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In the News
Last Updated: 01/01/1900
Presidential Somersaults and Elite’s Greed in Honduras
by José Cuesta

September 18, 2009


More Than Meets the Eye

Hondurans consider themselves to be proverbially calm. When asked how they are doing, they will most likely answer a laconic “tranquilo.” They consciously distance themselves from their rebellious Nicaraguan and industrious El-Salvadorian neighbors. If this is a good indication of the Honduran collective psyche, it might offer an explanation for the traditional absence of the country in the headlines. The military ousting of President Zelaya in his pajamas on the morning of June 28th, however, did make it into the news worldwide.

Yet nothing is what meets the eye in Honduras. Despite what would seem a very low “decisiveness parameter”, in the language of economic theory of conflict, Honduras has hosted more than 400 armed uprisings since independence from the Spaniards. In the 1960s, Hondurans and El-Salvadorians brawled into a war that was ignited by their rivalry during the soccer World Cup qualifying round. The hundreds of disappeared civilians in the ‘70s made little dent on the Hondurans’ trust in the military, second only to their faith in the Church, as reported year in and out by Latinobarómetro opinion polls.

Even though Honduras has lacked a rebel group seeking separatist goals, break-away enclaves or ethnic tensions, several ethnic groups share very little in common, from Miskitos in the sparsely-populated Eastern jungles to English-speaking black Garifunas in the tourist-based wealthy northern islands (once haven of pirates) – in this Central America country of 7.7 million people slightly larger than the state of Tennessee.

The country is also the third poorest in Latin America—after only Haiti and Nicaragua—and is abundant in neither high-value mineral nor agricultural natural resources. Yet, the infamous economic abuse and political interference of large fruit transnational corporations during the first quarter of the last century led to the coining of the term “Banana Republic”, later replaced by the “backyard” of the U.S. counter-insurgence operations against Nicaraguan Sandinistas.

Adding to these numerous contradictions in Honduran history, the military toppled Mr. Zelaya’s administration just five months before the legal expiration of his term. The military alleges that they simply responded to an indictment by the Supreme Court ruling out Mr Zelaya’s aspirations of a constitutional reform referendum as illegal. In fact, Article 239 of the current 1982 Constitution sanctions a President who instigates the reform of its foundational articles (called pétreos, literally, cast in stone) with separation from public office.

These circumstances make the Honduran coup unique as the military overthrew a legally elected President ostensibly on behalf of preserving the constitutional rule of law that was perceived (certainly by the socioeconomic elite) to be threatened by the incumbent government. The military did not seize power for itself, but instead transferred it to the opposition group, which maintained the constitutional rule of law pre-existing the coup. Even though preserving the Constitutional rule of law is certainly a mandate of the armed forces (Article 272 of the Constitution), they incurred unconstitutional acts in Mr. Zelaya’s overthrow: Article 102 indicates that a Honduran citizen cannot be extradited or handed over to a foreign State; Article 278 explicitly indicates that the armed forces must obey President’s commands; Article 375 states that those violating the Constitution ought to be tried under the Constitution and incumbent laws.

In any event, this is clearly different from the last century’s assiduous military coups, grabbing power and changing the Constitutional order, as well as from recurrent popular protests forcing the incumbent President out of office observed in Latin America since the ’90s. In contrast, the Honduran coup took place in order to maintain a threatened—or so it was perceived­—status quo. The military was the executing instrument but not its direct beneficiary.

The Foretold Chronicle of a “Somersaulting” President

In hindsight, Mr. Zelaya’s attempts to reform the Constitution via summoning a new Constitutional Assembly that would potentially pave his way for re-election, were inexorably what took him out of office. Why then Mr. Zelaya’s insistence?  Some analysts point to the erratic, impulsive and confrontational character of Mr. Zelaya, which would have magnified the large discount rates into the future and short planning horizons that politicians are typically bestowed with. A Chilean analyst, Angel Saldomando, puts forward another view—not inconsistent with the former—stressing Mr. Zelaya’s incapacity to generate minimum political consensus. That inability led him to a disproportionate personalist and antagonist behavior, in which the consultation of the constitutional reform was a question of life-or-death.

