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Central American University - UCA  
  Number 187 | Febrero 1997



A Model for Poverty

The impoverishment of Hondurans is so rapid that business people warn about the possibility of civil war, a Fujimoro-type coup, or sheer anarchy. To prevent this they have proposed a polemical and elitist “Great Project for National Transformation”.

Reflection, Research and Communication Team (ERIC) of Honduras

The government of Carlos Roberto Reina completed three years in office in January 1997 with the great majority of Hondurans still asking themselves what happened to the proclaimed "moral revolution" that he insistently promised during his electoral campaign. Another question is even more disturbing: where is the "human face" that was going to soften the harsh economic "adjustments" the government implemented to meet international financial organization demands?

Everyone Against Neoliberalism

From the popular organizations in the streets to high-level government officials themselves, there is unanimous discontent with the neoliberal model being so rigorously imposed on the weak structures of Honduras' economy. The Committee for the Defense of the Honduran Consumer demonstrates in front of the presidential offices with these slogans: "Mr. President, people are dying of hunger;" "The Reina brothers governing and the people starving;" "The moral revolution put the poor in bad shape." They also delivered a letter to the President arguing that the economic situation is producing "social instability."
But those on the Committee aren't the only ones. When the presidential designate, Guadalupe Jerezano, goes to the executive offices, he publicly attacks the neoliberal model: "We have seen that this model has not pulled the majority of the world's countries out of their crises." Manuel Zelaya, director of the Honduran Social Investment Fund, a key agency in cushioning the social effects of the economic adjustment, urges the government to revise the model on the grounds that it produces more poverty daily: "Today we can confirm, with proven statistical data, that every minute of every day there are two more poor people in Latin America." And the Honduran Foreign Minister told the UN General Assembly that world globalization threatens small nations: "We express our concern about the future of weak and less developed nations."
It would be tedious to enumerate all the pronouncements made in Honduras in recent months against the government's neoliberal policies. The most significant have come from the Coordinating Council of Honduran Peasant Organizations, the Honduran School of Economists and the United Confederation of Workers of Honduras. One of the country's main newspapers published an editorial titled, "A Model for Poverty."
Even the business sector has been critical, largely because private enterprise leaders recognize the need to adapt the adjustments to Honduran reality to avoid a "social convulsion." "We have to seek a balance so Honduras can continue in peace and development," they said, "We must condition the economic model to the country's situation." During a prolonged highway takeover in the Agußn Valley in October, Juan Bendeck, president of the Honduran Council of Private Enterprise (COHEP), declared: "The country is virtually at the edge of anarchy. If the government doesn't take immediate action, the situation could get complicated."

The Economy: A Failure

After promising the people an economic policy "with a human face," the Reina government, in office since the beginning of 1994, has continued along the very same adjustment lines initiated by the Rafael Callejas government, and has applied them even more strictly. And the national economy has remained in a prolonged state of depression despite the privatizations, liberalizations, restriction on credit resources, wiping out of agrarian reform and cuts in government social spending, The country's economy decreased by 1.5% in 1994 due to an energy crisis, while growth in 1995 (3.6%) barely kept pace with population growth. This same contradiction was faced in 1996. According to the Interamerican Development Bank's annual report, Honduras' per-capita gross domestic product is $597, the second lowest in Latin America after Nicaragua.

The economy's greatest movement is in the commercial and financial sectors. The only development is that of speculative capital, based on high interest rates, currency purchases and some commercial activities, all of which are concentrating wealth more and more. According to the Central Bank of Honduras, over 50% of credit granted by the financial system goes to commerce, with disastrous consequences for the whole economy because no investment is generating new businesses or jobs.

The inflationary trend is continuing, and is now one of the highest in Latin America. In 1996, for the third consecutive year, annual inflation reached a rate of 25-30%. According to official data, the consumer price index increased by exactly 100% between December 1993 and November 1996, a calculation that undoubtedly underestimates the real inflation rate, because it does not take into account even greater increases in basic grains (corn and beans), electricity and transport.

Given the trade balance deficit, the exchange rate is rapidly deteriorating. When Reina took office, a lempira was worth a little more than US$0.14. In November 1996 it had dropped to less than $0.08. Despite the devaluation, exports have not gone up significantly, but luxury imports are rapidly increasing. Because of the lempira's devaluation, dollar deposits increased by 109% in 1996, while national currency deposits increased by barely 17%. In November 1996 foreign currency deposits represented 31% of the national monetary volume. At the same time, according to the National Industrial Association, there is an alarming flight of Honduran capital toward foreign banks.

