Lobo's dilemma

Out with the old, in with the new. Pepe and Mel. Photo: El Herarldo, Honduras.

Honduras president-elect Pepe Lobo's dilemma is understanble. Besides the political pressure, he's inheriting a bankrupt government.

Manuel Zelaya stepped into a cushy financial position in 2006, at least cushy by Honduras' poor standards. Many hundreds of millions of US dollars of debt had been forgiven thanks to efforts by the previous president, Ricardo Maduro. New aid was flowing in.

Zelaya received a government in as good financial shape as it has ever been. He took advantage of that and ran it into the ground with expensive failed projects, increases in government jobs, malfeasance, corruption, and extreme excesses, including the 61% raise in the minimum wage which his own government didn't have the money to pay to its employees. (Many government salaries by law are based on multiples of the minimum wage so the increase not only affected minimum wage employees.)

Eventually, aid began to be reduced because, for example, the UN and Sweden complained of poverty funds being used to meet government payroll and campaign promises rather than being used for the poor. Couple that with the effects of the international financial crisis and the resulting large reduction in family remesas, the economy is a mess. The internal debt is now at L. 23 billion (US $1.2 billion), more than tripled from 2006. The external debt of Honduras in 2008 reached the same levels as 2005, before the condonation.

That is the state that Micheletti received. There had been no budget, no financial reports. They didn't know where the money had gone − except the L. 50 million in cash withdrawn from the national bank which was caught on video on June 26. The country again had huge debts, virtually no aid, and no access to BCIE or the IMF for loans and disbursements on government projects already approved and underway.

Without the immediate restoration of aid and access to loans, there will be no money to meet payrolls, much less continue projects and meet Lobo's campaign promises.So, Porfirio Lobo will be in a bad spot when he takes over. He has been getting pressure from the US and OAS for months. Oscar Arias ominously threatened that Honduras could become the Albania of Latin America.