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.

Friday, August 28, 2009

Burn Rate

Just a quick economic note. Since June 25th, the de facto government in Honduras has drawn down the liquid foreign reserves by about $400 million so that today, the Banco Central de Honduras reports its liquid reserves of international currency at $2,063.8 million. At the rate of $200 million a month, by the election day, November 29, 2009, the liquid reserves will be down to $1,463.8 million, and by the time a new president could take office in late January, they will be down to $1,063.8 million, or to a level that is less than half what it was before the coup. Whoever takes over in December under these conditions will have a Honduran economy that's in freefall, former Banco Central director Edwin Araque Bonilla said today on Radio Globo.

I suspect that a major part of the outflow of reserves of foreign currency is for petroleum products now that the de facto government has been cut off from the cheaper fuel of the Petrocaribe agreement and has to pay for petroleum in hard currency instead of the favorable terms of Petrocaribe. No wonder the Secretary of Industry and Commerce (SIC in Spanish), Benjamin Bogran, asked people to start saving gasoline. He noted that up until now, the government has been subsidizing half of the price increases in diesel, so its even more important to conserve that. He closed by saying they are developing biodiesel and ethanol.


Anonymous said...

RAJ, Honduras Dossier may be a resource worth looking at.

--Charles of MercuryRising

Jakob said...

looks like Honduras is benefiting from the 250 billion in SDR the IMF is giving out to shore up reserves. Honduras gets a nice little cushion of 163.9 million. Meaning they get about half of what they've lost in net reserves since the coup....

RNS said...

First, the BCH says 150.1 million, not 163.9 million in the press release, and its an interesting release; thanks for pointing it out. However, its not at all clear Honduras will be able to draw on those funds.

Here's what's clear. The FMI made an allocation of funds to all 186 member countries in proportion to their size, per the FMI document referenced in the BCH press release. That includes Honduras, but there are a number of extenuating circumstances that lead me to question whether they'll be able to draw on those funds.

(1)The FMI still recognizes Edwin Araque, head of the BCH under Zelaya as the BCH representative to the FMI. Araque still has signature authority with the FMI.

(2) The FMI has already cut off some funds to Honduras because it is not in compliance with FMI guidelines.

(3) The FMI has not disbursed any funds to the de facto government since it assumed power, and has no signed agreements with it.

(4) The Micheletti administration lies in press releases on a regular basis, as for example the alleged "red notice" arrest warrants that Luis Rubi claims Interpol has for various ex-Zelaya Ministers.

I'm not saying the BCH has lied; but there is no actual guarantee that they can draw on this allocation. Its interesting that they're the only country to issue a press release out of the regular FMI administrative process. No one else thought it was newsworthy. Think they're worried about their burn rate? I do.

Jakob said...

They are set to receive the rest of the 163.9 million on September 9 (if memory serves), which is when the IMF is allocating the rest of the drawing rights.

I would not give the FMI so much credit though, if they wanted to help they would have explicitly said, i.e. made a public statement, regarding the allocation to Honduras.

Clearly the golpistas are willing to lie, but without the FMI saying anything publicly, the propaganda will be allowed to stand. They can tell business leaders and investors that they have shored up the reserves, even if it is not completely true.

We are both in agreement that they are scared about the burn rate.

RNS said...

I'm still not sure the FMI will let the de facto government draw the money. Today's Tiempo has an article quoting Edwin Araque.

In it, he says the FMI reconfirmed him as governor for Honduras, and Rebecca Santos as sub-governor in a meeting with the Nicolás Izaguirre, FMI director for the western hemisphere. Also present was Ramon Guzman, FMI director for central america.

Araque says the money will not actually be made available to the de facto government, and said that the FMI was concerned by the loss of international reserves in Honduras since the coup.