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President Flores says 1999 will be "Another Very Hard Year" By: Lorenzo Dee Belveal In a story carried by United Press, January 6, 1999, Honduras President Carlos Flores Facusse declared that in spite of the well-publicized millions of dollars in cash donations, debt forgiveness, and related international charity, the Republica still lacks the ability to deal with the devastation left by Hurricane "Mitch". "There is no internal financing to reconstruct the country .... and 1999 will be a very hard year for Hondurans,'' President Flores told reporters. This advisory will come as no surprise to the vast majority of the Honduras population that has seldom known anything except "very hard years" for as long as memory runs. However, the devastation left by Hurricane "Mitch" has surely multiplied the misery of the majority of Honduras citizens who, even without a notable disaster, live well below the poverty line. Strange as it may sound, "Mitch" can very well prove to be a great blessing in disguise, provided President Flores and his administration officials have the flexibility and sagacity to capitalize on the opportunities a flood of international sympathies offer. To understand this situation, you need to take a hard look at the Flores tax program, that I labeled "Theater of the Absurd", when he announced it in April, 1998. You can read it at: http://ldbelveal.net/Hond_tax_plan.htm The fact is that Honduras has never had a fiscal program seriously pointed toward national self-sufficiency, and the Flores tax effort does nothing to alter this perfect record. Much is being made of the destruction of the banana plantations, as a great loss to the national coffers. The fact is, that President Flores virtually wiped out national revenues from banana culture, by slashing the export tax on bananas from fifty cents (U.S.) per forty-pound box, to four cents (U. S.) per forty-pound box. He did this a full six months before "Mitch" arrived! In view of this, the storm damage to the plantations is resulting in the loss of a lot of jobs, but the impact on government revenues is minimal, because El Presidente had almost totally removed bananas from the taxation list, half a year earlier. The Flores Tax Program was clearly designed to support an international fund-raising effort, rather than to meet the predictable financial requirements of the Republic. Coincidentally with his announcement of the new tax schedules, Don Carlos announced the formation of a team of money solicitors. consisting of key members of his administration, who were to be dispatched far and wide, to seek financial donations, loans and prepaid "projects" from the world's affluent nations. This approach to meeting Honduras fiscal needs is not new with Carlos Flores. Indeed, international beggary has been the major source of Honduras income for at least half a century. In the course of establishing this record, after interest and principle forgiveness, restructuring of obligations, gifts, etc., Honduras had still managed to build up a public indebtedness well in excess of four-billion dollars, by the time Mitch arrived. The bitter truth is that Honduras is a terrible credit risk. Honduras hardly ever repays principal and, almost as often as not, also defaults on interest obligations. This kind of a default record does not encourage potential lenders to keep bankrolling a non-performing client nation. Lenders like to get paid. When "Mitch" descended on Honduras, wreaking historic devastation across the country, the needs for reconstruction funds ascended to levels that neither Honduras, nor its lenders have ever previously contemplated. International sympathy is a strong motivator to provide the money needed to rebuild the storm-trashed nation. But a long-standing and dismal experience with Honduras as a borrower, has prompted the potential lenders to impose some restrictions intended to have a twofold effect: First, to insure that funds are spent as intended. Second, that necessary protections against contract "skimming" and other forms of financial hanky-panky are in place before the funds are handed over. These requirements are intended to make sure that accounting practices, progress reports and conformity to engineering standards are met. Flores is complaining bitterly that meeting these requirements of the lenders, as a precondition to release of the funds, is taking lots of time and delaying arrival of the money in Honduras, where it needs to be spent. Without doubt, his complaint concerning disbursement delays is well-founded. In justification of the position of the lenders, however, and based on the Honduras fiscal record as a borrower, it's difficult to imagine how it could be otherwise. Nations, like individuals, establish a credit experience with which they must live. On the record, Honduras is a lousy credit risk. There is another problem. Or two other problems, to be quite literally accurate. Section #200 of the Honduras constitution is an immunity clause that places all elected politicians and a great many appointed political functionaries above all the laws of the land, both civil and criminal. Thus immunized, Honduras political officials are entitled to break the laws that ostensibly apply to everyone else, with impunity. In addition, in April, 1997, the Honduras National Assembly passed a Publicity Gag-Law that imposed draconian penalties, fines and jail terms, forreporters, publishers and broadcasters, who publicize information concerning Honduras officials involved in corrupt practices of any kind. Taken in combination, these two protective devices have the end effect of making licensed potential criminals out of any "public servants" so inclined. With legal