Grain, Gold, and Greed: It's Still about Money

It is easy to lose sight of what is behind the Honduran coup, lured by the surface craziness and sometimes cartoon-like behavior of officials of the de facto government. Clearly, there are cultural issues here, class issues here, and the Armed Forces, at least, is really truly concerned to protect the US from communist invasion, it would seem.

But we need to remember that fundamentally, the sparks of polarization between the Zelaya government and the business network behind the coup are economic. Honduran academics, including Leticia Saloman and Miguel Cáceres Rivera, have been great guides on this.

Since the coup, Congress has been employed steadily in approving contracts that benefit the business community. The MCC funding cut off would have funded infrastructure projects benefiting the same community.

While the burn rate of reserve funding, the decline in tourism income, and loss of low-cost energy imports should concern this community, they seem not to be coming to terms with the real impact on their own sources of wealth.

The sale of Honduran grain reserves, reported originally August 21 in pro-coup La Tribuna, is another act of questionable wisdom. When originally advanced, the de facto regime's appointed "Minister" of industry and commerce, Benjamin Bogran, argued that the move would ensure a good price to Honduran producers, clear the way for the new harvest, and keep the grain reserve from deteriorating. Sounds good, right?

Yet one day before, La Tribuna reported that the Honduran Institute for the Agricultural Market had recommended not selling the grain reserves, saying

better to keep it to guarantee the sustenance of the population in case the hurricane season affects the production in the country

But really, do you need to pay any attention to the experts on something like this?

A week later, on August 28, La Tribuna reported the approval of the plan to auction a large part of the grain reserves, again justified by the claim it would benefit everyone. By then IHMA had fallen into line, although the article went to excessive pains to repeat arguments for why selling off the grain reserves was actually good. This included extensive explanation that selling off the reserves would insure agro-business better prices, perhaps giving a glimpse of a primary motivation more convincing than keeping the grains from deteriorating. At the time, marketing grain to Guatemala, El Salvador, and even the US was mentioned.

Now it seems this act of desperation or greed is leading to some disquiet in Honduras, as de facto leader Roberto Micheletti felt compelled today to reassure the Honduran populace that there would be plenty of grain and meat for domestic needs, as his government sells off grain to its desperate neighbor, Guatemala, whose need for basic grains is discussed this week by boz.

Micheletti has also tried to assure the Honduran populace that the price of basic foods needed for individual families would hold steady, which seems really unlikely. The price of this canasta basica familiar was the basis for the raise in minimum wage by President Zelaya last fall. Raising the minimum wage was a major trigger of increased discontent by the business community, fostering their support for the coup.

And now we see how much more the de facto regime can do for its business allies. El Tiempo reports that a new proposed special law would change the basic approach of Honduran labor law, allowing employers to pay hourly wages (instead of daily base pay). These changes, desired by the business community, are supposed to be the key to creating tens of thousands of jobs. The article proposes that, as in the US, people would now be able to have two part-time jobs, as if that was a desireable condition.

But even full-time employment at the minimum wage that Zelaya approved is not enough to pay for 100% of the basic food needs of a family. How much worse will the conditions of the working poor be if they are not even guaranteed a day's pay?

In a country where unemployment is currently at 70%, is more part-time employment in any way an improvement?

Honduran Skepticism About Democratic Institutions: Some Data and Opinions

Greg Weeks at Two Weeks Notice continues to provide some of the best actual data from studies of Honduran civil society that can be found. His post today, pointing to a soon-to-be-more-widely available study by Mitchell Seligson and John Booth of Vanderbilt University, is especially important to understanding both the circumstances of broader Honduran politics, and some of the motivation among Zelaya government officials for pushing for participatory democracy. But even though I understood the issues, the dramatic quantitative, comparative measures provided in the new Vanderbilt study still shocked me.

Greg notes that the study asks respondents about their satisfaction/dissatisfaction with

three key aspects of political legitimacy: support for democracy, support for national institutions, and evaluation of the government's economic performance.

The results are codified in a ratio of "triply dissatisfied to triply satisfied". In other words, how many people are dissatisfied with all three key aspects, compared to the number satisfied with all key aspects? Pardon me for being professorial here (occupational hazard) but as I deal with statistical data all the time, and find my students even in the doctoral program not prepared to really understand such measures, I want to break this out before reviewing the actual, horrifying numbers.

Say we asked 100 people in the average American city the same questions. Maybe 75 would have mixed reactions; another 10 might be extremely pessimistic and say "dissatisfied" to all three questions; and the remaining 15 might be among those lucky folks who think everything is wonderful. The ratio of triply dissatisfied to triply satisfied in our example would then be 10/15, or 0.66. This is a measure that tells us how large the extreme sentiments are in a society.

