HONDURAS

I was surprised to see Honduras, the small and not important country I once lived in, appear on the front pages of both the Washington Post and the Wall Street Journal. It seems there was a bit of a political ruckus.

My first trip to Honduras was in 1984. A consulting associate of mine had helped the Chamber New Orleans and the River Region get a grant from the U.S Agency for International Development (USAID) to promote investment between Honduras and Belize and the Mississippi Valley of the US. He got a sub-contract from the Chamber and I was chosen to do the leg work. I traveled to cities in Tennessee, Indiana and Texas, as well as New Orleans, to promote the idea. In addition to my first, exploratory trip,I escorted a small trade mission to Honduras later in the year. I don’t think there were any results.

Later, in late 1986 when business was really slow,I went to Tegucigalpa to meet with the USAID Mission and negotiate a contract, which I completed in December. In January 1987 I began my assignment there as Project Director of the Investment and Export Development Project, an effort to promote investment into the country and exports out.

My personal services contract carried a decent salary, a housing allowance and some benefits like sick leave and vacation time. Nydia remained in Potomac working for Garfinckel’s but traveled to Honduras about every three months for a month’s stay. I had bought a 1987 Jeep Cherokee which the Government shipped for me so Nydia and I were able to travel around a bit. During her March 1987 trip I took her with me to a meeting held in Guatemala and she found Sambol, the famous Guatemalan handicrafts store. By April I had found a nice apartment and the Government shipped some furniture for me. (Keeping expats overseas is expensive.) During Nydia’s July visit, her dad and step-mother came for a visit as well and thoroughly enjoyed their couple of weeks in Honduras. In the fall we drove to the northeast coast of Honduras to Puerto Trujillo over roads mostly unpaved and some that resembled goat tracks. In the spring of 1988 we drove through along the Honduran side of the border with El Salvador through the Mayan ruins of Copan and on to Guatemala where we traveled around a bit. Honduras is quite pretty, the people pleasant but it is poor.

My contract expired in January 1988 and having had enough of USAID internal paper shuffling I chose not to renew. I caught on with a consultancy tasked with trying to salvage a series of bad loans issued by the Central American Bank for Economic Integration which had its offices in Tegucigalpa. That came to an end and I returned to Potomac in July 1988. Incidentally all of the failed loans shared in varying degrees three characteristics: the negative impact of the 1981-2 recession, incompetent management and outright fraud. Examples of the latter include a Bank inspector discovering that the loan made to build an 80 room motel south of Tegucigalpa was only going to result in 40 rooms. A loan made to an Argentine group to develop a cacao processing plant in Costa Rica resulted in new equipment being bought, but shipped to Argentina, and old, used equipment sent to Costa Rica.

Progress was made. Honduras diversified agricultural exports through development of cultivated shrimp and the production of melons on the Pacific coast. These goods were trucked in refrigerated containers to the north coast – Puerto Cortes – for export to the US. There was substantial development of industrial parks set up as export processing zones, that is areas into which goods could be shipped duty free, advanced in value, and exported to the US paying duty only on the value added in Honduras. These parks were primarily along the north coast, near San Pedro Sula – Honduras’ commercial center , and at their peak in the early 90’s employed as many as 100,000 workers. The principal activity was apparel assembly, an activity that was hurt when the international apparel import quota system ended and the Chinese took over world markets. Honduras is still a major exporter of bananas, sugar and wood products.

The Honduran military ended their rule of the country at the end of 1981. Honduras has had seven consecutive reasonably well conducted democratic elections of presidents, none of whom has been permitted to run for reelection. During my continued consulting assignments there starting in 1989 and ending in 2004 I saw new luxury hotels and nice urban shopping malls built and the small middle and upper classes do well. Honduras’ seven million people today are individually probably better off than the five million or so in the 1980’s, but most Hondurans remain relatively poor and the country’s human resource base and capital stock are inadequate to generate strong economic growth.

Much of this problem is cultural. The country has natural resources but the population is ill equipped to exploit them properly. There exists a psychology of dependency. Rather than work hard, get an education and get ahead, most seem to believe that their fate is fixed and that because they are poor they are entitled to help from outside sources. They are always ready to join up with the man on the white horse who promises them a better life. The current gang of four demagogues that bedevil the US now, Hugo Chavez of Venezuela, Evo Morales of Bolivia, Rafael Correa of Ecuador and Daniel Ortega of Nicaragua, were all elected to office on just this type of approach. Their election proves the failure of their respective societies to meet the perceived needs of a majority of the inhabitants, but demagoguery and state socialism will only in time make matters much worse.

And so we come to Honduras’ seventh president of the series, Manuel Zelaya. A rancher from Honduras’ version of Texas, the Department of Olancho, sparsely populated and mostly dedicated to cattle ranching and logging, he started as a populist without much of an ideology, but appears to have come under the influence of a cabinet minister who is a dedicated Marxist. “Mel” as he is known decided that he didn’t want to go away at the end of his term this December but, emulating the gang of four mentioned above, he would rig things so as to stay in office. He would hold a referendum that would allow the voters to change the Constitution permitting reelection. His referendum was held to be unconstitutional and the ballots impounded. Zelaya and a band of followers physically invaded an Air Force installation and retrieved the ballots. By this time both the Church and the establishment had had enough and he was removed from his home and shipped to Costa Rica. Had the Hondurans kept him in country and put him on trial there would have been far less concern. But their understandable fear was that his followers would form a mob and attempt to free him by force.

The economic situation in Honduras has been weakened by the global recession. The country is wholly dependent on imported refined petroleum products and the spike of prices last year was quite damaging. The recession has reduced export earnings and lowered remittances from the couple of hundred thousand Hondurans in the US so there is popular unrest that played into the hands of Zelaya’s demagoguery.

So now for the crime of removing a man who clearly violated constitutional process in Honduras and who wanted to clone himself as a Hugo Chavez, Honduras has come under assault by the Organization of American States with the support of President Obama and Secretary of State Clinton. The crime is undertaking a “Golpe de Estado”, unlawfully removing a President. To their credit the Hondurans remain firm in their rejection of any return by Zelaya and I think in time the issue will die down in their favor.

It boggles the mind why the US would side so quickly with a group of feckless Latin American diplomats on a formalistic approach when the defined objective is clearly neither in the interest of Honduras nor the US. My guess is that there is sufficient US domestic opposition to people like Hugo Chavez and a Marxist approach to economic management that the Obama administration will be constrained in supporting the OAS position too strongly.