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Central American University - UCA  
  Number 147 | Octubre 1993
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Honduras

Beans on the Front Burner

The free market preached with priestly unction by the government has found problems with the humble red bean, principal source of protein for the Honduran poor, who thanks to the structural adjustment now number 8 of every 10 people.

Mario Posas

The Callejas government recently devalued the lempira, Honduras' local currency, by just under 9% through the official mechanism known as the Customs Value Factor (FVA), by which the state taxes imports.

When the severe neoliberal structural adjustment program was kicked off in March 1990, the FVA was set at 4.10 lempiras per dollar, but by the end of 1990 it had stabilized at 5.40. Then, in November 1992, it was raised to 5.70 lempiras per dollar, where it remained until July 1993, even though the price on the street continued to rise. On June 24, the Central Bank of Honduras announced that, starting July 1, the FVA would be 6.20and that, as of August, it would be set according real fluctuations with respect to the dollar. The increased cost of living that accompanies these devaluations has put the humble bean on the front burner of political debate in this election year.

Erratic Exchange Rate

The periodic rise of the FVA has been an important source of state income. According to estimates by Eduardo Facussé, President of the Tegucigalpa Chamber of Commerce and Industry, the most recent change in the FVA will provide the government between 150 and 200 million lempiras before the end of the year. But it has also been a source of inflation for a country where almost everything is imported: machinery, equipment, industrial raw materials, medicines, food and luxury consumer goods, among many other items.

The announcement of the new FVA increase caused the dollar price to shoot up in the money exchange houses and on the black market. This continuing tendency is such that some observers of the national economy predict that the dollar could rise to 10 lempiras before the end of the year.

The devaluation was only one of a series of measures taken by the Central Bank, which including the requirement that importers prove they have purchased their hard currency from legally established institutions. Some importers opposed this regulation, which is an attempt to reduce imports and break the black market, on the grounds that it goes against the free market spirit that the government promotes.

A "Chicago Boy" Back at the Bank

Although the FVA increase was intended to increase state income and reduce the fiscal deficit, the government is unwilling to accomplish these ends with a stronger devaluation, given the social cost of such a measure in this campaign year. Even so, the level of the devaluation and its immediate repercussion on the cost of living has become the central theme of the opposition parties' campaign, which uses it as evidence of the failure of the government's structural adjustment program.

To confront this uncomfortable situation, President Callejas and Oswaldo Ramos Soto, his party's current presidential candidate, decided to return Ricardo Maduro to the presidency of the Central Bank. Maduro, an economist, exporter, young and prosperous businessman and good social communicator, is one of the designers of the neoliberal plan as well as one of its most eloquent defenders. He was made president of the Central Bank of Honduras after Callejas took office, but resigned at the end of May to run for the National Congress. Now he would have to return to address the delicate monetary situation. The government party, which tries to sell the image of its leaders as young, aggressive, experienced and triumphant, also needed him back to reinforce that image.

Under Maduro's renewed leadership, the Central Bank announced emergency measures to control the dollar's rising tendency. The most important was raising bank reserves from 35 to 42%, a measure that would take some 360 million lempiras out of circulation. It also reduced credit to the central government by 489 million lempiras and announced that it was closing nine money changing houses and fining their owners close to 250,000 lempiras for violating Central Bank regulations on monetary use. Only five were actually closed and fined. Another measure was to reduce by half the legally established periods which varied between 30 and 120 days for exporters to repatriate the currency they had earned through international market sales.

Maduro's measures not only slowed the dollar's rising tendency but, at least in the short run, halted it. Responding to pressures from the private banks and businesspeople, the Central Bank later had to reduce the reserve requirement somewhat, allowing the private banks to recover the use of 150 million lempiras. But the difference is too small to have much impact on credit availability for production.

Stability somewhere between 6.20 and 6.70 lempiras per dollar is ideal for the government. In addition to Maduro's measures, the entrance into the country of some $550 million from exports and loans recently authorized by international financial organizations will help maintain this.

The Price of Success

The economic and social cost of this monetary achievement is disastrous for the national economy, as the sectors most affected by the measures point out. According to financial sector representatives, the reduction of credit for production investment will generate more unemployment.

The Honduran Private Enterprise Council (COHEP), the umbrella organization of Honduras' business sector, which was worried about the rising tendency of the dollar against local currency, supported the measures at first. But, just days later, echoing complaints from bankers and industrialists, it announced its opposition to the measures and demanded their immediate suspension.

