Honduras
Weakness, Inequality and Complicity
There is a general feeling that the country
has no economic direction and a growing impression
that President Ricardo Maduro will not see out his term in office.
There are also doubts about what is really behind
the fight against corruption.
Manuel Torres Calderón
Twenty years after civilian rule replaced military dictatorship, Honduras’ governability is still very fragile. Honduran society has extreme inequalities and is going through a crisis that is directly affecting the weakest social groups, while at the other extreme a handful of people is growing opulently rich. The figures are as stark as the general levels of indifference: the poorest 20% of the population receive only 2.65% of the national income, while the wealthiest 20% have their hands on 57.3%.
The only institutional “response” to this abyss is the Poverty Reduction Strategy (PRS). It is being presented as the nation’s most important social proposal, but it is not yet being implemented and does not address the country’s inequalities even theoretically.
The challenge is immense. The last household survey showed that 64.4% of Honduran households are living below the poverty line, with 47.4% living in extreme poverty. In rural areas, poverty affects over 70% of the households. One of the few practical results of the PRS in 2002 was to create a strategy consultative group, which consists of six representatives from the government sector, five from civil society and one each from municipal government and international cooperation.
Death to poverty or only a palliative?The Honduran debate over how to tackle poverty is characterized by a conflict between two approaches. The official strategy is to target 80 of the country’s 297 municipalities, some of which have living conditions similar to the worst cases in Africa, with social compensation actions. The civil proposal, on the other hand, is to promote regional strategies to fight the causes of poverty rather than simply palliate it.
So far the civil society delegates to the new consultative group have been unable to coordinate effective advocacy actions. With few exceptions, representatives from the worker and peasant sectors do not even know what the PRS is. At the same time there is a need to do more work on the regional proposals that are being offered as an alternative. So far they have tended to accept the official version’s indices, strategic areas, etc., with only the approaches differing. Even the concept of “region” is still being worked out. Perhaps what the official strategy and the civil strategy really share is the lack of any nation-based project. Neither vision offers a model of society that is significantly different from the current one.
The need for more taxesThe impact of the neoliberal adjustment model on Honduran families is still triggering social disintegration. It is creating a country oriented toward blotting out the traditional expressions of solidarity among the population and installing—even within the family—indifferent individualist attitudes based on the idea of “every man for himself.”
Government measures such as the Financial Equilibrium and Social Compensation Law have only ended up accentuating the problems, giving more taxes to a state that spends 11% of the GDP on maintaining a bureaucracy that is for the most part excessive, costly and ineffective. The tax burden is already heavy, with tax income representing 18% of the GDP, which business sectors consider to be already on the limits of tolerability.
The government insists that it has no intention of establishing new taxes, but there is intense pressure to secure more resources to cover current expenditure. The municipal governments handle their own tax policies and the mayors of San Pedro Sula and Tegucigalpa use taxes to maintain costly media campaigns to feed their own political ambitions. The growing tax harvest is helping both the central government and certain municipal governments cover their costs at the expense of sinking the economy even further into a recession that has been affecting us for years now.
A directionless economyHonduran families are being affected by unemployment, underemployment, job insecurity, low wages, the daily devaluation of the lempira against the dollar and rising prices for products in the basic basket of essential goods. The low average level of schooling among Hondurans (4.5 years) and family disintegration, with a consequent increase in single mothers, have implied women’s growing incorporation into the informal and formal job markets, where they are subjected to poor pay, exhausting work days and limited or nonexistent labor guarantees.
In its first year in office, Ricardo Maduro’s government team concentrated on promoting the maquiladora free trade zone assembly plants, tourism and a housing construction program, which it was calculated would generate 50,000 new jobs a year. But so far the prevailing feeling has been that the country is drifting in a climate of economic uncertainty amid indecision and unfulfilled expectations. The new government was unable to reach an agreement with the IMF in its first year. The main unachieved IMF goals were of a fiscal nature, such as the lexpenditure level dedicated to central government wages and net national financing for the public sector. The discrepancies between the government and the IMF are not really fundamental in nature; they have more to do with form and time periods. Both agree on the need for the mass layoff of pubic employees, but while Maduro is worried about the political price he would have to pay for such a decision, the IMF is only interested in numbers. It is most probable that the government will sign its letter of intent with the IMF in the first half of 2003 and that the citizenry will not be involved in the process.
We have the means to overcome povertyIt is evident that the economy was already in a bad state when Ricardo Maduro inherited it from his predecessor Carlos Flores (1998-2002), but the new team did very little to respond to the situation last year. With the exception of certain areas, productive activity continued to fall in the agricultural and industrial sectors, though inflation and monetary devaluation remained under relative control.
Public finances are being affected by the drop in international coffee, banana and shrimp prices. The authorities attribute part of the crisis to the economic deceleration in the United States following the September 11 attacks, but the Honduran recession dates back further and is becoming chronic. Immediate official hope is deposited in the recovery of the maquiladora sector, an improvement in coffee prices, growth of the tourism sector and, above all, an increase in the family remittances sent home by Hondurans working in the United States, but they face the end of the third extension of their Temporary Permanent Status in 2003. This boom in emigration to the North has been stimulated by the state itself. Even more dramatic than that is the fact that this country has the means to pull itself out of poverty, but cannot agree on how to go about it.