Honduras had the highest ratio of people dissatisfied in all three areas to those satisfied in all three areas among the Latin American societies studied. Its 6.17 score was almost twice as high as the next most pessimistic society in the sample (Guatemala, at 3.23).

To over-simplify, the Honduran score suggests that for every optimistic person who is satisfied with democracy, national institutions, and government progress on economic issues, there are more than six pessimistic people.

We want there to be more optimism than pessimism in democracies. When pessimism starts becoming the norm, people lose their motivation to participate, to support the institutions that ensure the survival of civil society.

Here is where the opinion part of this post starts. My friends in the Honduran government who support President Zelaya's attempt to raise the Constitutional reform issue have talked about this pessimism, the disenchantment of civil society with government, as threatening the survival of the Honduran democracy. These are people who lived under, or whose parents lived during, the long period of military rule in the 1960s and 1970s. They and their family members remember and talk about the history of 20th century oppression by dictators marked by violence and imprisonment that, while little known in North America, is a history that Hondurans have worked faithfully to ensure never can be repeated.

The failure of successive democratically elected governments since the 1980s to solve the structural problems of the Honduran economy has, in the opinions of many of these informed participants, eroded public trust in government. My colleagues did not need numbers like those we now have to understand that. So they have worked assiduously in the current administration to support policies intended to alleviate the economic burdens of the poorest members of Honduran society. Miguel Cáceres Rivera puts the case for how the Zelaya administration proceeded to try to address this civic weakness more clearly than any other scholar I know.

While economic justice is powerful, and fundamental, it alone would not be enough to ensure the survival of a democratic Honduras. The disillusion with the nature of democracy itself also needs to be addressed, the dissatisfaction with government institutions. Here, the fact is that the current form of government was constructed in such a way that it almost inevitably would produce such disillusion. Congress, the courts, and the executive branch, as well as state and local governance, institutionalized politics that privilege party operatives, as noted by Rodolfo Pastor Fasquelle. The theory of the Honduran Constitution of 1982 is representative democracy; but the few who persistently are elected are not perceived by a large proportion of Hondurans as representing the interests of the people. The decline in voter participation is one reflection of this. But so is the emergence of activism by social segments that seek a more visible presence, a voice, to participate.

Zelaya government policies not only acknowledged such segments-- women's groups, indigenous groups, african-descendant groups-- but worked on many levels to engage them in a common project of creation of a new vision of the Honduran nation as multi-ethnic and pluri-racial. This is clear in both statements by Zelaya government officials and the flyer the Fuerzas Armadas claims to have seized during their raid on President Zelaya. It is clear as well in statements by segments of society that have never before had an opening to participate fully in Honduran democracy, such as indigenous peoples.

What advocates of Constitutional reform in the Zelaya government are committed to is a project nothing short of countering the spread of pessimism in Honduran society by shifting from a basis of sterile and stylized "representation" to a vigorous level of citizen participation in governance. This is why a non-binding poll was worth risking legal action. Anyone who doubts the necessity for such activism to preserve democratic society in Honduras needs to read the numbers reported by Seligson and Booth and think about what it would mean to live in a society where six times as many people were thoroughly disillusioned as believed in government.

The trigger was money, not continuity in office

As international media repeat that the center of the conflict between President Zelaya and his opponents was a supposed intention to remain in office (despite the self-evident fact that he had no control over the military, always the key allies in unconstitutional continuity in office), it is worth taking a step back and examining the long-term history. We have already seen how Honduran sociologist Leticia Saloman points to an alliance of media, business, and political parties, aided in the end as well by the military and church, as key in opposing President Zelaya's non-binding opinion poll.

But why were they all so bitterly opposed to this action? Honduran economist Miguel Cáceres Rivera, in a commentary in the form of an open letter to his brother whose poetry I refuse to violate by even attempting to translate it, provides the most complete rehearsal of the issues I have yet seen. What he demonstrates is that President Zelaya had accomplished several fundamental steps that lowered the cost of living for the poorest of the poor in Honduras, and raised their potential income. These gains came at the expense of the rich, who gave up some of their profit margin. It is the gap between rich and poor that swallowed up Zelaya.

Specifically, Cáceres Rivera lists the following actions, explaining whose interests were affected:

(1) Steps taken to reduce the cost of petroleum to consumers: this included putting into place subsidies; reducing the profit margin allowed by the distributors; and of course, entering into a contract through Petrocaribe that allowed purchase of fuel with long-term, low cost financing. Who benefitted: everyone whose job depended on fuel (taxi drivers, bus owners) or who would have ended up paying higher prices for goods if transport costs were higher (end consumers). Who lost: owners and investors in petroleum companies, who saw their profits reduced and limited.

