Democracy And The Economy In Honduras Under Siege

Honduras is the second largest nation in Central America, after Nicaragua. With a relatively small population of 8.4 million, it is also the poorest country in the region, with the exception of its neighbor Nicaragua. Over the years, the political instability of the country and the entrenched political elite, have slowed the modernization of Honduras. 

The lack of real democracy and economic freedom over the years, has helped keep over 50% of the populace of Honduras in poverty. The economy is still based mostly on agriculture, with near 14% of the GDP (Gross Domestic Product).

Hurricane Mitch in 1998, caused massive and widespread destruction. President Carlos Roberto Flores at the time, said that 50 years of progress in the country, had been reversed. The near total destruction of crops and the transportation infrastructure, with thousands killed, and tens of thousand made homeless, cost the country an equivalent of $3 billion USD (United States Dollars).

The 2008 Honduran floods, were also devastating to the infrastructure and economy of the country. Nearly half of the roads in Honduras, were either damaged or destroyed.

Lawlessness and corruption are rampant, especially in the cities. The country was purported to have the highest murder rate globally, as street gangs and organized crime networks preyed on numerous communities. This was often in collusion with local authorities.

Although illegal activity has been somewhat reduced, under the current administration of President Hernandez, it still remains a major concern for much of the citizenry.

Due to the political disorder and economic deprivation, some 600,000 Hondurans which is near 7% of the population, have emigrated to the United States.

In a sign of fiscal mismanagement, as late of 2013, the government budget deficit was an unsustainable 7.9% of GDP.

Along with the ongoing economic hardships,political uncertainty has spread to the highest echelons of government, as another presidential election nears.

In 2015, the Honduran Supreme Court struck down a controversial term limit for presidential re-election. This law had been enshrined in the 1982 Constitution, as a way to prevent a single individual from gaining too much control of the country, through a political power grab. It was a safeguard to prevent a future dictatorship.

In Latin America’s last real coup, former Honduran President Manuel Zelaya ended up being ousted from office, due to his proposal to possibly change the constitution in 2009. The document clearly stated that to even suggest a change, was grounds for dismissal.

Mr. Zelaya had proposed holding a non-binding referendum, on whether a constituent assembly should be convened for the purpose of making changes to the constitution. This alarmed the established oligarchy, that he might be intending to stay in office indefinitely.

These political elites were already troubled by President Zelaya’s supportive position, towards the socialist government in Venezuela. There were fears that over time, Zelaya would attempt similar policies in Honduras.

Current president Juan Orlando Hernandez from the National Conservative Party, was far more artful. He allowed another former president, to bring a suit against the law on term limits. Former President Rafael Callejas had argued that the limitations for office holding, was a violation of his human rights.

Two years ago the Supreme Court finally ruled in the favor of Mr. Callejas. He of course is not running, but current President Hernandez, is now seeking a second term.

President Hernandez has been in office since January of 2014. Even as he was being inaugurated, his administration was already sending units from the army, to take action against criminal elements. Armed units have since taken up positions, in the highest crime areas, to allow some semblance of civil order.

He has slowly made headway, in combating the myriad of problems confronting Honduras.

During his presidency, Hernandez has disrupted a number of drug trafficking organizations and has extradited many suspected drug lords, to the United States for legal remedy.

The President has brought stability to public expenditures. He both raised taxes and cut government outlays for wages. In April of 2016, the Congress approved legislation, intended to institutionalize the new fiscal responsibility.

As a result of these steps, government spending is now 29.1% of GDP and budget deficits have been reduced to 4.4% of total output, a far more sustainable level. Public debt is still at a moderate 47.4% of GDP.

Although capital markets are still not fully developed, the financial sector has regained some stability, following the liquidation of Banco Continental, towards the end of 2015.

Hernandez has taken pains to encourage new foreign investment. His aim is to better develop industries, such as call centers, textiles and various facets of the tourist sector.

The economy has maintained an average of 3.5% growth, over the last 5 years.

President Hernandez is also working with the leaders of El Salvador and Guatemala, in making Central America more economically competitive, in the area of trade.

Yet, the ineffective regulatory edifice still does not encourage entrepreneurship and the cost and time to form a business, is quite burdensome. Labor regulations and the continuation of price controls over major sectors of the economy, stifle innovation.

An additional onus concerns property. Near 80% of the privately held land in Honduras, is either improperly titled or not titled at all. Resolution of ownership rights often takes years to resolve,because of the corruption and weakness of the judicial system.

The government has made headway with reforms in education. The quality of teaching has improved measurably and students are now spending 225 days a year, in the classroom.

The President also continues to fund a program known as Vida Mejor (Better Life). This government sponsored plan, helps with housing construction assistance, replacing roofs, filters for drinking water, and other household needs.

The problem with the many of the improvements put in place by President Hernandez, is the increased control he is exerting over the very government structures and institutions, he is reforming.

Although security is moderately better under his administration, it comes at the cost of heightened military control, throughout the government and society.

The electoral commission and more worrisome the judiciary, are increasingly being seen as susceptible to presidential influence and interference.

Voters in Honduras have become frustrated with the ongoing political corruption and disorder from the top positions in government, right down to the local level.

Since the toppling of Zelaya in 2009, there have been three different Presidents, with another election due in November.

The coup has virtually broke the political system, that was put in place, once the military dictatorship gave up power in 1981. From that time forward, the government was basically shared between the conservative National Party, which took turns in power with the Liberal Party.

The liberals until the time of Mr. Zelaya, had never promoted policies, too far in opposition to the conservative position.

The overthrow of Zelaya split the Liberal Party. Some liberals ended up supporting the coup, while others created a new party known as LIBRE.

After Zelaya was sent into exile, Roberto Micheletti finished out the presidential term from June of that year through January 2010. The 2009 general election was held in November and Porfirio Lobo succeeded to the presidency, the following year.

As an example of the continuous corruption, during the Lobo Presidency, close to $300 million USD was stolen from the social security system. It was taken by a number of individuals and companies. Even now, the former president’s son, is on trial in New York for illegal activity.

Last month as part of the testimony in the aforementioned trial, a former member of a drug trafficking gang, claimed he had met with President Hernandez’s brother. The purpose of the meeting was to get him to use his influence, in having the government pay debt owed to a company, used by the gang to launder money. The brother of the President has denied, there ever was such a meeting.

President Hernandez himself, is under a cloud of suspicion. In the fraud scandal involving the theft of social security funds, a relatively small amount of the money, ended up financing the President’s election campaign. Hernandez insists, he was unaware of this fact. The revelation of this money trail led to protests and demands for his resignation, already back in 2015.

Another hurdle for the President in the upcoming election, is that nearly two-thirds of the voters oppose re-election. They do not favor the decision made by the courts, to permit it to become legal.

The upcoming November election will have three candidates in the presidential race. They are President Hernandez the conservative, the socialist LIBRE politician, Xiomara Castro and Luis Zelaya from the Liberal Party. It is important to note, that the underdog in the race Ms. Castro, is the wife of former President Manuel Zelaya.

The challenges for Honduras are still immense. The ongoing high levels of violence, money laundering by drug cartels, and general governmental corruption, continues to undermine the economy. It also damages the international image of the country, which makes it far more difficult to attract much needed foreign investment.