“We’re monitoring Nicaragua very closely,” Yohannes said in a phone interview from Washington. “It has not improved. They need to have free democratic elections.”

Tensions in Nicaragua increased last month as supporters of President Daniel Ortega attacked opposition lawmakers seeking to block a Supreme Court ruling giving Ortega a green light to seek re-election in a 2011 vote.

El Salvador’s $461 million in aid is the last remaining MCC program in Central America after cuts to Nicaragua and Honduras. The corporation slashed $10 million to Honduras to protest a coup last June, Yohannes said.

The assistance includes a 289-kilometer (180-mile) highway, to be completed by 2013, to boost trade in parts of northern El Salvador that were the main conflict zones during the country’s civil war in the 1980s, Yohannes said.

The corporation, a foreign aid agency created by the administration of former President George W. Bush, has also cut programs in Madagascar, Armenia, Niger and Yemen for failure to meet political obligations since 2008.

--Editors: Paul Tighe

To contact the reporter on this story: Blake Schmidt in Granada, Nicaragua at bschmidt16@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman in Rio de Janeiro at jgoodman19@bloomberg.net