National Industrial Association president Ardolfo Facussé ridiculed the measures. "Trying to scare away the fox that threatened the chickens," he declared, "the government set fire to the henhouse." Despite the pressures, the monetary authorities reiterated that the measures will be suspended only when the dollar's rising tendency has been fully controlled and the exchange rate definitively stabilized.

Observers have doubts about the plan's medium term perspective for success, since it addresses problems that result from applying neoliberal economic measures in a country that imports almost everything it consumes. The import sector of the Honduran economy is stronger than ever, particularly in the area of luxury goods for those benefiting from the structural adjustment and those profiting from laundering drug traffic dollars.

Beans Worth their Weight in Gold

The open market blessed by the government has not only created headaches with the dollar's exchange rate. It has also created problems with beans, the main protein source for low income Honduran families now 8 out of every 10 thanks to structural adjustment.

At the beginning of this year, the standard bean measurement (5 pounds) cost 6 lempiras. By mid May the price had risen to between 13 to 15 lempiras due to their scarcity in the local market. At the beginning of June, the price reached 20 to 22 lempiras, the highest in the country's history. It has now hit 25 lempiras.

This dizzying increase in the price of one of the basic elements of Honduran's diet put beans at the heart of the electoral debate. This also happened in the last campaign, won by President Callejas. One of the most crucial publicity gimmicks then was a graphic illustration of the drop in the amount of beans that Hondurans could consume due to the high cost of living and inflation. Rapid measures were required to avoid history repeating itself.

At the beginning of June, the government purchased 700,000 pounds of black beans from El Salvador. This became the occasion for some corrupt officials to pull off a stunt that has so far gone unpunished: while the beans were being transported from the Salvadoran border to local warehouses, they were changed for old black beans, which were as hard as fossils. Housewives who bought them complained that they took six to seven hours to cook. The other problem is that Hondurans usually do not like black beans, and prefer exclusively red beans.

The black bean fiasco only stimulated the wave of discontent among consumers, who complain daily about the uncontrollable increases in basic consumer prices. The government was forced to import red beans from Costa Rica and sell them at subsidized prices. The long lines that formed due to the accumulated bean shortage prompted Carlos Montoya, a leader of the opposition Liberal Party, to accuse Callejas of "cubanizing" Honduras. That first shipment of Costa Rican beans sold out in a few days and the government had to import more. The importation of red beans concludes in August, when the national harvest is expected.

In another calculated but desperate attempt to get basic grains out of the electoral debate, President Callejas went on national radio and television to announce the sale of bags containing 5 lbs of corn, 4 lbs of beans and 3 lbs of rice for the modest price of 12.20 lempiras. The opposition denounced the measure as contradicting Callejas' neoliberal posture, and a mere attempt to improve the image of the governing party's candidate.

Virtually everyone agreed that the bean crisis was a disaster, to say nothing of the measures employed to control it. Only the minister of natural resources denied the disaster, claiming that the bean shortage was basically due to climatic conditions.

Perhaps the most disastrous part of all was that the crisis unleashed an intense debate about government agrarian and food policies in general. Many issues are cited, among them: 1) governmental disinterest in, or inability to put together, a program that promotes both exports and food security; 2) the disastrous impact of structural adjustment and of the wide sweeping agricultural modernization law, particularly on food production; 3) government ineptitude in failing to keep a strategic basic grain reserve to guarantee Hondurans' minimal food needs; and 4) the need to establish guaranteed prices to basic grains producers and offer them subsidized credit. Even the government's free trade policy came under the lash, since it means that beans produced in Honduras are sold in Guatemala, El Salvador and Nicaragua, leaving the local market unstocked.

The rise of the dollar against the local currency, together with the rise in bean prices to record breaking levels and the state's interventionist measures to counterattack these increases, put into doubt once again the neoliberal thesis of the Honduran "Chicago Boys." The strongest critics said that the drastic state intervention in these two areas contradicts the neoliberal dogma based on state non intervention in the economy. The most impassioned stated that the economic model has once again proved itself to be a catastrophe that has only brought "an increase in the cost of living, a reduction of exports, and massive impoverishment of the population."

