While the rest of the world has since carried on as if nothing had ever happened, the Honduran economy still bears painful reminders of the coup and its consequences. The Economist sums things up succinctly. “It is the third-poorest country in mainland Latin America in terms of GDP per head, and is heavily reliant on foreign help. In the six months between the coup and the election of Porfirio Lobo…the aid tap was turned off. In 2009 the country lost out on $320m in grants and credit, says Humberto López of the World Bank. Its public debt rose from 19.8 percent of GDP in 2008 to 26.3 percent in 2010… Even after two voluntary bond conversions this year, extending maturities to between three and seven years, repaying the principal of the domestic debt alone will cost Honduras 1-2 percent of GDP each year until 2015.”
A suffocated economy, though, could be the least of the country’s concerns. Since taking office, the administration of Pepe Lobo has opened the door to expanded American military presence in Honduras and has quite literally auctioned off his country’s sovereignty and right to self-determination.
Last week, the New York Times reported that the United States has established three new military bases—“each in a crucial location to interdict smugglers moving cocaine”—as part of its increased efforts in a revamped “war on drugs” in Latin America. While the US mission has been ordered “to maintain a discreet footprint,” the six hundred American troops are now “responsible for the military’s efforts across all of Central America,” and offer Hondurans another reminder of Washington’s grim record of military involvement in the country. Even hard-right conservatives are spooked, though for reasons that have more to do with American security than they do Honduran interests. According to the Times, these efforts will “draw on hard lessons from a decade of counterinsurgency in Afghanistan and Iraq,” a plan that leads Cato’s Ted Galen Carpenter to remark, “That anyone would regard the Iraq debacle as a template for future military operations is more than a little worrisome. The principal lesson of the Iraq war should be to avoid murky counterinsurgency/nation-building crusades, not to try to pursue such missions more effectively.”
As the US military sets up shop in remote jungle areas, the Lobo administration has been looking to radically refashion the country’s urban centers through a privatization scheme that would make Milton Friedman blush. Planet Money’s Adam Davidson reports that “in late 2010, [presidential aide Octavio Rubén] Sánchez met with [economist Paul] Romer, and the two hurriedly persuaded President Lobo to make Honduras the site of an economic experiment. The country quickly passed a constitutional amendment that allowed for the creation of a separately ruled Special Development Region.” The so-called “charter city” will reportedly “assure investors that they’ve created a secure place to do business…If a multinational company commits to building new factories, real estate developers will follow and build apartments, which then provide the capital for electricity, sewers, telecom, and a police force.” If this sounds like the colonial Mandate System on crack, that’s because in many respects it is, though potential nation-state partners are wary. “Romer hasn’t yet been able to persuade any nations to take on the role of custodian, so Honduras has named a board of overseers until there are enough people to form a democracy.” A democracy of whom, one might ask? It’s not clear, though in yet another twist of irony, the first of Romer’s Honduran charter cities is slated to be built around the harbor of Trujillo, site of Christopher Columbus’ first forays onto the American continent and the inspiration for O Henry’s “Cabbages and Kings”—from which famously comes the term “banana republic.”
Not surprisingly, supporters of each initiative highlight the potential positives. Davidson points out that “Even though he expects most initial opportunities will be fairly low-paying basic industrial jobs, the local government [of the charter city] will mandate policies that ensure retirement savings, health care and education. According to Romer’s plan, the immigrants who arrive will not get rich, but their children will eventually be ready to climb the economic-development ladder.” Meanwhile, containing the operations of drug traffickers is of direct important to US security because, according to Admiral Joseph Kernan, the number two man at US Southern Command, “There are ‘insidious’ parallels between regional criminal organization and terror networks.”
But when we consider that violence and foreign control have been at the heart of Honduras’ problems for the better part of a century, these latest developments are of great concern. And not only that, they’re also interconnected. Carpenter correctly notes that “Because of the black-market risk premium, profit margins are far wider than normal, filling the coffers of illicit traffickers and giving them ample financial resources to challenge competitors and either corrupt or neutralize government institutions…Unfortunately, the Obama administration stubbornly refuses to recognize that reality.” This has direct effects on the dismal levels of physical security countries like Honduras suffer, which in turn scares off potential investors from putting their money behind the country’s economic development. Jettisoning failed and flawed prohibition policies would likely reduce levels of violence as profits—and therefore market monopoly incentives—shrink, and return the economy to a semblance of stability. The result would leave both Romer and the United States military without reason to be in Honduras which, if they are both committed to the region’s future prosperity as they have led us to believe, should be not only a policy preference but a matter of highest priority.