"You take my life when you do take the means whereby I live.”

Shakespeare

There are various explanations for the political crisis which Honduras is going through. The first is the interest of President Juan Orlando Hernández (JOH) for reelection, jumping the obstacle of legality. It is an example of planned ambition for power, through exercising broad control of the institutions that could have stopped it. Through the National Party and their elected parliamentarians, he promoted an alliance with the Liberal Party to obtain control of the legislative power, with MPs and leaders of this Party lending themselves to establish this alliance, against the offer made by the LIBRE Party for a Liberal MP to occupy the Presidency of the Congress with the sum of the votes of both Parties.

He changed the magistrates of the Constitutional Chamber of the Supreme Court of Justice, so that it would sentence in favor of his reelection project, although the sentence says that reelection can be considered, but not that JOH could aspire to it.  Previously, he had imposed the General Attorney of the Republic, Oscar Chinchilla, without following established procedures. In the armed forces he had placed his friends, just as he exercised a direct control over the Supreme Electoral Tribunal (TSE) especially its President, David Matamoros Batson, and the representative of the Christian Democrat Party, Saul Escobar, an employee of Arturo Corrales Álvarez, the fallen Guru who until recently (after the elections of November 26, 2017) was special foreign minister of the Honduran Republic in the US. He exerted influence to maintain a fellow countryman and friend as President of the Supreme Court of Justice, despite the denunciation by Salvador Nasralla that MPs were bought off in order to obtain their vote for the aforesaid candidate.

The second cause, linked to the previous one, is the weakening of the electoral institutions and in general of the government. In addition to politicization and lack of transparency, credibility and innovation of the processes, there was a lack of representation and integration of the political forces in contest, in the case of the LIBRE Party and the Anticorruption Party (PAC). The rules of the electoral process are practically imposed by the Presidency, and the members of the TSE are mere executors.

The third cause is related to the lack of ethical principles and democratic values, within political parties, civil society organizations (including the owners of the media and paid journalists) and the population. There are MPs elected to the Congress of the Republic who confess that they have read very little, with serious deficiencies in their professional formation and basic education, broad ignorance of the Constitution of the Republic and political history of Honduras and of economic, social and cultural reality. They came to this post not with the intention of legislating, but of approving, with their eyes shut, the projects and initiatives presented by the Executive, and to vote against those generated by the opposition parties, obtaining resources from the National Budget and bribes given by businessmen.

But there is also a not very visible cause that has to do with the draconian programmes of economic adjustment supported by the IMF and their effects. After the Coup d’état (June, 2009) and in the government of “Pepe” Lobo (2010-2013) the IMF signed a programme of economic adjustment for 18 months, basically oriented to stabilizing public finances, and reactivating the country’s economy. This programme did not fulfil the goals of tax collection and reduction of expenses, but the government was congratulated for relaxing monetary exchange policy (greater flexibility in the rate of devaluation of the currency), maintaining the monetary policy rate (TPM) high, in accordance with the inflation goals of the Central Bank.  They did face resistance in bringing about a reduction of the operational losses of public enterprises such as HONDUTEL and the Electric Energy Company, that were absorbed by the State with resources of the public debt (internal and external). Some 1.7 billion dollars acquired through sovereign loan-bonds were destined to cover these losses and governmental current expenses.

From the Congress of the Republic, with JOH at the head, a series of laws were approved, supposedly oriented to reactivating the economy, but which in practice fulfilled the proposal of devaluing employment and social achievements, privatizing the provision of goods and services and selling off public enterprises and pieces of national territory to the highest bidder, thus providing an incentive for the development of extractive industries such as open cast mining, energy generation and the establishment of model cities or zones of employment or development.

Among the actions framed in this neoliberal model supported by the IMF, the following stand out: a) The approval of the Law of Hourly Employment, that makes work more precarious and weakens social conquests and union organizations; b) A new Law of Education that crushes teachers’ organizations, freezes the achievements of the Teachers’ Statute and facilitates the process of privatization of education in Honduras; c) The Law of Public-Private Alliances (APP) that facilitates the surrender of goods, services and resources of the State to the private sector, without clear benefits of such deals. One example is the privatization of highways with collection of tolls, that for leaders of the LIBRE Party means robbery of the people and the resources of the State itself, since the concessionary company has not indicated the amount of their contribution in financial resources to enter the business; it has been questioned whether this contribution is not being taken from the resources from the highway toll charges; d) The Law of Protection of Investments that allows foreign companies to transfer out of the country the value of their profits, capital gains, dividends, royalties, and also technology of their property, and to obtain credit from the national finance system (Decree 51-2011 of July 2011); d) The Zones of Employment and Development (ZEDE), initially called Charter Cities, so as to create another State governed by foreign companies and capital; e) The New Mining Law, that does not prohibit open-cast mining and robs communities of their natural resources, forests, water and biodiversity, in addition to the repression and murder of leaders and f) The Law of Reconversion of Foreign Debt, that commercializes resources and goods of the State and offers them to the highest bidder (Suazo; 2017).

