Freedom

How the U.S. economic meltdown helped create a crisis in Honduras.

By Fernando Carrera Castro

The coup d'état in Honduras has received due international attention for its political implications -- and its potential to erode democracy across Latin America. Unfortunately, that's only half the story. Equally important are the economic factors that both catalyzed discontent and could now exacerbate the country's internal crisis.

Honduras is the most open economy of Central America and the one that most depends on its relationship with the United States. Exports to the United States accounted for almost a quarter of Honduras's GDP in 2007 (the second highest in Central America, after Nicaragua), according to figures collected by the Central American Institute for Fiscal Studies. Remittances from migrants amounted to 21 percent of GDP in 2008 and are expected to remain about the same this year. Meanwhile, U.S. direct investment in Honduras is among the highest in Central America. All told, Honduras's links to the U.S. economy represented close to 60 percent of the country's GDP in 2007.

Such a remarkable dependence was a blessing from 2003 to early 2008, while markets were booming and U.S. consumption was at an all-time high. But it turned out to be a major problem with the first signs of economic downturn, and since the last quarter of 2008, the situation has become a nightmare. The impact on exports, foreign direct investment, and tourism has resonated across Honduras. Businesses have gone belly up, consumer expenditure is down, unemployment and poverty are rising, and the government's coffers are running dry.

The downturn might have played well for ousted President Manuel Zelaya's increasingly populist rhetoric. But it also presented Zelaya with an awkward reality: Despite his nationalist rhetoric, Honduras would desperately need help from the United States and the international community to keep his government afloat. Calculations made in the early months of 2009 indicated that a fifth of the fiscal budget was expected to be financed with international loans and donations. By June, with the worsening economic situation and fallen fiscal revenue, this figure might have reached 35 percent. It is clear, then, that the government was not going to be able to pay its employees' salaries this year without external financial support. And this was the situation before the coup.

The current political crisis can only make matters worse (if such a situation is even possible). Any Honduran government will depend on the international community's financial support to survive in the coming year. The poorest citizens in Honduras, with one of the highest malnutrition and infant mortality rates in Latin America, might even need international humanitarian assistance if things continue on their current path.

Given this daunting situation, it is rather impressive that anyone wants to be president of Honduras at all. But if you are not poor, and your future is not threatened by the current economic crisis, you might find the presidency a very attractive job. One could ask Manuel Zelaya and Roberto Micheletti about that.

Fernando Carrera Castro is executive director of the Central American Institute for Fiscal Studies (Instituto Centroamericano de Estudios Fiscales).

Photo: ORLANDO SIERRA/AFP/Getty Images

That pesky little detail about "democracy"...

By Lino Gutierrez

On September 11, 2001, minutes after the attacks on the World Trade Center and the Pentagon, representatives of the Organization of American States (OAS) in Lima, Peru, signed the Inter-American Democratic Charter, a document that established that only democracies could be members of the organization. Last week, representatives of the same organization, which expelled Cuba in 1962, rescinded Cuba's expulsion and invited the hemisphere's lone Marxist dictatorship to return.

What happened in eight years? For one thing, the regional dynamics have shifted. After September 11, many believed that the United States, occupied elsewhere in the world, was paying little attention to its own backyard. Latin American countries, moreover, were never comfortable with the Iraq war. Even Chile and Mexico, usually staunch Washington allies, failed to provide needed votes when the United States sought the U.N. Security Council's approval to take Baghdad. Abu Ghraib, reports of civilian casualties, and George W. Bush's personal unpopularity all contributed to a precipitous drop in the U.S. image across the region.

Things changed for Cuba, too. Once a feared, Soviet-backed promoter of worldwide revolution, the Castro regime got new support thanks to the election of populist leaders like Venezuela's Hugo Chávez, Bolivia's Evo Morales, and Nicaragua's Daniel Ortega -- all of whom are admirers of Fidel. Suddenly, it is politically correct to welcome Cuba back to the family like a prodigal son. Under the leadership of Brazil's President Luiz Inácio "Lula" da Silva, the Rio Group, a collection of Latin American democracies, asked Cuba to join its ranks late last year (Cuba accepted). At least eight hemisphere presidents have visited the island of late, all getting the requisite picture with the ailing Fidel in his track suit (none of these official visitors asks about or visits Cuba's brave dissidents).

In the United States, too, some members of Congress are calling for an end to the 47-year-old trade embargo and travel ban. Although President Barack Obama has affirmed that libertad (freedom) will be the cornerstone of his Cuba policy, he has called for a new approach. Obama fulfilled his campaign promise to lift the Bush administration controls on remittances and travel by Cuban-Americans to visit their relatives in Cuba -- a measure that will mean additional foreign exchange for Cuba. Now, the U.S. president has called for Cuba to reciprocate.

The OAS would have been a great chance for Cuba to do just that. But Cuba won't rejoin the organization, which Fidel Castro once called a "Yankee bordello," anytime soon. The island's leaders did hail the OAS's invitation as a great victory, of course. But becoming an OAS member would subject Cuba to the kind of international scrutiny it has avoided for the past half century. The invitation calls for Cuba to rejoin the organization and commit to its established norms -- including the Democratic Charter. And while Venezuela and its allies would gladly give Cuba a pass, the United States, Canada, and others would require that Cuba at least begin a process that leads toward democracy.

That is a process that Cuba will not undertake so long as the Castro brothers are in charge. Though Fidel is no longer on stage, he continues to influence decisions behind the scenes. Brother Raúl seems to be open to more dialogue with the United States, and many Cubans hoped he was a closet reformer. But after announcing some modest economic reforms in 2008 (Cubans can now stay in tourist hotels), the regime seems to have retrenched and closed ranks, as the recent firing of reform-minded economist Carlos Lage and Foreign Minister Felipe Pérez Roque seems to indicate. Both Fidel and Raul have said that, while they're willing to talk to the United States, the revolution's principles are non-negotiable.

Curiously, the variable in the present equation is none other than Obama. Despite Fidel's boast of having outlasted 10 U.S. presidents, neither he nor Raúl have dared take on the popular U.S. president. Cubans are fascinated with Obama, having been told by the Castros for years that blacks were second-class citizens and that no African-American could ever hope to be in a position of power in the United States. In a country that is 60 percent Afro-Cuban, Obama's very election has sparked new hope among many that things could at last get better. How and when this will happen remains to be seen -- but at least for now, Cuba's future won't be in the OAS.

Lino Gutierrez was the U.S. ambassador to Argentina from 2003 to 2006.

Photo: ADALBERTO ROQUE/AFP/Getty Images