immunity protecting political malefactors from the provisions of civil and criminal statutes, and a publicity gag-law to immobilize honest reporters and publishers from investigating and reporting violations of the public trust, crooked politicians truly enjoy the best of both worlds: Pesky reporters are warned to look the other way where political corruption is involved, and even if found out and identified, the laws governing fraud, misappropriation, and related crimes against the public trust do not apply to them. This situation would have to be viewed in an extremely grave light, even under the best of circumstances, but there is another facet to the risks involved in Honduras. In August, 1998, "Transparency International", a German University organization that specializes in screening official business practices on a worldwide basis and rating the nations involved, identified Honduras as the third most corrupt country on this earth. According to the "Transparency International" report, only Paraguay and Cameroon, are more corrupt than Honduras. Consider this reality along with the immunity blanket and the publicity gag-law. Small wonder that potential lenders, donors, etc., seek to impose some reliable safeguards, before handing Honduras large sums of money to handle at its own discretion - ostensibly in the area of reconstructing the devastation left in the wake of Hurricane "Mitch". Proceeding from its accrued reputation as one of the most corrupt nations on earth, it is not surprising to discover that potential benefactors seek reasonable safeguards against the very real possibility that their donated and loaned funds might otherwise just disappear into what has been called "the black hole of Central America". President Carlos Flores finds this reticence to hand over the millions - or billions - of dollars to Honduras, for disbursement as they see fit, to be an onerous if not insulting process. He points out that meeting the donor nations' pre-requirements is a great time-waster, when so much needs to be done at once to rectify the damages left by "Mitch". Indeed, he declares that his administrative team will seek alternative funds from other - presumably less cautious - money sources. Just who these more tolerant bank-rollers of Honduras reconstruction may be has not been clarified. Until they stand up to be identified, this reporter strongly suspects they are figments of the Flores imagination. There can be no argument with the obvious fact that Honduras has suffered an historic catastrophe. Equally obvious, Honduras desperately needs countless millions of dollars to replace and repair destroyed roads, bridges, and related infrastructure. And this says nothing of the tens of thousands of private homes that must be renovated or entirely replaced, along with emergency food requirements, medicines and restoration of public health facilities. These things will require money - in a hurry, and in amounts never before contemplated in Honduran history. Moreover, it seems obvious that the international community stands ready to liberally participate in this Herculean task. But first, prudence demands that, on the Honduran record alone, there must be some firm protections in place to make sure that history is not repeated, with the reconstruction funds being diverted to the illicit enrichment of avaricious and venal political criminals. To ignore this very real possibility would require ignoring half a century of consistent Honduran behavior. At the very least, Honduras owes its benefactors the token gesture of expunging the infamous immunity statute and the disgraceful publicity gag-law from the books. A respectable nation has no need for such flagrant invitations to political corruption on the part of its officials. Indeed, an honorable nation would be shamed by their existence. But beyond this, properly wary potential donors and lenders are surely not going to ignore these enticements to official abuse of relief funds, as long as they exist to aid and abet it. Until these shameful statutory provisions are stricken from the laws of the land, Honduras can never expect to have its promises of honest dealing and responsible conduct in the handling of relief funds to be taken at face value. The greatest mystery of all is why Honduras officialdom pretends to not understand this sorry reality. ============================ Background: Hurricane Mitch struck Central America in late October and early November, 1998. Honduras was the country hardest hit, with more than 5,600 people killed, 8,000 people missing and an estimated $5 billion in damage, according to official figures. ``To push ahead the national reconstruction, there are only offers and international commitments, that require cumbersome steps to convert into money in the future,'' he (President Carlos Roberto Flores) said. In the two months after the storm, Honduras has received $85 million in aid from 20 countries, but only $10 million in cash. The rest has been in the form of supplies, such as clothing and medicine, and the arrival of aid has slowed considerably in recent weeks. Honduras is also burdened by a $4.3 billion international debt, the servicing of which which makes up 40 percent of its budget. Several nations, including the United States, France and Cuba, have promised to forgive part or all of their share of the debt, along with rescheduling of interest and principle payments. Flores Facusse said the government would continue to seek (quicker) international aid because it lacks the (ready) money to cope with the damage. ``The little that the government has done to help the affected population has been with its savings, and that's already depleted,'' he said.
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