Thursday, December 4, 2014

Falsified Supreme Court Decision

On November 25th the Constitutional branch of the Honduran Supreme Court emitted a ruling finding the government responsible for defaulting on a payment to a Honduran pharmaceutical company, and ordering it to pay immediately 126 million lempiras.

Or did they?

On December 3 of this year, the Honduran press covered the release of a Constitutional Branch of the Supreme Court legal decision, upholding a lower court ruling that the government of Honduras owed Farmasula S.A. de C.V. 126 million lempiras (about $6 million) based on the government defaulting on a payment of about 61.5 million lempiras (about $2.9 million)  to the company.

The order was "signed" by Justices Silvia Trinidad Santos Moncada (president of the Constitutional branch of the Supreme Court), Jose Elmer Lizardo Carranza, Jorge Alberto Rivera Aviles, Tomas Arita Valle, Reina Sagrario Solarzano Juarez, and Lidia Estela Cardona Padilla.

Now, there are several problems with this order.  First, it supposedly has six signatures of justices, but each branch of the Honduran Supreme Court consists of five justices, not six.  Where did that sixth justice come from?

Second, there are the names of several justices there that don't ordinarily belong on a Constitutional branch opinion.  I refer of course to justices Alberto Rivera Aviles, Tomas Arita Valle, and Reina Sagrario Solarzano Juarez.  They are not listed as members of the Constitutional branch, and so could come to sign an opinion there only if some of the assigned justices were absent.

This turns out to be the case.  Three of the justices assigned to the case, Lidia Estela Cardona Padilla, German Padilla, and Victor Lozano, were out of the country the day the case was supposedly decided, attending a judicial seminar.

By being out the country with her colleagues at a judicial seminar, Lidia Estela Cardona Padilla could not have participated in any debate or signed the decision on November 25th.  She flat out denies that her legitimate signature appears on the document.

The accuracy of the order is supposedly guaranteed by the signature and seal of Carlos Alberto Almendarez Calix, secretary of the Constitutional branch.  Did he goof and add her name to the list of signatories?

But more importantly, why was this case, which had been tabled for further study and not scheduled to be decided, suddenly brought up and replacement justices assigned while the three normal members of the Constitutional branch were out of the country attending a legal seminar? 

Someone needs to ask Justice Silvia Santos Moncada that question.

Tuesday, November 18, 2014

Honduras's Millennium Challege Scorecard, 2015 Edition.

Honduras once again failed to resolve issues that prevent it from obtaining a Millennium Challenge Compact from the US Government.  Honduras failed to score a passing grade on 10 criteria, though not the same 10 criteria it failed to score a passing grade on last year.  These yearly scorecards determine a country's eligibility for a Millennium Challenge Compact.

The Millennium Challenge Corporation (MCC) uses what it describes as"objective and quantifiable policy in­dicators in three broad policy categories: Ruling Justly, Investing in People, and Encouraging Economic Freedom".  These broad areas are broken down into several measures in each area, each listed with the third party that developed and scored the countries.
Ruling Justly
     Civil Liberties (Freedom House)
     Political Rights (Freedom House)
     Control of Corruption (World Bank/Brookings Institution WGI)
     Government Effectiveness (World Bank/Brookings Institution WGI)
     Rule of Law (World Bank/Brookings Institution WGI)
     Freedom of Information (Freedom House / FRINGE Special/ Open Net Initiative)
Investing in People
     Immunization Rates (World Health Organization and UNICEF)
     Public Expenditure on Health (World Health Organization)
     Girls’ Education (UNESCO)
     Primary Education Completion (Scorecard LICs)
     Secondary Education Enrolment (Scorecards LMICs)
     Public Expenditure on Primary Education (UNESCO)
     Child Health (CIESIN and YCELP)
     Natural Resource Protection (CIESIN and YCELP)
Encouraging Economic Freedom
     Business Start-Up (IFC)
     Land Rights and Access (IFAD and IFC)
     Trade Policy (Heritage Foundation)
     Regulatory Quality (World Bank/Brookings Institution WGI)
     Inflation (IMF WEO)
     Fiscal Policy (IMF WEO)
     Access to Credit (IFC)
     Gender in the Economy (IFC)
This set of criteria was adopted in 2012. 

The Millennium Challenge Corporation board then selects five countries from those that receive passing scores on all indicators and allows them to develop a compact, based on available moneys allocated by the US Congress.  These compacts can be worth up to $250 million to a country.  In addition, a few countries each year get a 1-3 year grant called a Threshold grant designed to help them improve their score where they fall below the 50% threshold.  Threshold grants are $10-$30 million.

