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Central American University - UCA  
  Number 144 | Julio 1993



Neoliberal Measures Cause New Problems

As in other Latin American countries there is growing in Honduras a generalized cry for the punishment of corrupt officials.

Mario Posas

On April 29, the Central Bank of Honduras decided to raise its local currency reserve rate by two points: one in May and the other in June, a jump from 34% to 36%. These reserves amount to a fund that a country's central bank forms with a percentage it retains from the private banks' daily income. In Honduras's case, 36 of each 100 lempiras entering each private bank must now be transferred daily to the Central Bank, making it the country with the highest reserve rate in Central America, according to local reports.

The objective of the measure was to reduce the local currency in circulation, and thus brake the upward tendency of the dollar. During the entire second half of 1992, the exchange rate of the lempira was stable at 5.95 per dollar, but by the end of April 1993, when the Central Bank made its decision, it had dropped to 6.27. But even with the measure, the tendency is continuing; today the rate is hovering just over 6.30.

In other countries, this movement in the local currency's exchange rate could seem insignificant, but not so in Honduras, where there is no tradition of devaluations and where a good share of what is consumed in Honduras is imported or contains imported components. Furthermore, the government is simultaneously testing out a strict wage control policy, which puts an even greater strain on the growing gap between wages and the cost of living.

The business sector was the main one to protest the increase in banking reserves. Adolfo Facussé, president of the National Association of Industrialists, called the increase a "damaging protectionist measure, negative for investment and production." Sidney Panting, director of the Bank of the Country (a private bank founded recently with local capital), argued on behalf of his colleagues that the measure would take some 100 million lempiras out of circulation, which would in turn restrict credit, investment and production in general. Mario Argüello Lacayo, executive director of the Honduras Council of Private Enterprise, which represents the inner circle of Honduran business, added that the reserves hike would "increase interest rates and could touch off an inflationary spiral."
Argüello Lacayo's prediction, made on April 30, proved prophetic. On May 21, the private banks increased interest rates by 3-4 points, hitting the 25% mark. This was a harsh blow to the hopes of local business, particularly the industrialists, who have been pushing for a reduction in interest rates, the reserve rate and even energy and port costs to improve their competitive position in the new Central American economic integration. They hold that these tax burdens, which they feel are extremely high, put them at a clear disadvantage vis-à-vis industrialists from the other Central American countries.

For the same reason, these industrialists have also requested state support to begin modernizing their factories. But President Callejas, a staunch advocate of free competition and Central American integration, has ignored their demands, accusing them of not wanting to leave the security of state protectionism.

Looking for scapegoats, the government's economic Cabinet accused the privately-owned exchange houses of being largely responsible for pushing the dollar price upward, since they had enjoyed a fair amount of flexibility in establishing prices for the sale and purchase of dollars. On May 20, the central Bank put the clamps on these lucrative businesses--which, ironically, were established due to the impetus of the Callejas administration's neoliberal measures. From now on, they must sell 20% of the dollars they receive from the public to the Central Bank and will not be allowed to set the dollar price at their discretion.

The exchange house owners were understandably upset by the Central Bank's decision to regulate, supervise and control their activities, since they handle about 28% of the dollars traded on the local market. And while it is true that they have speculated with the price of the dollar, the root problem is a real scarcity of foreign exchange.

This scarcity, in turn, is partly due to the government's free market policy and the pattern of conspicuous consumption among those who benefit from the neoliberal measures. It is also linked to the drop in prices and demand for Honduras' main export products, the requirements of an industrial sector that must import capital goods and industrial raw materials, and the drain represented by foreign debt payments.

Fuel Touches off Another Spark

On May 12, businessman and Minister of Economy Carlos Chain made two more upsetting announcements: a new increase in fuel prices and their immediate "partial liberalization." The latter means that any increases in petroleum product prices over the next few months will be made, after prior consultation with the government, by representatives of the two enterprises that import these products--Texaco, a local subsidiary of the transnational, and the Petroleta Company, funded by local capital.

He also announced that, as of August, petroleum product prices will be totally liberalized. This means that the state will completely abstain from intervening--with either controls or subsidies--in the setting of these prices. They will be set by the oligopoly that controls fuel imports, in accord with international price fluctuations. For now, the two petroleum importing companies decided to increase gasoline prices by one lempira, which makes it slightly more expensive in Honduras than in Costa Rica and El Salvador.

These two measures have generated intense controversy, in which the country's different social sectors at least all agree that they are a "new aggression against people's pocketbooks." Eduardo Facussé, president of the Tegucigalpa Chamber of Commerce and Industry, emphatically rejected them because they place the country "at the disposition of the transnational corporations," and because they would increase inflation, since businesses would have to transfer those increases to the final price and thus affect the consumer. He also pointed out that the measures form part of the commitments by which the Callejas government ingratiates itself with the international Monetary Fund, adding that the government is no longer serving as regulator of the national economy, but is turning into "the coyote lying in wait for the rabbit"--in other words, the Honduras people.