However truthful, these are opportunistic explanations of the Honduran coup. A longer term perspective is in order, going back at least to 1981, when Honduras returned to democratic rule after years of intermittent military dictatorships. Since then, seven elections have been held periodically every four years, with four transitions of power between the two major parties, Liberal and National, both widely considered conservative. The 1982 Constitution precludes Presidents from seeking re-election, either for consecutive or non-consecutive terms. However, more than twenty five years later, analysts consider the Honduran democracy to be far from fully developed, engaged instead in a continuous partisan uncooperative electoral-like state; overridden by rent-seeking and clientelist behavior; and insufficient—albeit increasing—political participation of civil society.

By November 2005, Mr. Zelaya unexpectedly won the Presidential election with 46 percent of the total vote. His subsequent years in office were marked by international oil, food, and financial crises, exacerbating the country structural economic problems (declining labor productivity; no diversification strategies; scarce reform progress) and political troubles (corruption, reform paralysis, and insecurity). The poverty reduction strategy that had guided policy making in the previous two administrations—but seen by many as an imposition of a neoliberal international community—was moved out the limelight. In a 360 degree shift, Mr. Zelaya turned his initial conservative ideological position towards leftish positions, adhering in August 2008 to the left-wing coalition of ALBA, the Bolivarian Alternative for the Americas, with Venezuela as its powerhouse.

That shift generated fear and uncertainty in a significant section of the Honduran society, which was further alarmed when, eight months before elections, Mr. Zelaya announced his intention to call a new constitutional assembly  referendum coinciding with  the November elections day that would possibly revoke the prohibition of re-election. Congress, the political establishment (including his own party), and the judiciary (both Supreme Court and Supreme Electoral Tribunal) all declared the referendum illegal in June 2009. Mr. Zelaya replied by organizing a popular consultation (to be held on June 28, 2009) on the need to summon the constitutional assembly referendum. The military publicly warned the President of the dire consequences of his plans. After that, Mr. Zelaya removed the Armed Forces General in Chief, General Vasquez. The day after, June 27, 2009, Mr. Zelaya headed for an air force base accompanied by a horde of supporters to recover the electoral material for the popular consultation that had been seized hours before by the air force. The following morning, the military arrested and ousted the President to Costa Rica.

Since then, Mr. Zelaya has symbolically participated in institutional meetings by a sympathetic international—mainly Latin American—community such as ALBA and UNASUR (Union of South American Nations, in English) summits and the American States Organization, OAS, sessions. OAS’s initial endeavors to restore the ousted president  failed, seen by many as the workings of a lop-sided leftish ideological position driving OAS actions.

Prompted by the U.S. government, a couple of rounds of negotiations between Mr. Zelaya’s and de facto President Mr. Michelletti’s teams took place in Costa Rica under the auspices of President and former Peace Nobel Laureate, Mr. Arias. The negotiation also failed by the refusal of the two protagonists to meet in person. Ironically, President Obama’s public calls for the restoration of Mr. Zelaya equally disappointed the de facto administration (whose Foreign Ministry doubted Mr. Obama’s knowledge of the situation with clear racist overtones) as well as the previous administration: Zelaya himself and Venezuela’s President Chavez accused him of not doing enough to put him back in office. Part of this U.S. anomie may be explained by the decisive phases undergoing key domestic and foreign issues for the Obama administration, such as health reform, Afghanistan’s election and U.S. involvement in Iraq, to cite a few.

Mr. Zelaya’s behavior since his ousting has not helped, either, increasingly perceived as being orchestrated from Caracas: specifically his repeated calls to supporters for a direct confrontation with the de facto government (initially calling for an insurrection, then for resistance) and his bizarre attempts to enter the country, first by a broadcasted live incursion by plane, then, literally speaking, by momentarily stepping in and out of the border with Nicaragua. In the contexts of the clashes between supporters and security forces, three people have died.

The Untold Story of Elite Greed and Social Contract Rupture

Under the theory of conflict developed by economists such as Grossman, Hirschleifer, Collier and Hoeffler, the Honduran coup can be modeled as one in which the opposition’s greed plays a critical motivating role. In peace, the government has access to fiscal revenues of both supporters and opposition (whether or how successfully the opposition manages to evade their taxes is not considered here, but it will not change the conclusions). This public provision of services may well be the result of the public good nature of most of these services—many universal, others simply ill-targeted in practice—rather than a benevolent nature of the government.

