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Monday, June 29, 2009

Honduras Business Supports Zelaya Ouster

Honduras' business community supports the ouster of President Manuel Zelaya.
Manuel Zelaya's policies were seen as arbitrary and often hurting business. (Photo: Honduran President's Office)


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While the international community – including the US government and the European Union – condemned the Sunday ouster of Manuel Zelaya as president of Honduras, the business community in the country supported the move.


“It is extremely popular,” says Jacqueline Foglia Sandoval, former president of the American Chamber of Commerce in Honduras. “I don’t know of any one who isn’t celebrating.”


The ouster came after Zelaya’s efforts to hold a referendum on whether he could run for re-election. Such a move was deemed illegal by the Supreme Court and the national assembly, but Zelaya planned to move ahead anyway.

That followed three years of Zelaya policies that were seen as arbitrary and often hurting business, Foglia Sandoval says.

“Over the last three years, our ex president had created political and social chaos,” she says. “He [was] very unpredictable and many times [imposed] arbitrary actions that …affected the business climate.”


Among the latest examples, was his decision in December to raise the minimum wage by 60 percent despite that unions had demanded 20 to 30 percent and employers had countered with zero to 10 percent.

Not only did he exceed the union demands, but also imposed the new laws as companies already had their 2009 budgets ready, Foglia Sandoval points out. As a results some 150,000 jobs were lost during the past six months, she says.

Another concern was his talk about implementing socialism of the 21st century, modeled on Venezuela.  “People associate socialism with ration cards, with lines, with the things we do not want,” Foglia Sandoval says. “It’s a poor country, but we don’t have rationing, or lack of mobility, or have to ask permission for moving.”


Meanwhile, Zelaya neglected the issue that most Hondurans felt was their top concern – the lack of personal safety and the growing drug trafficking, she adds. “
He had completely ignored that,” Foglia Sandoval says. "This was becoming a narco state.”

Foreign investors also singled out the lack of security as the top challenge of doing business ion Honduras. “The main challenge has to do with security, and the negative effects that this issue has both in our consumers and on the ability to attract foreign investment," Pablo Largacha, a Costa Rica-based director of public affairs and communications for Coca-Cola's Latin Center Business Unit, told Latin Business Chronicle in late 2007.

Zeleya didn’t score any points for his hostile treatment of foreign oil companies, either. In January 2007, Zelaya announced plans to temporarily assume control of oil terminals and restrict imports of oil to one company in an effort to reduce fuel prices. However, after the US Embassy in Honduras warned that the takeover would have serious consequences, the government reversed its position on the terminals.



The ouster of Zelaya may lead to U.S. trade sanctions, Alfredo Coutino, director for Latin America at Moody’s, told Bloomberg.

Such a move would be ironic as Zelaya was the one who had been worsening relations with the United States, Foglia Sandoval says. However, the business community is planning to fight any sanctions by getting the message out that the ouster was done in accordance with Honduran laws. Among other channels, it is using the Internet through blogs like the one for the Union Civica Democratica, to get its side of the story out, she says.


“No body cared that for the past three years we had a president who violated laws,” would be ironic as Zelaya was the one who ha been worsening relations with the United States, Foglia Sandoval says. “It came to this point.”

The ouster won’t have much of an impact on bond valuations, according to JP Morgan analyst Franco Uccelli. “While we view yesterday's coup as an isolated event prompted by internal factors (most notably the alienation of business, political and military elites by Zelaya's decision to move Honduras closer to the left and his desire to reshape the Constitution to broaden presidential powers), we believe that to the extent that it exposes lingering institutional weaknesses in Central America, it is bound to generate some concern among investors involved in the region,” he wrote in an analysis today. “Given the low risk of contagion, however, we expect the impact on bond valuations to be generally negligible.”

© Copyright Latin Business Chronicle





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From: Shawn Paul

Awesome article. Why can't the USA leaders see this for themselves and respect the rule of law in Honduras. Is it possible that our current leaders in the USA have socialist fiber within them as well??

From: jason oberbeck

I'm proud of the people that took a stand against Chavez Socialism. This should send a message to the rest of these dictators too. The message is the real power is in the people, not the government.

From: paul blart

ironies abound in the honduran situation. the u.s. response will be interesting, particularly from the perspective of whether the administration chooses to view this essentially as a bilateral issue or in the multilateral context such as the OAS. interesting days ahead.

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