President Callejas, who recognized that the increase in gas prices is a new blow for the already weak economy, has rejected Facussé's comments, arguing that the impact of the measures should not be that strong, since diesel--the fuel most used for transporting cargo and passengers--will still be subsidized. To avoid protests by public transportation users, Callejas ordered subsidies for the collective taxis, which recently received governmental authorization to increase their rates.

The measures affecting gasoline prices have also generated tremendous controversy among the presidential candidates of the country's preeminent political parties. Carlos Roberto Reina, candidate of the opposition Liberal Party, took advantage of the situation to accuse the government of impoverishing the great majority of the Honduras population through its neoliberal economic adjustment program. He called on voters to issue a protest vote against the candidate of the governing National Party. Meanwhile, Oswaldo Ramos Soto, the National Party's own candidate, has publicly acknowledged that the increase in gas prices and the eventual total liberalization of the petroleum product prices could negatively influence his party's electoral possibilities. Ramos Soto has urged the government not to let itself to be overly "impressed by the IMF."
Ramos Soto had been publicly declaring that the economic adjustment measures had come to an end, but the new liberalization of gasoline prices gives the lie to his propaganda. To match his discourse to the new tune that international financial organizations and some United Nations agencies have recently begun to sing, Ramos Soto announced the hour of social development and investment in human resources. What remains to be seen is what impact these most recent measures will have on the mood of the voters who go to the polls the last Sunday of November. It is likely to be very significant in the urban areas, and far less so in the rural sector.

The Ad-Hoc Commission

The different sectors of Honduras civil society have continued questioning the armed forces, demanding that the DNI-- the state's internal security forces--be done away with and the military's budget and size be reduced. Demands have also been made for demilitarization of the police--which has been under military control since 1963--and of other state institutions under military control, including the National Board of Population and Immigration Policies, the General Aeronautics Board, the National Geographic Institute and the Honduran Telecommunications Institute.

Business interests are also asking that the military brake its growing involvement in the country's economic activity, which has turned the armed forces into owners--as incorporated institutions--of a whole array of enterprises. These include a clothing factory, a shoe and canvas factory, an insurance company, a bank, a funeral parlor, a radio station and one of the two cement companies in the country, which the military received as part of a very questionable privatization process by the state. All sectors of society are aggressively demanding an end to the impunity that the Honduras armed forces have traditionally enjoyed.

To help get the military out of this confrontation, Callejas decided to institutionalize his way out of its least crude aspects. On March 1, he created an Ad Hoc Commission, made up of representative from the executive branch (government officials and representatives of the Armed Forces' High Command) members of the country's legally registered political parties, media representatives and, in representation of the Catholic Church, Oscar Andrés Rodríguez, Archbishop of Tegucigalpa. Bishop Rodríguez was named coordinator of this commission, which was given 30 days to make recommendations regarding the DNI and the country's legal system.

On April 12, in a special broadcast over all radio and television stations in the country, Bishop Rodríguez read the commission's final report, in which it recommended the creation of a Public Ministry and a Department of Criminal Investigation to replace DNI. The Public Ministry would be headed by an attorney general, who would oversee respect for human rights and other constitutional guarantees, investigate crimes, initiate legal action against public servants who break the law and verify protection of the country's ecosystem and ethnic groups.

This attorney general would enjoy all rights and immunities pertaining to the Supreme Court justices and could only be remove from office by the National Congress. The new Department of Criminal Investigation (DIC) would also be under the attorney general's authority.

In its report, the Ad Hoc Commission took no position--though one had been expected--on transferring the police force from military to civilian authority. It instead recommended that this decision be made by a National Study and Advisory Group to the Police Corps. This group would collaborate in evaluating all police personnel, as well as in preparing a program for their technical, civic and moral training. It would also recommend the changes needed in the organization and functioning of the police and prepare a roster of positions and salaries as well as an evaluation program for once these job descriptions are decided. And, finally, it should also develop a position about the "definitive incorporation of the armed forces into the state apparatus."
In terms of the legal system, the Ad Hoc Commission proposed the creation of a Committee of Judicial Integrity, to be entrusted with investigating charges of corruption and illicit enrichment against judges and other judicial system employees, and with drawing up an obligatory Code of Legal Ethics. The Ad Hoc Commission also proposed the creation of a Technical Judicial Auditorship, which would make an inventory of all the trials and legal cases that are paralyzed or whose paperwork has not been finished, so as to speed them up. The slowness with which cases are heard and sentences issued is notorious in Honduras. To insure that all citizens become involved in the respect for and application of the law, the Ad Hoc Commission also recommended the creation of a legal education program for the grassroots sectors. The Commission took a stance against military impunity and called for the prompt clarification of crimes that have convulsed Honduran society, improvement of the Honduran penitentiary system and a strengthening of the Office of the Human Rights Commissioner.

