Responses to the Coup d'etat in Honduras on Sunday June 28, with special emphasis on producing English-language versions of commentaries by Honduran scholars and editorial writers and addressing the confusion encouraged by lack of basic knowledge about Honduras.

Saturday, October 24, 2009

Bad Economy Getting Worse

There's a lot of financial news today. First comes the news that the de facto government has sold $1,000 million lempiras in bonds, payable in 709 days at 8.1% interest, primarily to Honduran banks (private capital), and pension funds. Congress, has in recent months, authorized it to sell up to $10,000 million lempiras in bonds. By its own estimates, the de facto government, by staging a coup, caused a loss of about $6,600 million lempiras in in income from production, in addition to almost all international funding. As it stands, the de facto government has a bond sale every Tuesday.

At the same time, the bonds that were used to finance the 2006 and 2008 budget, totaling $2,000 million lempiras came due without the de facto government having any means to pay them. They got Congress to pull their chesnuts out of the fire and extend the term of those bonds for another 2-3 years, or about the same time as this year's bonds come due. This will be during the administration of the next president, severely constraining him financially.

Several newspapers are reporting about an attempt to reprice gasoline in the country. When Manuel Zelaya assumed the Presidency, one of his accomplishments was to redo the way the retail price of gasoline was determined. This brought down the price of gasoline around 6 lempiras per gallon (around $0.32) in part by changing the source and consequently reducing the transport costs. US supplier monopolies were broken up (Chevron) in favor of Petrocaribe. Ever since the coup, the Micheletti regime has said that its suppliers (surprise, its Chevron again) are prepared to guarantee the necessary supply to the de facto government. Now we learn the price; return to the old pricing method which increases profits for the gas station owners.

Finally, Gabriela Nuñez, the de facto government's Finance Minister, the one who has lied multiple times about the FMI drawing rights and having been invited by Gordon Brown to London, says the government has money to actually pay its employees for October. It seems employees aren't being paid on schedule. Every month the de facto government has been late with payments. "This government has guaranteed the pay of all public employees until the last day that it corresponds to president Roberto Micheletti to direct the destiny of this country," she asserted. However, it seems there's a cash flow problem (see debt sales above) such that they can only pay some workers in any given week. They've instituted a committee to see what the income is for any given week, and who they can pay that week. So it might be a while before everyone receives their October paycheck. She places the October obligation at around $1,500 million lempiras.

But don't worry government employees, even if your pay is late, Gabriela, who never lies, says your pay is assured, and your pension fund has invested in bonds issued by this illegitimate government to pay you now, bonds the next legitimate government may choose to ignore. An illegitimate government after all, cannot make contracts binding on the next government. Buyers of the bonds assume all the associated risk.

7 comments:

Political Economist said...

Hello, I am working on a report about the coup and how to oppose it. Could you please clarify the source material for the reference to Chevron's supply of petroleum to Honduras or the claim that they are supplying resources?

Thank you.
J. Feldman

rns said...

I am outof the country and mostly away from the internet for the next couple of days, but it was either from a recent article in El Heraldo or La Tribuna.

Political Economist said...

Thank you.

J. Feldman

La Piedra Libre said...

Do you know who owns the banks in Honduras that are buying these bonds from the regime?

Any possibility that this may be an eloquent drug-money laundering scheme? Invest the narco-trafficking dollars in these bonds in order to maintain the funding of the security forces?

Along with the hope that they do occupy that 'legitimate' future government and can reap again in the future if the bonds are declared legit at repayment time.

rns said...

The banks investing in the bonds are owned, in large part, by coup supporters. The pension funds, however, are owned by various unions of government employees and unions.

Its normal for governments to sell bonds; that's how they get the use of money they don't have at the time. I don't see anything sinister about the selling of bonds just that the total amount of bonds is large for this illegitimate government, and the buyers likely include the pension plan of the teacher's union; the very people out protesting against this administration.

The bonds will be honored; three years of bonds will be payable at the same time, and that will be the problem of whoever becomes president in January.

Political Economist said...

I have collected data on financial connections, but in the post coup settlement the constellation obviously changes. One does not want to destabilize the "reform" government, but the problem is that the "reform" government lacks power in many ways to control the economy because of leverage by various transnational forces. The drugs, etc. connections are not the key thing in my view, rather normal operating procedures (20 to 60 or more years old) are.

Political Economist said...

I searched the Chevron connection in the newspapers you mentioned and found nothing. If you have a better idea of how to find the information, I would welcome it. I think this blogg is a great resource!
Thanks!