WorldCity Business Magazine

Honduras flirts with three-step remedy to poverty

by Marcela Sanchez

If there were a lottery to end poverty, Honduras would be holding a winning ticket.

Last month, the Group of Eight major industrial nations announced that it had agreed to “the biggest debt settlement the world has ever seen,” which would benefit some of the poorest, most indebted nations, including Honduras. Also last month, President Bush’s development aid program known as the Millennium Challenge Account made Honduras the first beneficiary in Latin America and only the second in the world. And the controversial Central American Free Trade Agreement between the United States, Honduras and five other nations survived its first real test, passage by the U.S. Senate.

Combine trade, aid and debt relief and Honduras has the big-three poverty reduction strategies sought by both the left and the right.

For decades, churches, nongovernmental organizations and student groups have been advocating debt relief as well as increased aid to poverty-stricken nations. Honduras currently pays 15 percent of its annual national budget or $250 million to service its debt. If all multilateral debt is forgiven, Honduras will see a windfall equivalent to six times what it currently spends on medicines or 12 times what it spends on school meals, Honduran President Ricardo Maduro told me. With the Millennium Challenge Account, Honduras is slated to receive $215 million over the next five years to help small, poor farmers become more competitive and get their goods to market.

For at least a decade, business and pro-market leaders have been pushing for agreements such as CAFTA to further integrate the hemisphere commercially. CAFTA would open up a trade market among its member nations valued at $32 billion. The effect on that nation’s poor could be significantly positive.

Yet while Honduras may have won the lottery, it might well fritter away its gains. The second-poorest Central American nation 64 percent of the population lives on less than $2 a day is also regarded as the second-most corrupt nation in the region.

Maduro is quite aware of what’s at stake. The Stanford-trained economist points out that his administration has taken on corruption directly. During his three years in office, Maduro has rounded up more than 80 businessmen involved in financial crimes, penalized more than 2,000 businesses for tax evasion, and hired new Customs employees through a competitive process using public advertisements.

Despite these gains, Honduras has a long way to go to clean up its act. Maduro made efforts to strengthen the National Anti-Corruption Council through congressional sanction and giving it an operating budget. But the council has not met for a year and a half, according to German Espinal, its former executive director.

Honduras was also one of the first countries in the region to eliminate immunity for former public officials, including presidents, who face prosecution. Yet, the Honduran prosecutor’s office has shelved enough corruption cases, as it did last year to the benefit of former President Rafael Callejas, to make that immunity statute irrelevant. The prosecutor’s office is so tainted that in an unusual move, the U.S. embassy in Tegucigalpa last month publicly announced its decision to revoke the deputy prosecutor’s U.S. visa.

So it is no wonder some are taking the good news this week cautiously. Cardinal Oscar Andres Rodriguez Maradiaga, a tireless advocate for debt relief and aid, said in a nationally televised interview in Honduras last month that “this should fill us with happiness,” but will do so only if Honduras ends its corruption “addiction.”

“How can we progress with a Honduras the way it is?” asked Rodriguez, whose name was on every short list of candidates for pope. “I believe if this doesn’t change, any debt relief, any donation will not be useful.”

Rodriguez, one of the most popular figures in the country and frequent ally to the president in times of crisis, calls this opportunity the “second and perhaps the last chance” for Honduras to reduce corruption significantly.

The first came more than 30 years ago when the Central American country was battered by Hurricane Fifi, killing more than10,000 people. The international community responded with billions of dollars to help rebuild Honduras and ease the suffering of its people. But 40 percent of the aid, according to Espinal, ended up in the pockets of politicians and other officials. And so the hurricane, said Espinal, created Honduras’ “new rich” and left the rest destitute, as most remain today.