The new government with JOH at its head (January 2014-January 2018) signed a broader agreement with the FMI, from December 4, 2014 to December 4, 2017, again oriented at stabilizing public finances, reactivating the economy, institutional reform and strengthening programmes of social compensation.

In economic and social matters, the principal laws include: a) Law for Ordering Public Finances, Control of Exonerations and Anti-evasion Measures (Decree 278-2013) that increases the sales tax from 12% to 15%, maintains exonerations to industrial zones and fast foods, lowers the number of subscribers that receive a subsidy for electricity, adjusts taxes on fuel imports and creates a fund of 4.5 billion lempiras to finance the social compensation programmes, the main “visible” instrument with which the government and the Partido Nacional have promoted the presidential reelection; [1] b) The Framework Law for Social Protection, that allows the direct participation of the private sector in services of social attention and protection, as well as the use of resources of the institutes of social security such as the Instituto Nacional de Previsión del Magisterio (IMPREMA) and the Instituto Nacional de Jubilaciones y Pensiones de los Empleados y Funcionarios del Poder Ejecutivo (INJUPEMP) for such purposes, in addition to the adjustment of the quotas of contribution of the affiliates to social insurance regimes; c) The Energy Sector Law that permits the direct participation of private enterprise and banks in the provision of services of the ENEE, and the automatic adjustment of electricity tariffs to real costs, creating a new Regulatory Commission of Electric Energy CREE); d) the Law of Fiscal Responsibility, that puts limits on the increase of public spending, but above all to the percentage of the budget deficit; e) the Tax Code, that introduces the territorial rent, by virtue of which companies can pay taxes in the country that is most convenient to them, also the mono tax as a single tax payment to oblige informal workers to pay taxes; f) Agreement with the IMF to reduce expenses, increase taxes and reduce the budget deficit, accompanied by a cleansing of the finances of the ENEE and flexibility of the exchange rate (Suazo: 2017).

To this is added a new modality of zones of employment and development managed by Comisionados, and the new Tourism Law, which hands over the river basins, microbasins, statues of national heroes, beaches, forests, archeological zones, etc., to the developers of tourist companies with the participation of foreign capital.

Before the elections of November 26, 2016, the IMF praised the achievements obtained by the government. For Mission Chief Roberto García Saltos, the government fulfilled all the criteria for the release of funds, backed up with a greater and more stable growth and improvement in the social conditions of the population. This includes, in addition to the successful structural reforms in budgetary and tax matters, a new Institution responsible for Tax Administration of the country, made up of sympathizers of the National Party, the consolidation of fiscal discipline and the macro fiscal policy of medium term added goals.

After the elections, once the evaluation of the Medium Term Stand By Agreement has been finalized, the IMF has pointed to achievements such as the reduction of the budget deficit from -7.9% in 2013 to -3.0% of GDP in 2017 (estimated), the adoption of a more flexible exchange rate (i.e. devaluation) and the regime of inflation goals, recuperation of investor confidence due to a reduction in risk premiums on loans and sovereign bonds, reduction of the poverty rate from 65% in 2013 to 61% in 2017 (official figures, not yet confirmed), as a result of the implementation of social compensation programmes, and the reduction of homicides from 75 per 100,000 inhabitants to 40 homicides (figures yet to be confirmed, according to human rights defence bodies). There is also talk of a growth of the GDP close to 4%, although the quality of this growth doesn’t matter, with an inflation rate somewhat superior to 4% (without considering the impact of price rises due to marches and the takeover of streets), increased export production and over 4 billion dollars coming in through family remittances.

The IMF has little to say about the accelerated indebtedness of the Honduran economy, whose total public debt is above 10.6 billion dollars, more than 50% of the GDP. It is hoped that from 2019 the debt will stabilize and even begin to diminish, through budget stability, low cost of resources (risk), greater economic growth and increased foreign investment. This acceleration of the debt has served to sustain a programme of social compensation in favour of the poorest sectors of the population, but that also benefits government officials with NGOs, MPs denounced for corruption, and the reelection project of JOH, since the population that did not vote for JOH nor attended the marches called by his party, have not received the so-called 10,000 bond and run the risk of being permanently excluded from the programme. The IMF has remained silent on this corrupt and antidemocratic practice, which has served to promote illegal acts in the country.

Linked to this, there is no reference by the IMF to the process of acquisition (privatization) of public enterprises and services; these have been scarcely transparent processes where there is a “partnership” between government officials and foreign businessmen. Among the emblematic cases, we can mention the collection of highway tolls, and several of the energy business firms in which public officials, MPs and businessmen linked to the board of the Honduran Council of Private Enterprise (COHEP) have benefitted from overpricing in energy sales to the government. The IMF fills its pages with articles on successful experiences in the struggle against corruption, but on Honduras it has remained silent.