In August, 2013 Honduras received a 3 year, $15.6 million,  Threshold grant to "to improve public financial management and create more effective and transparent public-private partnerships."  This program had a number of concrete programs designed to improve Honduras's scores in several areas:
Public Financial Management
     1. Budget and Treasury Management
     2. Improve Procurement Capacity, Planning, and Controls
     3.  Improve the Capabilities of the Tribunal Superior de Cuentas
     4. Grants to Civil Society Organizations to Foster Accountability
Public - Private Partnerships
     1. Enhance COALIANZA's capabilities to Select, Finance, and Manage Risk.
     2. Fund Fundación para la Inversión y Desarrollo de Exportaciones to provide government solutions supported by user fees and manage exports through an government platform.
Depending on the statistic, the years 2012 and 2013 form the baseline for evaluating the effectiveness of the Threshold program. 

The 2013 scorecard forms the basis of assigning Honduras to the Threshold program, so lets look at the areas where Honduras was deficient (below average) on that scorecard and see what's happened since then. 

Under the rubric of scoring Economic Freedom, the MCC uses a number of indicators.  Honduras in 2013 had deficient scores (below the median score) in four of them:  Fiscal Policy, Gender in the Economy, Land Rights and Access, and Business Start-Ups.  In 2013 Honduras scored a 50% in Fiscal Policy.  That meant that 50% of the countries scored better, and 50% scored worse than Honduras.  Its ranking on this criterion worsened in 2014, to 46% and plunged on the 2015 scorecard to 26%.  That plunge can directly be attributed to the economic policies of the Porfirio Lobo Sosa government, whose last year in office forms the basis of the 2015 score.  The Threshold program has not yet had a chance to affect this indicator.

Honduras was deficient in 2013 in women's participation in the economy, called Gender in the Economy.  Here Honduras started with a score of 21% on the 2013 scorecard, improved its score in 2014 to 41% then saw its score decline again in 2015 to 37%.  No Threshold grant goals sought to address this criterion.

Land rights and Access was another criterion where Honduras was deficient.  Here Honduras began 2013 with a score of 32% and saw it decline on the 2014 scorecard to 23%.  On the 2015 scorecard it improved slightly to 25%.  No Threshold grant goals seek to address this criterion.

The final Economic Freedom indicator where Honduras was deficient was in Business Start-Ups.  In 2013 Honduras scored 28%.  That improved to 50% on the 2014 scorecard, but decreased to 43% on the 2015 scorecard.  No Threshold grant goals addressed this criterion.

Honduras was also judged deficient in Girls Secondary Education Enrollment Rate.  Here Honduras began with a score of 16% and actually managed to improve it in the 2014 and 2015 scorecards, so that in the latest scorecard its 31%, nearly double what it was two years ago.  Still there's a lot of room for improvement here.  No Threshold grant money had improving this indicator as a goal.

Under the rubric of Investing in People, Honduras had two areas of concern:  Girl's Secondary Education Enrollment Rate and Children's Health.  Honduras scored 16% on the 2013 scorecard in Girl's Secondary Education Enrollment Rate.  This continued to improve in 2014, where Honduras scored 22% and 2015 where Honduras scored 31%.  Children's Health scored 43% in 2013 but improved to good levels in 2014 and 2015 (56% in each) and is not currently an area of concern.  By comparison, another criterion, the Immunization Rate, became of concern in 2014 and continues to be of concern as Honduras's ranking plummets.  Honduras scored 87% on the 2013 scorecard.  It scored 44% on the 2014 scorecard, and 37% on the 2015 scorecard.  No Threshold grant goals address any of these three criteria.

Under the rubric of Ruling Justly, the MCC found Honduras deficient in four of the six criteria in 2013:  Freedom of Information, Government Effectiveness, Rule of Law, and Control of Corruption.  Honduras scored just 28% in Freedom of Information on the 2013 scorecard.  Its score has decreased on each subsequent scorecard to 27% in 2014 and 21% in 2015.  Government Effectiveness follows the same trajectory.  Honduras scored 44% on the 2013 scorecard, and its score declined in each subsequent scorecard, to 27% in 2014, and 25% in 2015.  The criterion Rule of Law scored 44% on the 2013 scorecard, but only 4% on the 2014 scorecard, and 7% on the 2015 scorecard.  Finally, in Control of Corruption, Honduras scored only 16% on the 2013 scorecard, 15% on the 2014 scorecard, and 21% on the 2015 scorecard.  The Threshold grant was designed to affect both the Government Effectiveness and Control of Corruption criteria, but because these measures only reflect the years of the Porfirio Lobo Sosa government, it has yet to show any results.