This contradiction is most obvious in the area of agriculture. The rural sector as a whole is immersed in a serious crisis, from which the limited Law of Solidarity with Agricultural Producers, with its slow execution mechanism and its failure to provide the expected credit assistance to small and medium producers, could not extract it. Farmers’ expectations were not met in 2002 and their demands are still pending, including peasant access to land, a just aspiration to which only the market is currently “responding.” Official policy has concentrated on issuing title deeds for lands already adjudicated or for community lands. However, despite the difficulties involved, agriculture still accounts for most of the work force (35%), although to a much lesser degree among women (6%), since they find greater possibilities for incorporation in urban activities.
The same old deceptionAs far as the political panorama is concerned, the first year’s gloves are now off and the air is thick with the smell of confrontation, as proved by the Liberal Party’s critical analysis of the Maduro administration. The Liberals demanded that the government do everything that they failed to do during the previous eight years when they were in power. But then politics in this country has always been more motivated by the plain calculationof interests than by scruples or ethical considerations.
The National Party has a straight majority in the National Congress with which to counter this “opposition,” providing it can maintain the alliance it signed with the Christian Democracy bench and with Filiberto Isaula, a parliamentary representative who deserted the ranks of the Democratic Unification Party. That alliance has consequences that go beyond the simple matter of congressional voting, and iinclude:
* A relative state of parliamentary governance, making it possible to push through decisions that only require a straight majority.
* Reduced influence of the other parties, particularly the minority ones, which annuls the positive effect of “split-ticket voting” in the last general elections, when the electorate gave the National Party control of the executive branch but denied it a legislative majority.
* Making political negotiations (alliances and temporary agreements) more important than the political will of society.
* The increasing perception that the electorate is becoming frustrated with democracy.
Will he see out his term?The Maduro government’s relative control of parliament does not guarantee it a stable administration, however. Politically speaking, it is facing very strong contradictions and power conflicts even within its own party, particularly with Tegucigalpa’s mayor, Miguel Pastor, who is himself looking to be the next President. Pastor is gradually gathering the National Party’s non-Maduro majority around him.
In any case, if the first year was difficult for Maduro, the three remaining ones will probably be no less conflictive. In a private meeting in November 2002, representatives of the intellectual opposition group Civic Forum directly informed the President of the growing impression that he would not see out his term in office. He answered with an enigmatic smile, which did nothing to dissipate the feeling of uncertainty.
If he is to avoid any unexpected risks, Maduro will have to promote a broad policy aimed at building alliances, such as he organized during his electoral campaign. But linking up with one of these strategic allies, the organized citizenry, does not appear to be in his plans. Right from the start he filled his Cabinet with bankers who do not even understand the representative nature let alone importance of civil society. They rather view it as a continuation or recycling of their political adversaries of the eighties.
It did not take long to notice that Maduro’s capacity for dialogue with civil society when he was a candidate was sharply reduced after he became President. And although his offices issue sporadic invitations to meetings, the results are increasingly less credible.
Honduras is no longer the hacienda of a fewIt is no longer sustainable to govern Honduras as the same old hacienda in the hands of a few, given the existence of civic initiatives in many local or regional governance experiences, such as advocacy work, environmental protection, popular communication, literacy work, infant and maternal health, HIV-AIDS prevention, sustainable agriculture, etc.
A good point of convergence between the government and the citizenry in 2003 would be the demand for state decentralization. To date, the relationship between the government and the population has been predominantly top-down and never vice-versa. The decentralization favored by the state has been understood more as privatization or concessions for exploiting strategic resources such as water than a mechanism to strengthen civic participation or co-management. At the grassroots level of society, however, efforts are still being made to mobilize communities under different organizational forms, including associations, and there are many positive experiences whose value transcends the local sphere.
The government’s need to find civilian interlocutors will be even more indispensable in 2003, a year already charged with high levels of social conflict, once initial expectations are adjusted with a good measure of realism. The conflicts with secondary school teachers and coffee growers will remain latent, although it is evident that the conflictive agenda will increase and become more heterogeneous.
A grassroots leadership vacuumThis year will see an increase in protests against the Free Trade Area of the Americas (FTAA), with the Popular Bloc heading up a civic reaction that while necessary is still indequate in the face of what has already been consummated. The Popular Bloc is incorporating other privatization-linked demands into its agenda and represents an important advance by breaking with the tendency of organized sectors and their leaders to mobilize and define their identity around wage demands, defense of professional interests and conquests of or demands for quotas of power.
This traditional way by which the grassroots organizations position themselves in the national reality has created an almost insurmountable distance between them and the ordinary citizens who make up the majority of the population. Hardly anybody now pays any attention to a rebellious discourse that rails against the system, the FTAA, Plan Puebla-Panama, privatization, the impositions of the international organizations or corruption and impunity if such general proclamations do not establish binding links with the daily injustices experienced by the population.
