Marco Cáceres di Iorio

Beware of Neoliberal Economic Growth Strategies

Honduras used to be known as the “breadbasket” of Central America. It grew enough of the basic staple crops of beans, rice, and corn to feed its own people and then have enough left over to export to the region. But back in the early-1990s, as part of economic liberalization efforts by the World Bank and International Monetary Fund (IMF) to push for free trade and open up markets around the world — the so-called policy of “neoliberalism” — these institutions persuaded Honduras, governed then by President Rafael Leonardo Callejas, to lower or eliminate import duties on basic grains, thereby opening the way for cheaper imported beans, rice, and corn. In return, Honduras received loans that it needed to pay off older loans accumulated by previous governments. And consumers benefited from lower food prices (temporarily).

But the price for Honduras’ small farmers and rural communities was huge. Because small farmers were not able to compete on price with the much cheaper imports, many of them went out of business, had to sell their lands, and eventually had to move with their families to the cities to find work. (This migration of campesinos to urban areas and abroad — mainly the US — created a whole new series of social, political, and economic problems for Honduras. But that’s another story.) Suddenly, it became much harder for campesinos to feed their families, their communities, and the rest of the country’s population.

All this was done in the name of “free trade.” Of course, the idea of free trade has largely been a myth, because a large portion of the cheap grain imported by underdeveloped countries like Honduras under neo-liberalism has been subsidized by foreign governments. The United States government, under the massive Farm Bill for its Department of Agriculture, is bloated with subsidies designed to protect US farmers. Just from 1995 through 2012, for example, US rice subsidies totaled $13.3 billion. For that same period, US subsidies for corn totaled $84.4 billion.

Free trade? No such thing.

Naturally, small farmers in Honduras could never hope to compete. Despite all the talk of free trade on the part by advocates of neoliberalism, the fact is that free trade has never existed because of the widespread and huge government subsidies. If the subsidies were removed, many farmers in the US would face the same fate as have many Honduran farmers: They’d go out of business.

Thanks to the deals made with the World Bank and the IMF two decades ago, Honduras has lost its ability to feed its own people. Nearly two-thirds of the rice Hondurans eat has to be imported. Half of the corn consumed has to be imported. The country has also become vulnerable to fluctuations in the international prices for its staple foods, making it increasingly difficult for Hondurans to afford a basic diet, particularly in light of the prevailing low wages and high unemployment. Is it any wonder that there is so much crime and violence in the country? People who are hungry and are desperate to feed their families tend to do things they would not normally do.

But it’s not bad enough that Honduras has lost its domestic ability to feed itself and is subject to up-and-down world prices for the grains that its people require to survive, now — because of this external dependency and vulnerability — the country is even more vulnerable to whimsical threats such as currency devaluations.

An IMF team, led by Lisandro Abrego, arrived in Tegucigalpa yesterday. It will spend about 10 days in Honduras negotiating with a team from the Honduran government… starting off with a nice cocktail reception last night. The talks could result in some $220 million in credit for Honduras under favorable rates of interest. One of the central points of discussion will likely be Honduras’ high budget deficits and to what extent they should be reduced. In other words, how much pain should the Hernández administration inflict on the Honduran people in terms of spending reductions.

Another point of contention may be the value of the lempira. It’s no secret that the IMF would like the Honduran government to significantly devalue the lempira, which currently trades at about 21 to the US dollar. Any devaluation — forget a major one — would greatly hurt the poor in Honduras where it hurts the most: their stomachs. A devaluation would immediately make imported grains more expensive, and thus more unattainable for the poor, who are already hungry and malnourished.

Thus, this is a really bad idea. The people from the IMF know it, but that’s not their primary responsibility or concern. Their job is to find ways for Honduras to increase its exports and attract foreign investment in order to generate more hard currency for the government so that it can improve its capacity to pay off its international loans and receive new ones. So you can’t blame them too much for insisting on an “accelerated” devaluation.

The blame should fall squarely on the shoulders of the Hernández administration if it allows itself to succumb to this pressure… against the better core interest of the vast majority of Hondurans: the poor.

Feed, educate, and protect your people. It’s pretty basic. If a government can’t do it, then it doesn’t deserve to be in power.

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