More Who Are Eating Less

All economic viability indicators show that the Reina government's economic management has been a colossal failure. And the disaster is even more appalling in the social sector. Malnutrition affects some 39% of children who attend primary school and more than a quarter of the total population. The basic grains crisis in the second half of 1996 has aggravated this situation. The price of corn and beans tripled in just a few months due to low production, exports to neighboring countries and the role of middlemen. Catastrophic floods in November 1996 in the north destroyed thousands of acres of crops for both export and domestic food consumption, so there will surely be a grain scarcity in 1997.

The problem of corn, beans and rice production is not unique to this moment; it has a long history. From 1981 to 1994, the Honduran population grew by 50% while corn production increased only 3%, beans 7% and rice 22%. Stagnated production of these basic foods has led to a dramatic drop in per-capita consumption. Annual per-capita corn consumption dropped from 264 lbs. in 1981 to 171 lbs. in 1994, beans from 33 lbs. to 22, and rice from 21 lbs. to 16.

The most recent data from the United Nations Development Program reveals that 71% of Hondurans now live below the poverty line, and 55% of those are indigent, without enough income to cover even minimum nutritional needs. The gap between the hungry and the well-fed is widening: the "indigent" increase by 3% annually, while the "non-poor" increase by 1.7%. The housing shortage is an obvious sign of the endemic poverty; it is estimated that 16% of the country's housing is improvised and must be replaced, while another 46% have inadequate structures, lack services and have overcrowding problems.

Basic Minimum Wage

The basic wage in Honduras is ridiculous. In 1994 and 1995, respectively, the minimum day-workers' wage rose from 12 to 15 lempiras a day, then from 15 to 20. But the combined effect of inflation and devaluation cancelled any increase in practice. The 70,000 young people who work in the maquiladoras, plants that assemble imported inputs for re-export, earn a basic wage of 30 lempiras (under US$2.40) for an eight-hour day. Curiously, the current push for a minimum wage increase is coming not from the shut-down union movement, but from the business sector, which seem to be ashamed that Honduran workers earn only half of what workers earn in neighboring countries. The recent 25% minimum wage increase was cancelled out by an immediate and ill-conceived price hike for various products. Juan Bendeck, from COHEP, called the businesspeople who raised the prices "shameless." "They are pushing the country to a civil war," he said.

Anxiety, Insecurity, Risk

The economic crisis has also brought an ever more patent decomposition of the Honduran social fabric as one of its consequences. The increase in street violence and paramilitary terrorism takes ever more victims. There have been 57 incidents with explosives in the three years of the Reina government. In October 1996, a high-powered bomb exploded under the Legislative Palace, producing extensive damage to it and the nearby Central Bank and Ficensa Bank. A fragmentation grenade was thrown against the main gate of the municipal capital court at the beginning of November, killing 1 and injuring 25. A powerful plastic explosive was discovered in the main building of the Public Ministry in early December and deactivated. These terrorist attacks have continued since then. Human rights organizations insist that they are perpetrated by allies of the military in order to maintain a climate of fear.

Kidnappings, bank robberies, delinquency and massacres of entire families are evidence that life has been devalued with the same speed as the currency devaluation. According to the Committee for the Defense of Human Rights, there has been a dramatic increase in the number of killings, assaults and robberies over the last three years. The committee states that "the high risk ranking for foreign investment in Honduras given by The Wall Street Journal is based on research into the country's violence indicators, which have increased radically under this administration." According to criteria of London's Economic Intelligence Unit, Honduras has experienced the worst drop in its world risk ranking, moving from 70 to 75 points on a scale of 100, where 0 indicates no risk.

Only the Big Guys

The main reasons for this worsening are divergences between Honduras and the IMF around the privatization of public services and the restructuring of the foreign debt, which is currently US$4.3 billion, equivalent to 108% of the annual gress domestic product.

Despite major government efforts to satisfy the international financial organizations, Honduras has not won the favors it so urgently needs from them. The renegotiation of the billion dollar debt with the Club of Paris countries failed, and will not be addressed again until 1998, with the next government. Nor was any agreement signed with the IMF, because the government did not increase energy rates in July 1996 or fulfill its economic program, which included approval of a new tax law and Central Bank reforms.