The IMF makes little reference to the negative effects of this policy of economic stability, that ties the economy to the search for and fixing of a Monetary Taboo, that is, inflation limits. The costs have been rather high in terms of contraction of bank liquidity, the fixing of a TPM of 5.5% and the contraction of credit to productive sectors with fewer assets, as is the case of small producers of basic grains, vegetables and small urban businesses.

Although the IMF has taken a stand against the concession of fiscal exonerations and exceptions, with the commitment assumed of its elimination or regulation, budgetary spending in Honduras represents 6% of the GDP, benefitting maquiladoras, fast food, tourists and those tied to the APP projects.

The consequences of the indiscriminate use of social security funds is another of the virtues of this packet, although the greater part of these resources are destined to finance the construction of a Civic Centre where the governmental institutions will be housed, and the construction of physical works of the capital city and San Pedro Sula where the government acts as the financial backer. The greatest beneficiaries of these resources are the contracting (external) business firms and national ones that, according to the leaders of the LIBRE Party, such as Juan Barahona, benefit the same public officials and friends of President Hernández.

As is well known, the absorption of resources that budgetary adjustment generates should help to reduce the external breach and encourage internal savings for real investment. The trade deficit of Honduras is estimated at 3,434 million dollars for 2017 (Cepal, 2017), higher than what was observed at the beginnings of the government; but the government and the IMF are not worried since they expect to count on around 4.7 billion dollars in net monetary reserves by the end of the year, without having evaluated in depth the negative impact of the fanatical immigration policies of President Trump of deportations and closed borders. Also the amount of real investment is reduced when compared with the amounts existing before and at the beginnings of the coup d’État; at the present time it represents less than 2.8% of GDP, although the government hopes for an increase in 2018, without considering the effects of the political crisis generated and its duration in time.

The trade deficit will be greater in the future because of the high food dependency generated by CAFTA-RD and the other trade agreements signed by Honduras, where there has been a carnival of commercial agreements without recognizing the asymmetries between countries and economic and productive sectors. The channeling of greater recourses to payment of the debt service (over 34 billion lempiras annually) and the problems of tax collection due to lack of employment and the closing of businesses, will affect the levels of real public investment, added to the problems of corruption and the scarcely effective use of these resources, since the government does not have a proven system of prioritization of investment projects, many of which are negotiated by MPs and/or authorized by the Executive, without the IMF batting an eyelid.

In 2016, Honduras and Nicaragua were the two countries that captured the lowest flows of direct foreign investment (DFI) among Latin American countries (CEPAL 2016); Honduras only received 1,002 million dollars, although the IMF underlined economic stability (i.e. an adjustment package) as a prerequisite for the increase of such flows.

This economic adjustment drove up unemployment figures, with a rate of open unemployment that increased from 4.3% in 2011 to nearly 8% in 2017. More than 50% of the population is underemployed, and women continue to have less access to remunerated employment and sustainable salaries instead of spurious ones. It is estimated, according to official figures, that a million youths neither study nor work, hence their future opportunities are uncertain, including many who have or are about to receive a university degree. These young people are those who most of the time are in the streets looking for work, access to housing and studies.

The presidential candidate Salvador Nasralla, with his discourse and proposal for government, generated hope for the population affected by economic adjustment, corruption and demagoguery. A central point of his agenda was to relieve the tax burden for business firms so that they would be able to invest, also to increase the income available to households to improve their buying power and their material living conditions. This includes an increase in subsidies, use of the resources from corruption for the generation of more jobs, direct support for food production, revision of unconscionable contracts with national and foreign companies, the sale of stocks and luxury goods of the State and those seized from drug traffickers.

As is well known, the people came out massively to vote for a change of agenda that would have made it possible to ensure greater access of the population to goods and productive and financial resources, eliminating the burden of corruption that erodes development and democracy. And, they will continue on the streets, demanding respect for their vote, since they have little to lose.

Meanwhile, the IMF hopes to sign a new agreement with JOH, reelected by the TSE, known as “the pork barrel”. The question is what will they demand? Perhaps a total liberalization of the exchange rate and of the financial system, completion of the privatization of social security and health, acceleration of the privatization of Higher Education, more resources for the armed forces and the launch of various ZEDE; all this to guarantee, among other things, the payment of the foreign debt, jeopardized by the protests and streets occupations of the population who are indignant over the electoral fraud.

What is certain is that in this new Agreement of (squared?) economic stabilization, it is prohibited to mention electoral fraud and repression, much less of corruption and human rights. The IMF is not guilty of the coups, gas attacks, tortures, disappearances or deaths. The government of JOH has fulfilled its commitment, and hence is a good partner and should continue to be supported, irrespective of whether it is illegitimate and the result of fraud.

Tegucigalpa, DC, December 20, 2017

(Translated for ALAI by Jordan Bishop)

[1] See Javier Suazo Honduras: Modelo de Corte Neoliberal: ¿Qué Hacer? Fundación Ebert, January 2017.