So Honduras is still deficient in 10 criteria though not the same 10 criteria that were deficient in 2013.  Child Health was eliminated as a concern, and Immunization Rates became a concern during the last two years.  The Threshold grant has yet to be able to show any results, but that is to be expected.  The scorecard has yet to report on years in which the Threshold Grant was active.  Honduras's deficiencies are directly attributable to the Porfirio Lobo Sosa government's actions, not the drug trade, not gangs.

Whether the Hernandez government can use the Threshold grant to turn some of these scores around remains to be seen.

Monday, November 10, 2014

Dueling Murder Rates

Good News.  Honduras's murder rate has fallen significantly, though the magnitude of the drop depends on who you believe.  The Security Minister reports a homicide rate of 65.55 per 100,000 population, or 15.67 murders per day.  The Observatorio de Violencia, indicates that Honduras is on track to have a murder rate of 71.82 per 100,000, or 17.17 per day.  Still, either of these rates lets Honduras remain the murder capital of the world for nations not a war.

The difference again comes down to what you count as a murder.  Arturo Corrales, the Security Minister, changed the definition of murder back in 2013 to require both a police report and a coroner's report indicating the case is a homicide.  Corrales claims he was just following the recommendations of the Inter-American Development Bank (IADB0 on how to construct a comparable murder statistic between countries.  See our previous posting on this topic for a link to that IADB "standard".  We point out in that post some of the shortcomings of the standard.

The Observatorio de Violencia, on the other hand, gathers both the police reports and the coroner's reports and reconcile the two.  There are bodies that lack a police report but have a coroner's report.  There are bodies that have a police report but no coroners report.  The Observatorio, using internationally recognized techniques attempts to determine based on the information available, if those bodies represent a homicide, and if so, include it in their statistics.

The difference so far this year is 623 bodies in the first half of the year that the Security Ministry does not recognize as homicides because they lack a coroner's report.  The Director of the National Police, Ramon Sabillon,  told El Heraldo that until there's a coroner's report the body cannot be incorporated into his database.  His database is the Sistema Estadistico Policial en linia (SEPOL), the official public face of crime statistics in Honduras.

Then too, there's confusion among the official government sources about how many homicides there have been in the first half of 2014.  FUSINA, the inter-institutional police force (combined military and police) says 2442 murders in the first half of the year, while the Police report 2720 homicides.  The coroner's office reports 2442 homicides.

Still, despite the innumeracy of the Honduran government, this is good news.  Murders are decreasing, though slowly. 

Thursday, October 9, 2014

A Cartel del Pacifico Network in Guatemala Linked to Honduras

As I was writing the previous three posts outlining what is known about the Honduran side of the drug trade, the Guatemalan newspaper, El Periodico, was reporting on the Guatemalan connections of the Valle Valle family.  The central focus in Guatemala is on José Manuel Lopez Morales, alias El Ché, a drug trafficker identified by the US Drug Enforcement Agency (DEA) as the main Valle Valle connection in Guatemala.

On September 27, 2014, Guatemalan security forces and the DEA raided a variety of homes and businesses in Chiquimula, Guatemala, looking for José Manuel Lopez Morales.  Lopez Morales, they contend, is linked to a number of other known drug traffickers and transportistas believed to control the drug trade from along the Honduran border into Guatemala, Belize, and El Salvador.  The raids failed to capture Lopez Morales, although they did capture both his wife, Deidy Gisleny Nufio Franco, and one of his bodyguards.

Lopez Morales is the nephew of the mayor of Chiquimula, Mario Rolando Lemus Martinez, whom the DEA has identified as being in charge of the logistics of the drug trade in the region.  Lopez Morales is also alleged by the DEA to be the godson of an unnamed town official in San Jose La Arada, near Chiquimula.  In addition, Lopez Morales has benefited from the political support of the Mayor of Concepcion, Las Minas, Juan Banegas.  In the communities around Chiqiumula, El Periodico reports that Lopez Morales is said to be helpful in funding social projects, and this includes having the arena in San Jose Ermita named after him.  Further, Lopez Morales was connected with the owner of a bus line that runs from the Honduran border crossing near Ocotepeque, Honduras, to Quezaltepeque, Guatemala.  That bus line is said to have hidden caches in the buses where drugs are smuggled within Guatemala.

Without looking at a map, its not immediately evident that these towns named above are all strategically located for the transhipment of drugs from Honduras into Guatemala and El Salvador.  San Jose Ermita is located along the road between Copan Ruinas, in Honduras, and Chiquimula.  San Jose La Arada is located along the route from Chiquimula to El Salvador, passing through the Ipala region.  Concepcion Las Minas is near Esquipulas, on the border of a large forest preserve along a highway that leads into El Salvador.  Quezaltepeque is located along the road that runs from Ocotepeque, Honduras, further into Guatemala, or over into El Salvador.

