High murder rate in Honduras, but presidential vote could hinge on economy

In Honduras, the gap between rich and poor has grown since the last election, and violence and economic decline have gone hand in hand.

For two decades, Sandra Rivera worked in one of this city’s maquiladoras, factories that receive materials from the United States and return them as brand-name clothes: Nike, Abercrombie & Fitch, Fruit of the Loom.

But last month, Ms. Rivera struck a deal with her employer, agreeing to be laid off from her job sewing T-shirts in order to receive back wages. Waiting in a packed unemployment office, Rivera, 36, says her age and lack of a high school diploma have made finding work nearly impossible.

“The only thing I ask from the next government,” she says, “is that they generate more employment, and that there are opportunities for older people like myself.”

On Sunday, Hondurans will choose a new president. Though the Central American nation has the highest murder rate in the world, with an average of 20 murders per day that shows no sign of dropping, election-season polls show that residents worry at least as much about economic problems as they do crime. More Hondurans are living in poverty, and fewer are formally employed than they were four years ago, when a military coup deposed then-President Manuel Zelaya.

The two front-runners have stumped on economic proposals, but have offered few specifics. Some business leaders, meanwhile, have responded to the economic crisis with radical plans to create city-size trade zones that would have their own autonomous governments, police, and laws.

“Rapidly declining living standards will be a pressing issue for whoever is elected,” says Jake Johnston, an analyst with the DC-based Center for Economic and Policy Research (CEPR).

Employment drops

In the four years since the coup, poverty levels and the gap between the rich and the poor have increased dramatically. While most of the region has seen a reduction in inequality, Honduras has the greatest wealth disparity in Latin America, according to a report released this month by CEPR. Of the country’s 8 million people, 46 percent are now living in extreme poverty, up from 36 percent five years ago. 

“In a country plagued by record-high levels of violence,” says Mr. Johnston, "increasing poverty, unemployment, and inequality will only exacerbate the problem.” 

Honduras’s recent economic woes began with the US recession of 2008, which hit the maquiladoras hard. The following year, the ousting of Mr. Zelaya resulted in a holdup of essential foreign assistance.

Honduras missed out on hundreds of millions of dollars in grants and credits in 2009, and to make up the shortfall, it took on unfavorable loans that it’s still paying off. Even after aid flows resumed, Honduras continued to rack up public debt, which now tops $7 billion, and it's estimated that a fifth of next year’s budget will be designated to paying it off. No one knows for sure, though – the budget is sealed in an envelope that the parties have agreed not to open until after the elections.

Unable to raise revenues, the Honduran government has resorted to simply not paying doctors, nurses, teachers, and other public sector workers, who have responded over the past year with strikes.

Many of the applicants crowding San Pedro Sula’s unemployment office have been without regular work for months. Like Rivera, who now makes a living washing clothes, most have taken on informal jobs selling food or cleaning buildings, joining the growing number of underemployed here. According to CEPR, the number of people working full time but not receiving the monthly minimum wage ­– which varies by industry but is on average about $340 a month – has jumped from 28 percent of the workforce in 2008 to more than 40 percent this year.

The informal sector is becoming “a refuge” for unemployed Hondurans, says Guillermo Altamirano, an economist in San Pedro Sula. But this type of work generates incomes of about $130 a month, less than a third the average minimum wage, Mr. Altamirano says.

Crime and violence

The presidential campaigns have focused largely on crime and violence. Altamirano says these issues carry economic consequences as well: Foreign investment has stagnated, partly due to security concerns. According to the Inter-American Development Bank, crime and violence cost Honduras $1.7 billion in 2010, or about 10 percent of its gross domestic product.

Still, Altamirano says, “there are no clear proposals from the candidates” on how to get past the economic crisis.

The most recent polls have the two lead presidential candidates, Xiomara Castro de Zelaya, and Juan Orlando Hernández, in a statistical tie. The last CID-Gallup poll, in October, had Mr. Hernández with 28 percent support, compared to 27 percent for Ms. Castro.

Castro, head of a new left-leaning party called Libre and wife of ousted President Zelaya, has said she would curb government spending and seek new streams of foreign investment to ameliorate problems with the economy. She also promised agrarian reform and credit programs as anti-poverty measures.

Hernández, head of congress and part of the conservative National party, has promised to boost manufacturing and agriculture in an effort to create jobs, and to expand a cash-assistance program for the country’s poorest families.

Both candidates say they would crack down on the country’s rampant tax evasion and seek a new deal with the International Monetary Fund, something that outgoing President Porfirio Lobo failed to do. Honduran economists have predicted that such a deal would involve lower public salaries, privatizing some state utilities, and devaluing the currency.

Thinking outside of the box?

In San Pedro Sula, the nation’s business capital, industry leaders are promoting a solution all their own ­– one they say would alleviate economic and security concerns in one stroke.

Employment and Economic Development Zones, or ZEDEs, legally sanctioned last year after a series of constitutional amendments, would be run independently of Honduras’s national government. They would comprise, in some cases, whole cities complete with their own courts, tax systems, and police – and a lot of factories.

By being beyond the legal reach of corrupt institutions and immune to shifts in political power, the zones are positioned to thrive ­– and to spur investment, says textile magnate Daniel Facussé, the president of Honduras’ association of maquiladoras.

Critics of these zones counter that they would weaken Honduras’ institutions further, insulate businesses from civil rights, labor, and environmental laws, and likely fail anyway. The first test of their viability will come on election day, when the 100,000-some residents of two towns, Peña Blanca and Suyapa, vote to decide whether they want to be governed as ZEDEs.  

Mr. Facussé insists that the zones are the only way to attract foreign investment and create jobs.

“We need to realize that Honduras by itself does not have enough money to be able to provide decent jobs for everybody that needs them,” he says.

For many in San Pedro Sula’s unemployment office, any job will do.

Alejandro Cabrera has cleaned bathrooms, welded, and sold tacos this year. These informal jobs have helped him cover whatever necessities his wife’s income from a textile factory often can’t. But he would prefer something steady that lets him take care of the couple’s two sons.

“It’s not easy to go home when you don’t have a job,” Mr. Cabrera says, fiddling with his wedding ring. “At times, my sons ask for something and I can’t bring it to them.”