Indications from international financial organizations themselves show that the Reina government has left out not only peasants and workers, but also small and medium businesses, which complain of the 40% interest rates that close the door to credit. Rather than favoring projects that strengthen the agricultural economy and produce jobs, the government has enthusiastically backed the "Great National Transformation Project" (GPTN), whose implementation will require no less than US$18 billion, which must obviously be obtained abroad. Well-known businessman and investor Miguel Facussé, the project's promoter, has distinguished himself by grabbing up thousands of acres in the country's most fertile valleys, taking advantage of desperate peasants abandoned by the government after the Agricultural Modernization Law was approved

The Great Project

The GPTN is a proposal by which Honduras' economic elites hope to achieve the country's economic take-off in the context of globalization, taking advantage of the comparative advantages that Honduras offers. Facussé presented the GPTN to President Reina, the ministers' council, the diplomatic corps, COHEP members, the National Industrial Association and international financial organization officials as the instrument that will transform the Honduran economy, resolve national problems and, in the new globalization era, make Honduras a competitive nation. According to its promoters, the GPTN objectives are:
Increased well-being and permanent progress for all in the framework of social peace, effective democracy, negotiated consensus agreements and environmental sustainability for future generations. Equal opportunity for the least favored Hondurans.

Honduras' insertion in the inevitable economic globalization through building on the potential of national and regional advantages. Human promotion to improve the performance of the country's human and natural resources.

Extension of banana cultivation. Exportation of African palm crops and industrialization of lumber. Exploration and exploitation of mining deposits in Yuscarán.

A concession for the design, construction and operation of tourism projects in Tela and Amapala. A concession for the design, construction and operation of a highway between Tegucigalpa and the Comayagua valley. Concession of the country's airport terminals.

The GPTN was accompanied by the argument that if Honduran's living conditions continue to drop, "there will be a coup d'etat, a 'Fujimorazo' or anarchy."

"No Crumbs from the Rich"

GPTN promoters argued that economic growth of 4-5% is not enough to resolve the problem of underdevelopment and poverty in Honduras. And they said that Honduras cannot wait 18 years to reach El Salvador's development levels or 27 years to reach those of Costa Rica. The project hopes to obtain annual economic growth of 12 to 16%. According to its promoters, the GPTN would directly create 65,000 new jobs a year for a total of 325,000, which would benefit 1.5 million Hondurans and add US$4.5 billion to the national GDP.

The GPTN is designed to go beyond the Reina government and have continuity with future governments. Economist and coordinator of the GPTN presidential commission Roger Marín conceives of the program as a "super-party." The political parties should thus all support it and not undermine it, making sure that the political year does not become a limitation on the project.

Marín's explanation of what the Great Project is trying to be was crystal clear. "The primary objectives are designed to satisfy the needs of the international community and not the needs of the domestic market (examples are the inter-oceanic highway and the Super Free Trade Zone between Puerto Castilla and the Gulf of Fonseca). The Great Project should not be thought of as a domestic project linked to such needs as basic grains. It's not that. The new strategic focus of the country's development is to satisfy the needs of the international community."
Miguel Faccussé says of the GPTN: "The true challenge is to establish a competitive, dynamic and robust economy that generates resources for a just, moral and progressive society. It is not possible for us to be a people gathering the crumbs from the rich people's tables."
The Great Project, which consists primarily of new highways, an oil refinery, various hydroelectric projects, port and airport facilities and tourist development, gives no room to national businesspeople, who do not even possess the resources to be third-rate partners in such a gigantic initiative.

An Enclave once Again

The Great Project appears aimed at converting the country into a new enclave, as it was in the past with the transnational fruit companies. If the country's political, economic and military elites transformed Honduras into a "US airstrip" in the 1980s with the deep hope of turning it into an "associated state" of the United States as a way to resolve national problems, the economic elites now want to make Honduras into the Hong Kong or the Singapore of the continent.

The most worrisome aspect of the Great Project is the installation of a "Super refinery" in Puerto Castilla, close to a tourist area and to ecologically delicate zones. The environmental organizations oppose the Great Project, claiming that "progress in the areas of environmental management and sustainable development are being sacrificed for rapid and short-lasting enrichment of the economic elite, which down the road will leave the Honduran people much worse off than they are today."
The Facussé project has also been criticized for depending totally on loans, which will increase the foreign debt and run the risk of turning into another CONADI (the National Investment Corporation, which wasted hundreds of millions of lempiras in projects destroyed by corruption in the 1980s).

Elections: Four new Aspects

In the midst of this major economic crisis, members of the two largest traditional political parties, the Liberals and Nationals, went to the polls on December 1, 1996 to choose new party authorities and their electoral candidates to compete in general elections in 1997.

