Heading for Ruin

Tiempo is reporting today that the Economic Commission for Latin American and the Caribbean (ECLAC in English and CEPAL in Spanish) is reporting that Honduras has spent approximately $680 million of its hard currency reserves over the last two months, a far greater sum than the Banco Central de Honduras has admitted.

ECLAC estimates Honduras's foreign reserves at $1,900 million. For comparison, the Banco Central is reporting a liquid reserve of $2,186 million. It is unclear if the Banco Central is counting the IMF SDR grant, which it technically can count against reserves, but which the IMF says it cannot actually turn into hard currency.

The ECLAC numbers indicate a burn rate of about $30 million a day in reserves. Edwin Araque, in a Radio Globo interview, independently put the number at somewhere between $20 million -$30 million back when we wrote the original Burn Rate blog post.

Additionally, ECLAC noted they can expect an economic decline of over 8% this year, down from a growth rate of 4% last year, and exports have been cut in half over last year's exports.

Yesterday, Standard and Poor's downgraded Honduras's debt from a B+ to a B indicating that they had concerns about the liquid hard currency reserves of the country. They noted that the budget request for 2010 proposed to Congress by the Micheletti government presupposes a return to normal, with about $466 million in foreign aid and donations.

Its hard to understand how businessmen in Honduras can continue to support the coup government when Micheletti is taking their economy into utter ruin, fast.