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Free trade with poor, dangerous Honduras

Friday, October 14, 2011

It’s better than it sounds

Stephen Harper wants Parliament to approve a free trade deal with Honduras, the country with Latin America’s highest homicide rate and second-lowest standard of living, and with which Canada last year had merchandise trade of $192 million – the amount of business which Canada does with the United States in three hours.
So why is the Prime Minister, along with several senior officials and dozens of bureaucrats, spending valuable time on this project?
Actually, it could be a smart plan.
Canada needs new markets, since trade with traditional parters, especially the United States and Europe, has declined significantly during the past decade.
For its part, the United States has trade agreements with seven Central and South American countries, including Honduras.
Partly as a result of these deals, U.S. sales to the region increased close to 70% between 2000 and last year.
Honduras may be small, but it presents interesting opportunities for Canada.
For one thing, Honduras wants to make more clean energy, something which Canadians are good at.
Right now, it is planning two hydroelectric dams, Llanitos and Jicatuyo, which together will cost $600 million.
Honduras has commitments for $450 million, from Brazil’s National Development Bank and the Bank for Regional Economic Integration, among others.
A Canadian energy group may want to invest the remaining $150 million, especially if a free trade agreement exists, which makes the company’s investment safer.
Then there are potential mining projects, which at current prices for gold, silver, and other metals and minerals, would let Honduras earn a lot of money.
Many Hondurans oppose resource industries, because of environmental concerns, and because they think that most of any money the country gets from these projects will end up in politicians’ offshore bank accounts.
But with its share of mining income, Honduras could hire the world’s best environmental engineers, to guaranteee that any mine minimizes risk.
Miners can’t stop public officials from stealing money.
But Canadian mining companies – which already have more than 20 projects in the region, active and pending - could help Hondurans directly, for example by putting computers and an Internet connection in every rural school.
For their part, Canadian exporters should be able to increase sales to Honduras.
In the case of neighboring Costa Rica, Canadian exports more than doubled in the five years following the 2002 entry into force of a bilateral trade agreement, led by grains, beef, pork and packaged foods.
With a trade deal likely imminent with Panama, which for the past five years has had Latin America's highest annual rate of growth, Canadian exporters will be to a great extent be able to treat Central America as a single economic zone.
Honduras had serious problems in 2009, when opposition parties took power in a coup.
But the current president, Porfirio Lobo, is doing progressive things.
He wants Honduras to open commercial offices in China, India and Singapore, as well as Canada.
Lobo also has a plan to let private investors develop entire towns, which they would own and operate.
The concept of private cities is radical.
It may also be ingenious.
Honduras has outstanding natural resources, including fertile fields, significant hydroelectric potencial and beautiful beaches.
But the effect of widespread corrpution and inefficiency means that most Hondurans live poor and die young.
In this case, maybe outsiders can do a better job.
Free trade with Honduras can be profitable for Canadian companies.
Free trade with Canada may help Hondurans become richer and more peaceful.

* Published September 22, 2011 in the Globe and Mail

Fred Blaser
Republica Media Group