El Periodico reported that some in Guatemala believe the Valle Valle family articulated with the Cartel de Ipala, who run the drug trade in Guatemala's Jutiapa Department, along the Salvadoran border, but the Guatemalan Interior Minister, Mauricio López Bonilla, in a recent statement to the press indicated that Lopez Morales was the Valle Valle family's contact in Guatemala.

Lopez Morales reportedly escaped the DEA raid by hiding in one of 10 ambulances seen cruising the roads around Chiquimula all day with their sirens on; an unusual sight.  Because they had their sirens on, they were not detained by the police roadblocks, and Lopez Morales escaped.  He's said to have gone to the owner of the bus company mentioned above to have himself smuggled into Honduras.

While what El Periodico reports is sketchy, what they seem to be reporting is a Guatemalan crime family with ties to one or more transportista families.  The article briefly mentions cartels in adjacent parts of Guatemala.  The Ipala cartel tranships drugs from El Salvador into Mexico's Pacific Coast, and moves some drugs from Guatemala into El Salvador.  The Rodriguez cartel, mentioned as controlling the drug trade around Bodegas and Zacapa, moves drugs into Belize and the Guatemalan Peten.

What's beginning to emerge in both Guatemala and Honduras is an image of a number of small, territorial families linked to moving drugs from specific counterparts further along the path to the United States.  As drug interdiction succeeds in Honduras, there will be smaller and smaller amounts to move, leading to competition and consolidation of these crime families.  This particular network works for the Cartel del Pacifico (formerly the Sinaloa Cartel).

Stay tuned for even more violence.

A Zeta Network in Guatemala with Links to Honduras

Honduran security forces arrested Héctor Emilio Fernández Rosa, wanted for extradition to the United States on drug charges.  Fernández Rosa, a Honduran born in La Entrada, Copan, has been linked to the Zetas by the DEA.  He is alleged to operate as a transportista along the Honduran Guatemalan border, moving drugs from Playitas, Florida, Copan to the Peten in Guatemala.  Members of the Tropa de Inteligencia y Grupos de Respuesta Especial (TIGRES), along with the DEA, suprised Fernández Rosa in his home in El Hatillo, north of Tegucigalpa.

According to the Prensa Libre of Guatemala in 2012, Fernández Rosa was linked to various actors in the Zeta network in Guatemala, including Otto Herrera (extradited to the US), Jorge Paredes (captured in Honduras in 2008 and wanted in the US), Waldemar Lorenzana (patriarch of the Lorenzana crime family in Guatemala in charge of moving the Zeta's drugs from Honduras into Mexico), Elio Lorenzana (being extradited to US from Guatemala), Brian Linares (a member of Otto Herrera's group), and Mario Ponce (captured in Honduras and extradited to the US).

This is a lucrative business.  The DEA was able to reconstruct over 552 financial transactions, over $10 million, between 2007 and 2010 for Mario Ponce alone.

Because of all of the above captures, the Guatemalan side of the business has been in a constant state of flux, reorganizing as each person was captured.  Investigations last year in Guatemala determined that Jorge Ponce Rodriguez, brother of Mario Ponce, is currently in charge of this crime family and has recruited six others.  Hector Emilio Fernández Rosa is his Honduran contact moving drugs through blind border crossings between the Department of Cortes in Honduras, and the Department of Izabal in Guatemala, and from there into the Peten in Guatemala.

Jorge Ponce Rodriguez in turn, is working with Horst Walter Overdick Mejia around Lake Peten Itza  and Coban, Verapaz, to move the drugs closer to Mexico.  Overdick Mejia has been receiving weapons and training from the Zetas since 2008.  Ponce uses aircraft to move drugs within Guatemala, and has several pilots known to be working for him.  It appears that at least some part of his organization also moves drugs into Spain, where he owns several companies.

Its worth pointing out that Jorge Ponce Rodriguez is credited with being the drug cartel running the territory adjacent to José Manuel Lopez Morales discussed in a previous post.  Together these two control the entire Guatemalan side of the Honduran-Guatemalan border region, a region with at least 45 known blind crossings.

Wednesday, October 8, 2014

The Organization of the Honduran Drug Trade (Part 3 of 3)

In the first two installements of this series, we discussed examples of what a September 2012 UN report called a territorially-based crime group and a transportista crime group in Honduras.