(2) While I was aware of the oil contract issues, I was not aware that President Zelaya's government had persuaded bankers to reduce interest rates on home loans. Cáceres writes that these went from a range of 24-32% annually to one-half or even one-third of those rates. While 12% interest rates on home loans are still shocking, this one action would have made it possible for working Hondurans to remain in their homes as other parts of the cost of living rose. Who lost? obviously, banks whose profit margins were based on such high loan interest. Cáceres notes that these reforms actually allowed new banks, coming into the country from outside, to be competitive, offering loans at rates from 10.7% to 12.7%. He notes that this actually led to a boom in construction, and thus raised the income of the companies, from small to large, that supplied construction. In essence, he argues that while on the one hand business interests lost some interest income, the multiplier effect of the saved income, spent on housing, was good for the economy and for those capitalizing it.

(3) The raising of the minimum wage is the third factor Cáceres discusses. He notes that the costs of basic products within the country-- wheat, chicken, eggs, and palm oil (which replaced other sources of cooking oil in Honduras, even though the country still uses the word "manteca" translated elsewhere as "lard")-- increased as international prices increased, but then stayed high even when international prices declined. President Zelaya was unable to convince the producers of these goods to lower their prices, making an increase in the minimum wage the main way to give consumers enough purchasing power to survive again.

Cáceres then explores, as only an economist can, what these actions imply: a change in how economic growth is managed, and in particular, how the costs and benefits are distributed, that literally spreads the wealth around. But as he notes, this is a zero-sum game: what was previously managed by devaluation of Honduran currency (the lempira, which was for most of the 1990s constantly declining vis a vis the dollar) now is managed in other ways (and the lempira has remained notably stable, around 18 to the dollar, for the last few years). Devaluation, he explains, actually increased the supply of capital within the country as long as the minimum wage did not increase as the value of the lempira internationally declined.

To put it another way, labor that cost $10 in 2001 declined in cost to $8.50 by 2003, gains that exporting businesses and the banks financing them realized because they sold their products on the international market. Cáceres explains that those realizing gains and transforming them into sufficient consumption of imported goods actually passed the costs of their increased consumption onto the mass of Hondurans whose income was limited and who had to deal with increasing costs.

Cáceres gives precise numbers to illustrate what lies behind the differential patterns of consumption that exist today in Honduras, with imported luxury goods enjoyed by a minority while the majority use a new sector of sales of used clothing and goods to try to make ends meet. In 1989, the official pay for a farm worker was about $4.56 a day. In 2007, the official salary fell in value to $3.97 a day, declining 13% over 18 years. This, he notes, is an underestimate because he has not accounted for inflation at all, which means the purchasing power of the average worker will have eroded even more.

One outcome of this economic deterioration, he notes, is that 1.5 million young Hondurans have left the country, many as undocumented emigrants, in search of work they cannot find in the country. In addition, the main engines of economic development, small and medium sized businesses, oriented to internal consumption and thus lacking the means to profit from devaluation, have not been able to persist or expand.

Like Leticia Saloman, Cáceres points to the unprecedented concentration of economic interests in the hands of a few families that also monopolize most media as one of the features allowing the coup. In this group he includes the agro-food companies, the large export and import businesses, the banks, oil importers and refiners, large media networks, fast-food chains, as well as energy and telephone companies. He notes that Honduras has the highest prices for electricity, telephone, and fuel in Central America, benefitting this same network at the expense of medium and small business as well as the broader body of consumers.

Cáceres concludes that without some change, the gap between rich and poor will continue to widen as the rich benefit from structural conditions at the expense of the poor. Without changes, he warns,no matter what strategies to reduce poverty, no matter how much more well-intentioned international aid, no matter how much more focus on rural sustainable development, the attempts to battle poverty will be the perennial task of Sysiphus.

Cáceres identifies the stakes at play as economic, pointing to the potential, under a new constitution, that disadvantageous contracts that have given private enterprise exploitation of electrical generation and telecommunications for a fraction of what they could generate could be renegotiated. He notes that one of Micheletti's first actions was to return to international oil companies their monopoly on supplying oil, which President Zelaya had broken by his participation in Petrocaribe.

Finally, like Leticia Saloman, Cáceres notes that the existing governmental system is inextricably intertwined with the families that control these sectors of the economy. From this he concludes that a new attempt to reform government to allow broader participation is an unavoidable step, if there is to be fundamental improvement in the situation of poverty, and if there is to be more participatory democracy.