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Saving honduras, saving money

Thursday, October 13, 2011

A modern Marshall Plan would work better than the current system of wasted loans


Much of the western world has been outraged by the supposedly unconstitutional ouster last June of Honduran president Manuel Zelaya.
But this kind of political convulsion is pretty much normal in Honduras, where a video currently circulating purports to show Zelaya aides carting $2 million out of the Central Bank days prior to his expulsion by the army, whose chief of staff was in 1993 charged with being one of the leaders of a major car-theft ring.
What is – or should be – equally outrageous is the fact that during the past decade rich nations loaned Honduras vast amounts of money, which created little benefit for anybody.
Lenders recently ended up forgiving close to $4 billion of debt, which Honduras could not repay.
But despite these massive cash infusions, Honduras is still the third-poorest country in the Latin America, with annual income per person of $1,400.
Nor have poverty levels improved since 1998, according to the World Bank.
A better solution to solving the problems of dysfunctional countries such as Honduras is to offer them even bigger loans, but this time along the lines of a modern Marshall Plan, in which lenders and borrowers jointly control the way in which the cash will be spent.
For the most part, international aid programs currently involve rich countries and their multilateral lending institutions advancing money to poor ones, with only minimal controls over how the funds are spent, and – apparently – with little interest in knowing whether or not they have done much to help needy people.
By contrast, the Marshall Plan, which helped 16 European countries recover quickly from the devastation of World War II, involved the United States providing billions of dollars in financial aid, administered jointly by American and local business people and bureaucrats.
Joint management could help Honduras, which has great potential for growth in areas that include hydro-electric power, agriculture, tourism and light manufacturing.
Its people are for the most part hardworking and eager to improve their lives, which is why many (estimates range as high as 1.5 million) have endured the danger and trauma of migrating illegally to the United States.
Honduras also has a core group of well-trained professionals and skilled craftpersons, who would benefit from working with foreign managers and technical experts.
Meanwhile, a joint administration would help ensure that rich countries’ loans are invested in ways that are good for Hondurans, while creating a stronger market for the lenders' goods and services.
If support came from a consortium as diverse as the Paris Group, comprising 15 European countries, plus the United States, Canada, Australia and Japan, Honduras wouldn’t have to worry about the loans being politicized.
In addition, Honduras could work together with the lenders to define the projects which get financial aid.
Under the new arrangement, Honduras (or any other beneficiary country) could refuse to participate, in which case it gets no more financial support.
Or it could accept the program, including joint management and supervision, and get more support than before – clearly the better choice.
A new Marshall Plan would produce greater efficiencies not just for Honduras, but also for lenders, whose money would be better spent, and who would waste less time being outraged.

Fred Blaser
Republica Media Group