One new aspect of the elections was that the National Party agreed, for the first time in its 100-year history of impositions, to open itself up to party primaries to choose its electoral candidates, leaving behind a tradition that viewed consulting the citizenry as a weakness. It was a baptism of fire for the National Party, associated by the Honduran people with the military, since its strongman leaders had always imposed the candidates at all levels in the name of party discipline.

Another new aspect of these internal party primaries was the introduction of a separate and direct vote for presidential and vice presidential candidates, congressional hopefuls and mayoral candidate for each municipality, in which the votes were individually counted. This system allowed the congressional and mayoral candidates to be chosen independent of whether they belong to the presidential candidate's faction.

The third new aspect was the choosing of a woman presidential candidate: primary school teacher Nora Gunera de Melgar, wife of deceased General Juan Alberto Melgar who took over the Honduras presidency in a coup in 1975. Her National Party candidacy does not mean that woman are rising to power--men are behind her pulling the strings--but it has some importance because it takes place at a moment when woman's role is being redefined within Honduran society. This is the same Nora Melgar whose candidacy President Callejas sacrificed in the 1993 elections to make way for Oswaldo Ramos Soto, and the same armed forces widow behind whose skirts former President Callejas is now hiding to escape attacks of corruption.

The fourth new aspect was to decentralize the polls into localities. Given the crisis of credibility of the political parties, they went out looking for votes.

These four new aspects are positive signs within the democratic process initiated in 1980, when the transfer of power from the military to civilians was simply a US pretext to justify making Honduras a strategic base for its low-intensity war against Central America's revolutionary movements.

These primary elections cost the state 8 million lempiras, 3 million of them in printing 800,000 ballots plus distributing 6,000 ballot boxes throughout the country.

The Liberal Candidate

Carlos Roberto Flores, currently president of the National Congress, will compete for the incumbent Liberal Party against National Party candidate Nora Gunera de Melgar for the Presidency of the Republic in 1997. Flores won over five other pre-candidates, who had been registered by the Liberal Party's Central Council with the consent of President Reina and his brother Jorge Arturo Reina to make it harder for Flores' current to gain total control of the party. After the triumph of Flores, who now becomes the strongman of the Honduran state, the Reina brothers must step back into the penumbra in this electoral year.

Flores ran as a reconciliation candidate who will give a new focus to the country's problems. With his "new agenda" he proposes to combat the speculation that is raising the cost of the basic food basket and destabilizing prices in general. According to Flores, "It is time to begin growing without losing financial stability" and time to promote competition by eliminating incompetence so that the economy is at the service of Hondurans and there is well- being. Responding to general fears due to increasing lack of public safety, Flores announced that, with his presidential candidacy now secure, his very next task from his privileged seat in Congress will be approval of the transfer of the police from military to civilian hands.

Flores invested some 20 million lempiras in his campaign. With that he defeated the futile attempt by his party's Central Council to weaken the strength of his current, which brings together the country's strongest economic sectors. In Honduras, whoever has more money to invest in transportation, publicity and activists' salaries always gets the most votes.

The National Candidate

Nora de Melgar won her candidacy by defeating three other candidates and making a last-minute alliance with the Oswald and Callejas factions of the National Party to prevent the victory of "clean hands" candidate Elías Asfura. Her alliance with Callejas meant allying with the party sector most questioned about corruption during Callejas' administration, which preceded Reina. Many of its members are now being accused in the courts and, if justice is not applied, it will be because they live in impunity hiding behind their immunity. Her alliance with Oswaldo Ramos Soto, in turn, identifies her with the party's most conservative sectors, those who justified the repression and disappearances of the 1980s. She also directly represents a military sector and thus supports keeping the police in military hands.

The fight within the National Party was fiercer than other years and Melgar's triumph does not mean she can guarantee the unity of the party, divided after its defeat in the 1993 elections.

A Tired and Passive People

Hondurans' greatest concern is their helplessness in the face of the rapidly deteriorating national situation and a government, private enterprise sector and political sector that are doing nothing serious to resolve the situation. The inability of politicians and businesspeople to create alternatives to solve the country's fundamental problems is becoming more evident to the majority every day. The high abstention level in the National and Liberal party primaries on December 1 was only one indicator of the reigning disillusion. People are tired of demagoguery, unfulfilled promises, rhetorical speeches and political art, and are beginning to discern more clearly that behind all of that are businesspeople who only want large and immediate profits without worrying about the authentic development of Hondurans and of Honduras.

Even so, the traditional parties still dominate the panorama. The newer parties have an insignificant number of members, and the grassroots organizations continue to be strangely passive before the avalanche of adversity falling on the impoverished majority.

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