Caribbean & Central America - September 2012 (ISSN 1741-4458)

As part of its declared ‘fiscal emergency, the government led by President Porfirio Lobo announced ‘Operation Scissors I’ to cut and/or freeze senior public sector salaries, including those of the president and the executive, ahead of the arrival in Tegucigalpa of the International Monetary Fund (IMF) at the start of September.

The IMF said it was on a “medical mission” to merely “take the pulse” of the country and President Lobo himself played down the chance of a new stand-by agreement (SBA) immediately. The last US$207m SBA expired in March and talks on a new deal foundered before they ever got underway amid disagreements over the macroeconomic targets. Honduras missed its fiscal targets last year. Lobo’s first finance minister William Chong Wong quit in February saying he could not reconcile the Fund’s demands with the social reality in Honduras. However Honduras needs the deal – upon which depends US$130m in subsidiary credits from the World Bank and the Inter American Development Bank.

Having long since diagnosed the problem as the bloated size of the state, the Fund has recommended its usual strict fiscal regime and strenuous exercise of spending restraint. The patient, predictably, is very loathe to follow through on the recommendations and regularly falls off the wagon, putting its medium and long term health at risk. It doesn’t help that its dependents – in this case the national electricity company (ENEE) – are broke.

Honduras’ projected fiscal deficit in 2012 is now about 5.0% of GDP. Forecast real annual GDP growth this year is about 3.0%. High global food and oil prices have added to import costs and caused domestic price pressures. The first half trade deficit was US$358m, on exports of US$2.13bn and imports of US$2.66bn. Net international reserves were US$2.05bn as of 31 August, on central bank figures, down US$260m since 1 January, hardly a good starting point for the talks with the Fund.

Honduras “stained with blood”

Five decapitated bodies, limbs bound, were found dumped in rubbish bags in the port town of La Ceiba, one of the country’s most violent, on 1 September. Four of the young corpses were female, aged just 16-22, with one male put at about 24 years old. Just a day earlier in the capital Tegucigalpa, police found three corpses cut up into bits, apparently by a chainsaw. Again, the dismembered bodies were simply dumped on local streets in rubbish bags, evidence of the impunity with which criminals operate in Honduras, where there were 20 homicides a day on average last year.

  On 1 September, the country’s national flag day, the Catholic auxiliary bishop for the archdiocese of Tegucigalpa, Juan José Pineda, lamented in a sermon, “Honduras is stained with blood...The words of our national anthem, our illustrious heroes, you and I, we are stained with blood…In our country there is violence, not peace. There is hate, not fraternity…and the men of today don’t want to talk about the law or about the objective norm of our work”.

  The bishop called on the faithful to live and work “in coherence” with their religion and not to “dirty their hands”. “For a Christian it’s not just about going to mass on Sunday….they must also live a coherent life”, he stated. About 97% of Hondurans are Roman Catholic.

• Model cities

Juan Orlando Hernández, the head of congress and 2013 presidential hopeful for the ruling Partido Nacional (PN), on 4 September announced that the Comisión para la Promoción de Alianzas Público-Privadas (Coalianza), which is attached to the finance ministry, had signed an agreement with private investors for the first ‘special development zones’ or ‘model cities’. He identified three potential sites: the Valle de Sula region in the department of Cortés; the Sico-Paulaya and Agalta valleys, adjacent to Puerto Castilla, and the so-called ‘southern region’. He said investors had selected the sites for their proximity to sea and airports. Hernández did not identify the investors but after a recent trip to South Korea he strongly hinted at interest from the South Asian country. He claimed that the initial construction works would create 5,000 new jobs from October, and a total of 40,000 by 2015.