Callejas Responds Well

President Callejas publicly committed himself to supporting all of the Ad Hoc Commission's recommendations and has so far complied. He recently appointed a number of high level legal scholars to make up the committee that is to draft the decree creating the Public Ministry, as well as members of the National Study and Advisory Group to the Police Corps. In mid-March, at the request of the Ad Hoc Commission, Callejas appointed a committee to intercede in the DNI.

The Ad Hoc Commission’s report has touched off hot debate. Those who support it hold that, if its recommendations are correctly applied, they will bring about a substantial improvement in the police corps and in the administration of justice. Its critics agree, but reproach the commission for not having seized the opportunity to make more far-reaching improvements. The commission has also been criticized for not taking a position on the subject of demilitarizing the police force, as well as for not creating a clear demarcation line between the DNI and the new DIC. Many fear that the DIC will essentially be a DNI purged of its most repressive and brutal personnel.

The most radical criticism holds that the commission's report does not question the militarist ideology that has turned the Honduran armed forces into a haughty and arrogant group which envisions itself as the savior of national economic development. The danger of their activities takes on a new dimension in light of recent events in Guatemala which remind us all that coups, supported or led by armies, are a long way from disappearing definitively from the Central American political scene.

Scratching Corruption's Surface

The Ad Hoc Commission is not the only such body created by President Callejas. On January 13, he created two committees within the framework of a social concertación meeting that brought together representatives from the Cabinet, private business and worker and peasant organizations linked to the government. The first committee was dubbed the Economic and Social Concertación Forum and the second, the Executive Branch Supervision Committee.

The function of the Economic and Social Concertación Forum is to reach agreements on matters of political and economic policy between the state and the country's main productive sectors. To date, the forum has led to no concrete results, although business sectors have been unsuccessfully pressuring for some.

For its part, the Executive Branch Supervision Committee--created to fight government corruption--presented a report on corruption in Customs on May 17, which was broadcast nationally on al radio and television stations. Giving the names of those involved, the report revealed tax fraud and illicit acquisition of wealth on the part of high-level government officials. To highlight the scandalous nature of this corruption, the commission contrasted the low salaries government customs officials receive with the luxurious homes and vehicles they own. Thus it brought to public light what has long been an open secret. All Honduras know that winning a customs post in their country--long a place where corruption, contraband and tax fraud have been tolerated and even encouraged--is a ticket to a virtual free ride on the government's back.

President Callejas, who appeared publicly along with the Executive Branch Supervision Committee, pledged to fire all involve officials and to date has done just that, which has affected the administrators and deputy administrators of the main customs posts throughout the country. The most influential organizations in civil society are joining public opinion to demand that the corrupt officials be brought to trial and sent to prison. If this happens, it would be a significant precedent for the country's public administration. Until now, audited state institutions have never been taken to court--and much less has any important official ever served a prison sentence. Public opinion today demands an investigation of the wealth garnered illicitly by high government officials--civilian or military. In Honduras, as in many other Latin American countries, there is a growing clamor that corrupt government officials be punished.

And the Grassroots Movement?

The Honduran grassroots movement, made up of worker, peasant, community, student and teacher organizations, celebrated May Day with its usual enthusiasm. there were marches, slogans, banners and speeches in the streets and public plazas of the country's key cities, but, as happened last year, the celebration was a divided one. the organizations affiliated to the pro-government General Workers' Federation (CGT) celebrated separately from those identified with the Platform of Struggle for the Democratization of Honduras.

The organizations linked to the Platform--the most ambitious unifying project that has emerged in the country to date--criticize the neoliberal economic model being imposed by the international financial institutions and accepted by the government. They say the standard of living is much worse than five years ago. The Platform calls for elimination of state corruption, demilitarization of society, control of inflation and a general wage adjustment. It also demands that medicines be provided to public hospitals and that the government cease promoting and legitimizing parallel leadership structures in grassroots organizations.

The local press estimated some 10,000 protesters marching under the banners of the Platform for Struggle for the Democratization of Honduras, while the government-linked CGT organized a demonstration of only about 500. While the two celebrations demonstrated that--despite enormous problems and scant visibility through much of the year--the Honduran grassroots movement is still alive, the division in recent years reveals the acute problems that are shaking up the movement internally and keeping it from acting as a real force within Honduran society. The division is also one of the most important indicators of the success scored by the current government's anti-grassroots and anti-union policies. Being realistic, it must be said that there is no real hopeful sign on the horizon today, even though the crisis wracking the Honduran grassroots movement is finally beginning to be overcome.

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