Honduran economy vulnerable in coup aftermath

Honduran business leaders are nervous last weekend's military coup could trigger retaliatory sanctions that would damage an already struggling economy and key industries like coffee and textiles.

The business elite feted Sunday's ouster of President Manuel Zelaya, who upset the courts, Congress and many in his party with a shift to the left and a push to lift presidential term limits, but worldwide condemnation of the coup has left the country isolated.

No foreign government has so far threatened sanctions, and the country's vital coffee industry has not been affected.

But Venezuela's socialist President Hugo Chavez, a close ally of Zelaya, has said he will halt sales of subsidized fuel to Honduras, Central American neighbors cut off trade for two days and international lenders have put loans on hold.

One of the poorest countries in Latin America, Honduras survives on agriculture, manufacturing and dwindling money sent home from some 1 million migrants living in the United States.

Falling U.S. demand has already cost the "maquiladora" or assembly-for-export factory sector some 19,000 jobs since last year, and economic growth is expected to halve to less than 2 percent this year as exports and remittances fall.

"In these times of crisis, this pressure means more job losses. Businesses will shut down," said Santiago Ruiz, the head of the national ranchers association.

The Inter-American Development Bank and the World Bank said this week they were suspending new loans to Honduras.

Central American governments imposed a 48-hour commercial blockade which cost the region some $61 million in trade, according to the head of Honduras' private business council, Guillermo Matamoros.

The new minister of commerce in a caretaker government set up after the coup, Benjamin Bogran, told Reuters that imposing economic sanctions would cause "social and economic chaos."

"The poorest sectors of society would suffer the most," Bogran said. More than 70 percent of the population is poor and around 40 percent live on less than $1 a day.

Coffee, Factories Vulnerable

Honduras, a member of a the Central America Free Trade Agreement, or CAFTA, sends most of its exports to the United States, but it also weaves the bulk of the cloth used by clothing factories across the region, Matamoros said.

"(Extending the blockade) is not sustainable, it's an extreme measure. If you close the border with Honduras, you close down trade in all of Central America," he said.

Rowdy street protests and demonstrator clashes with police in the capital Tegucigalpa and the eastern manufacturing city of San Pedro Sula are also worrying the business sector.

Coffee producers, concentrated in the mountainous regions near the border with Guatemala, say some highways have been blocked sporadically by pro-Zelaya activists, which could complicate access to farms needing maintenance ahead of the next harvest.

Yet most of the country's 3.22 million 60-kg bags of coffee exports for the 2008/09 season, which began in October, have already been shipped. Arabica coffee futures closed at a 9-week low on Thursday, showing the coup has barely registered in the market.

Some manufacturing companies are hurting, however.

On Monday, the day after soldiers seized Zelaya and flew him to Costa Rica, Canadian T-shirt and sock maker Gildan Activewear (GIL.TO) said it was halting operations at some of its Honduran plants for two weeks, sending its shares plunging.

Zelaya, a former timber magnate, has vowed to return to serve out the last few months of his presidential term, but the interim government has warned him to stay away for the sake of peace and says it will arrest him if he enters Honduras.

The head of the Organization of American States traveled to Honduras on Friday and was expected to hand the interim leadership an ultimatum to reinstate Zelaya or face suspension from the regional body.

Cesar Leon, a foreign ministry spokesman in Guatemala -- Honduras' No. 2 trading partner, said he could not rule out the possibility of closing borders to commercial trade again.

[Fuente: Reuters, Tegucigalpa, 03Jul09]

Tienda de Libros Radio Nizkor On-Line Donations

DDHH en Honduras
small logoThis document has been published on 04Jul09 by the Equipo Nizkor and Derechos Human Rights. In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.