In addition to answers to its problems, the Honduran population is seeking an alternative national channel through which to express its discontent, protest and proposals. No such channel currently exists. On the contrary, there is a grassroots leadership vacuum at the local level. It should also be recognized that no group is capable of channeling so many different demands at the same time because the existing organizations do not represent all of the country’s grassroots social sectors. Nor have they been able to come up with the internal unity of criteria and common political lines needed to deal coherently with the different problems.
The “bank breakers”There is a need to highlight the problem of corruption, more specifically the one expressed in the collapse of several banks. Honduras is living proof that the best way to rob a bank is to found one. The year started with President Maduro promising to jail those responsible for bankrupting various banking institutions in a national, regional and international context that favors the fight against corruption.
The banks and financing companies in question emerged at the beginning of the nineties when former President Rafael Leonardo Callejas eliminated all of the obstacles to the creation of financial intermediaries. Between 1990 and 1994 licenses were approved for over 20 banks and finance companies, most of which were owned by people linked to the political elite of the National and Liberal parties.
Although disproportionate in a country with no capital market, the multilateral financing institutions did not oppose this initiative because they were busily pressing for the complete liberalization of the economy as part of the neoliberal adjustment programs. At the time, Ricardo Maduro was president of the Central Bank, the institution that was assessing the different proposals for opening up the banking sector and was responsible for guaranteeing and controlling their operations.
The current panorama includes certain changes. First, the international financing institutions are publicly declaring their support for the fight against corruption—as demonstrated in Central American by the case against former Nicaraguan President Arnoldo Alemán. Second, President Maduro urgently needs a popular internal crusade to boost his low profile, and the bank corruption issue is just waiting to be politically exploited. The population is outraged that the state is earmarking over 4 billion lempiras (around US$200 million) to cover part of what the bankers robbed with total impunity.
Over 500 million lempiras from Hondutel, the state telecommunications company, are being used to capitalize the Deposits Insurance, a mechanism being used to protect depositors from CAPTAL, one of several banks that collapsed due to acts of corruption. This mechanism, which compensates depositors up to a ceiling of 150,000 lempiras per person, started up in 1999 and will come to an end in 2004.
The millions of lempiras in the public budget earmarked to cover what amounts to robbery in the private banking sector is in stark contrast to the shortages in the country’s social security system, particularly in education and health, where the state’s manifest incapacity to attend to the population’s demands is all too clear.
The tip of an icebergThe insolvency of the banks and finance institutions was not a sudden development, but rather something that had been brewing for several years with the authorities’ full knowledge. The Bank Superintendent’s Office, predecessor of the National Bank and Insurance Commission, did not fulfill its role and in fact acted in complicity with those responsible for what happened. From 1992 to 2002 everyone in the Central Bank management and the Bank Superintendent’s Office turned a blind eye to the brazenly irregular or fraudulent practices that were going on.
The authorities left depositors unprotected, thus turning themselves into accomplices of the scams of bankers who acquired not only state bonds, but also “shares” in party politics by financing National and Liberal election campaigns and buying seats in the National Congress and the discredited Central American Parliament (PARLACEN).
A whole range of people are incriminated in the bank collapses, from former government ministers to presidential advisers and PARLACEN representatives such as Víctor Bendeck, who was proposed by the Liberal Party tendency headed by Jaime Rosenthal Oliva.
The cases so far documented by the Bank and Insurance Commission only refer to three collapsed banks. The general impression, however, is that with a few notable exceptions the entire private financial system is riddled with irregularities, starting with the fact that certain bankers have been disgraced while others have not.
What has happened offers a number of lessons, including how so many of the Honduran wealthy capitalize their economic power. Of course the bank collapses are just the tip of the iceberg and all of those involved have political connections and investments that explain the impunity they have enjoyed for many years.
What’s behind the fight against corruption?Despite the visible evidence, the real magnitude of the corruption in the financial system has barely been glimpsed and the questions on everyone’s lips are how long this scandal will last and what its real objectives are.
Some claim that the revitalization of the Bank and Insurance Commission and the National Anti-corruption Commission (CNA) is only temporary and responds to two immediate objectives: facilitating the signing of the new letter of intent with the IMF and providing political oxygen to the Maduro government, which was significantly weakened by a first year in office criticized by most of the citizenry.
Maduro and his main collaborators claim that their “political intention” is to set a precedent in the fight against corruption and to clean up the financial system. But the mere fact that this government is so influenced by bankers—most of its ministers come from the banking sector—has generated doubts about the real intentions behind its claims that it will investigate and try all corrupt bankers. It is still not clear who will end up with the main assets of the collapsed banks and which financial sector will control the country at the end of the process.
What is clear is that this disaster implies a very high cost for the Honduran people, who have already had to pay at least 4.2 billion lempiras to bail out those involved in the corruption: 1.68 billion for Bancorp, 817 million for Banhcreser, 1.3 billion for CAPITAL and 422 million for other banking institutions.
It is possible that the odd banker will end up in jail, but it would be wrong to assume that such actions would imply any permanent correction of the way financial capital is managed in the country or a decided start to the fight against corruption. Reaching such an important turning point would need more than the President’s simple “political intention.”
Manuel Torres is a journalist and member of the editorial council of the Honduran edition of envío.
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