TMS IN NUMBERS


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ANNEX I1 - COMMUNICATIONS TRANSFORMING MARKET SYSTEMS ACTIVITY

Beacons of Hope Demonstrate Impact of U.S. Investment in Central America7

Honduras has been in the news for all the wrong reasons. Named “Murder Capital” of the World in 2012, the ignominious label has stuck (though no longer accurate) and Honduras remains at the front lines of the U.S. – Central American migration crisis. As Chief of Party of the USAID Transforming Market Systems Activity implemented by ACDI/VOCA in Honduras, I’ve seen the impact of American investment in Central America. These programs help to build strong economies and address the drivers of migration. Throughout my time in Honduras, I have come across some “beacons of hope.” Their stories illustrate how targeted policy reform, access to education, transparency, justice, and economic development make Honduras a better and safer place to live. The Honduran Arrow Man

, 31, is an agro-entrepreneur whose agricultural services business serves 40-50 farms in Marcala, a mountainous municipality in the heart of Honduras’s coffee land. Our USAID Transforming Market Systems Activity has helped strengthen his business, one of ten small and medium-sized enterprises (SMEs) supported by the activity. Formerly a coffee grower himself, Efrain lost his leg in a car accident two years ago. He sees his situation as that of an arrow: “the faster you want an arrow to go, the farthest behind you need to pull it first. My tragedy has only propelled me to think harder, to discover what opportunities lay in front of me.” Believing in agriculture’s potential, he remains in his community, creating jobs for himself and 11 young men. “Little Girl in the Class” No Longer Another beacon of hope, , 23, is an agricultural extension agent. She works for the private-sector partner with whom we’re launching a Youth Agricultural SMEs initiative.

introduces farmers to crop-improving technology. When I ask why isn’t she in the United States, she says: “I earned my degree as an agronomist with great sacrifice – do you think I will throw that away [to] clean toilets instead? I didn’t brave five years of being ‘the little girl in the class’ for nothing. I have my family and my work here, there’s nothing like belonging where you live.”

7 Article published on the U.S. Global Leadership Coalition. Beacons of Hope Demonstrate Impact of U.S. Investment in Central America – USGLCwww.usglc.org


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Birder Turns Passion into Tourism Business

, 35, completed USAID tour guide training in 2015. He’s now a sought-after guide who’s launched his own bird-watching company, Beaks and Peaks. William travels the world promoting Honduras at travel trade shows. Tourism is a principal weapon to tackle poverty and foster development, and Honduras is no exception. Our activity works with and other operators in the region to boost Honduras’s reputation as a travel destination by providing training and technical assistance. The USAID project I lead partners and empowers at all levels of the Honduran economy. We have alliances with dozens more resilient beacons of hope like the individuals I mentioned above. For the thousands of people who have decided to risk the uncertainty of migration, economic development implementers like ACDI/VOCA are investing in the millions more who’ve decided to stay to build a future at home. We can support them through U.S. foreign investment, which creates a stable environment for families to thrive.

U.S. Agency for International Development

1300 Pennsylvania Avenue, NW

Washington, DC 20523

Tel: (202) 712-0000

Fax: (202) 216-3524

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