The government receives external resources in the form of investments and aid that in turn can be destined to economic productive development (which in Honduras has led to investments in infrastructure and timid export-led diversification), military activities, and the financing of public transfers, which in Honduras has meant substantive additional resources for the poverty reduction strategy linked to debt-relief. At its peak since the initiative started in the late 1990s, poverty related spending represented 10 percent of the GDP. The opposition carries out its productive activities, is taxed, and receives public transfers as seen above.

This constitutes what some in the context of conflict theory call “social contract”, a formal or informal arrangement that governs the allocation of resources and the peaceful settlement of grievances. Its fissure is frequently responsible for the onset of civil conflict, as has been the case in Africa (along with ethnic and regional dimensions not applicable to Latin America). Interestingly, this notion of social contract intertwines greed and grievances, which have traditionally separated economist and non-economist explanations of conflict outbreak and duration.

There are obviously several degrees of social contract fractures, only some of which should expectedly bring about such dire consequences as to prompt a rebellion or a coup. In the case of Honduras, was the lack of expected economic growth or faster poverty reductions likely seen as a social contract rupture? Unlikely. For that to happen, poor performance must be solely attributed to the government’s decisions, which becomes increasingly difficult to sustain in the globalized era we live. Furthermore, days before his overthrown, a Gallup opinion poll reported Mr. Zelaya’s approval rates at 46 percent, surprisingly intact with respect to those taken four years ago when he was elected. Did he announce draconian economic, trade, taxation or social policy shifts that would dramatically affect investors’ expectations? No. In fact, both net inflows of foreign direct investments and gross capital formation as a proportion of GDP have been moderately increasing since 2005.

What, then, would likely cause a social contract fracture in Honduras? We need to look at politics not economics. The issue of re-election was central in Mr. Zelaya’s announcements of constitutional reform, starting with a process of constitutional overhaul by a new Assembly clearly reminiscent of Venezuela, Bolivia, and Ecuador’s recent reforms. It is unclear, nonetheless, the extent to which the terms of the constitutional overhaul were already drafted or planned, which must only have contributed towards a greater deal of uncertainty and anxiety among the economic, social and political elite in the country.

The social contract at risk was not necessarily that governing the transfers across citizens’ political identities. Instead, it pointed to the accustomed power sharing between the two major parties, Liberal and National, which equates to the share of power among the handful of families dominating the political and economic spheres of the country. In a simulation exercise that models the rupture of social contract for Honduras, I estimated that the feared losses by this elite sector must have exceeded a whopping 11 percent of the GDP in order to green-light the military ousting of Mr. Zelaya. Perceived losses by the elite might have consisted of direct redistributions of wealth to the non-elite as well as indirectly from the empowerment of other groups such as supportive radical civil society organizations. The estimated amount undoubtedly would constitute a massive redistribution of resources within any society large enough to support such drastic measures. Also, it is a mobilization of resources feasible enough in Honduras, which has recently witnessed poverty-related spending within a similar order of magnitude. It is also reassuringly close to Paul Collier’s gross estimates of a 15 percent GDP loss in an average civil war.

The Next Critical Question

Beyond the questions of what motivated Mr. Zelaya and the elite to what they did, the social contract and greed explanation suggests that even in a heavily indebted poor country subject to continuous monitoring by the international community and strongly dependent on aid and debt-relief, the influence of the international community is ineffective in defraying a major crisis when the mechanisms that guarantee the elites’ grip on power are at risk. Regardless of the advocated principle of defending democracy’s legitimacy against a coup or the principle of defending the Constitution against its internal threats, it is the conventional fear—justified or not—of extraordinary economic losses expected under new rules of the game that might explain the lion’s share of motivations for the unusual coup in Honduras. The critical question for the future is whether more deliberate efforts to reform the economy, to tackle daunting levels of poverty and inequality, and to make Honduras’ form of democracy more participatory will meet the same fate as Mr. Zelaya’s purported re-election ambitions.