The Campaign's Final Stretch

Honduras is experiencing a sort of permanent electoral campaign. It begins the moment a newly elected President takes office, as the next batch of presidential aspirants begin to make themselves known for the post that will be left vacant four years hence.

These ongoing campaigns are illegal, according to the electoral law, which establishes that electoral campaigns should begin three months before the internal party elections to choose their own candidates and six months before the general elections. But no one with political decision making power is interested in holding to the law, including the National Elections Tribunal, which is charged with monitoring observance of the electoral law and the law of political organizations. This organization is highly politicized and made up largely of political party representatives, who receive instructions from their leadership and can easily be removed if they do not comply.

On the night of May 27, the Elections Tribunal, as required by law, formally opened the campaign for the November 28 elections. On that date, Hondurans will elect the President of the Republic, three Designates to the Presidency (or Vice Presidents), 128 representatives to the National Congress and an equal number of alternates, 20 representatives and their alternates to the Central American Parliament and 291 municipal mayors.

The principal presidential contenders in November are: Carlos Roberto Reina, candidate for the Liberal Party; Oswaldo Ramos Soto, for the governing National Party; Olban Valladares, Innovation and Unity Party (PINU); and Orlando Iriarte, Christian Democratic Party of Honduras (PDCH). Because of the high cost of the campaigns and the weak electoral power of the PINU and the PDCH, the campaign is dominated by Reina and Ramos Soto.

Electoral campaigns in Honduras are financed by public resources parties receive 5 lempiras for each voter in the last elections as well as by contributions that electoral aspirants are forced to pay and by the support offered from businesspeople, who later receive official concessions in exchange if the horse they bet on wins. A good amount of the huge amounts obtained is invested in contracting publicity specialists and in creating and paying for public announcements on posters and in the press, radio and television.

Many Words, Little Content

The campaigns of the Liberal and National Parties those most rooted in the electorate are long on superficiality. Each of the two main candidates has laced his campaign with cheap smear attacks and biting phrases against the other. As an example, Reina tried to ridicule Ramos Soto saying that he dressed up as a woman to watch the famous eclipse two years ago. Ramos Soto defended himself by saying that he had worn bermuda shorts, which Reina could never wear for fear of showing his "cañafístolas" (derisive slang for a person with long skinny legs).

Publicity agents have instructed Ramos Soto to emphasize the age difference between himself and Reina. Lawyer by profession and a university professor like Reina, Ramos Soto is about to turn 50, while Reina is over 60. Referring to his relative youth, Ramos Soto has said that Reina would not endure a game of soccer, while Reina responded that "this gentleman criticizes those who are older because he thinks he's young, even though he's about to turn 50. Since he feels so young he jumps in the river with his clothes and shoes on." That reference is to a TV campaign ad where Ramos Soto went into a river fully clothed to talk to a group of housewives washing clothes. Both Ramos Soto and Reina have television ads in which they appear making promises of a better future to a crowd of young people. All of this is to win the vote of more than 300,000 first time voters who will be the ones to choose the victor, since polls to date show both candidates with similar percentages among traditional voters.

Another element that characterizes the campaign of the two majority parties is the plagiarism of familiar musical themes. This has always happened, but this year the new twist is that the themes are taken from television soap operas. The National Party has adopted the theme from the popular Brazilian soap opera "Pantanal."
The aggressive and "grassrootsy" character of Ramos Soto's campaign has allowed this governing party candidate to downplay his relationship with the military and paramilitary groups associated with the "dirty war" at the beginning of the 1980s, when so many popular leaders disappeared and were murdered. In those years, Ramos Soto was the leader of known far right groups that made the National Autonomous University of Honduras, where he was rector for six years, their primary center of operations.

Serious debate about the country's economic and social problems, aggravated by structural adjustment, has been almost totally absent in the campaign. The effects of structural adjustment, the absence of a realistic alternative proposal by the Liberal Party candidate and the demagogic position of the National Party candidate are all criticized outside of the campaigns. In some forums, Ramos Soto has been forced to criticize the measures that his party has taken as "inhuman," but in others he has shown his agreement with them and even emphasized his willingness to continue them.

The economic policies imposed on the country by the international lending agencies have become a headache for both presidential candidates. To hide their essential complicity, both offer "development with a human face," repeating a phrase that the United Nations made fashionable some time ago. What will reflective voters do given these two electoral options? Abstain or vote for the lesser evil.

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