The third kind of group involved in the international drug trade are what the UN calls tumbadores, disruptive groups that prey on crime families and transportistas opportunistically, to take their drug shipments and sell them to others.

Tumbadores often form from territorial groups, like crime families. In addition to hijacking shipments of drugs, they may also extort the transportistas who must cross their territory to move drugs along, and they may contribute to street crime.

In Honduras, Los Grillos, a group operating near La Ceiba, have been identified as tumbadores.  They've been competing for territory with Los Pelones, also headquartered in La Ceiba. That conflict generated over 373 firearm caused homicides in the first half of 2011 in La Ceiba.

Both groups are said to operate by trying to hijack drug shipments traveling from eastern Honduras through the La Ceiba area. They have reportedly heavily infiltrated the police in La Ceiba, and carried out contract killings on reporters in the La Ceiba region, including reporter David Meza Montesinos, who was broadcasting exposés on police corruption in La Ceiba when murdered.

More recently Los Grillos have expanded into the Bay Islands of Honduras, particularly Roatan where they're following the drug traffic in coastal waters.

Not included in these three main categories are street gangs, the Maras. The UN report concludes that they "have little connection to the transnational drug trade, and focus primarily on extortion and other local power struggles".  This goes against a powerful representation popular with the Honduran (and some international) media that links the street gangs and drug traffickers together.

The Mara Salvatrucha (MS-13) and the Mara Calle 18 are territorial organized crime units. but are not usually classified as organized crime units because their focus is not financial gain. They provide small amounts of security and distribute money to friends and family, but make no pretense of serving a broader public good as do the crime families.

Their territorial control is about identity, respect and their place in the world, according to the UN report.  This focus on identity causes them at times to work against their financial interests, feuding with others over symbolic incursions.

They are trans-national, but not organized trans-nationally.  They are present across the United States, Mexico, Honduras, Guatemala, and El Salvador, but there is no central leadership that coordinates what each member organization is doing.  Both gangs operate as small territorial units, cliques, that control or dispute a small local territory.  Some analysts suggest there is a national structure made up of the leadership of the largest cliques. Both may have cliques that make opportunistic alliances across international boundaries but outside of this, there is no international coordination of activities.

While neither Mara is a major player in the international drug trade, both are involved in local distribution of drugs in Honduras. That doesn't mean they are benign; their primary activities are major sources of violence in Honduras: kidnap for ransom, extortion from transportation (bus, taxi), extortion of local businesses and individuals, murder for hire, and theft accompany their involvement in street trafficking of drugs within the country.

Their street level drug trafficking is mostly cannabis, with only a little cocaine these days.  Back when they arrived in Central America, they got their start by trafficking crack cocaine, previously not a problem in Central America. But today, the cocaine trade is international business of the cartels.

In Honduras, the way the Maras have articulated with the territorial crime families and transportistas is through murder for hire.  In the Bajo Aguan, there's evidence that a group calling itself Mara 61 has been hired by drug traffickers to provide security and logistical support for their operations.  Mara Calle 18 was hired by the Zetas to carry out contract killings in Honduras.

It is the activities of the Maras in extortion and murder for hire that produce the most violence in Central America.

In El Salvador, when politicians and the Catholic church negotiated a truce between MS-13 and Calle 18, it dramatically lowered homicide rates, while extortion and other gang related crimes continued unchecked. When the truce collapsed, homicide rates returned to their former, high, levels.

The UN report shows that violence in Honduras is a result of two primary forces, conflict between the various people involved in the drug trade, and the high level of violence promulgated by the Maras.

Collapsing these two sources of violence is a mistake that can lead to thinking strategies intended to fight the Maras are also countering drug trafficking, or that fighting drug trafficking will reduce the high levels of violence people endure in some Honduran cities. These are separate problems, even if each offers opportunities for the other.

Tuesday, October 7, 2014

Honduras Finding IMF Accord Difficult

Honduras failed to come to an agreement with the International Monetary Fund (IMF) for stand-by funding of the Honduran government over the next three years last week.  Negotiations have now entered overtime with a deadline of today, October 7.  Without an agreement and a dramatic reduction in deficit spending, the Honduran government of Juan Orlando Hernandez will have trouble making payments on the existing debt accumulated by the unrestrained deficit spending of the defacto government of Micheletti Bain and his successor Porfirio Lobo Sosa.

Marlon Tabora, President of the Central Bank, has been leading the negotiations with the IMF in Washington, DC since the beginning of last week.  He has met with high level officials within the IMF including Alejandro Werner, Director of the Western Hemisphere Department.

There are two real sticking points in the negotiations.  First, the IMF is requiring Honduras to divest itself of the state owned electric company (Empresa Nacional de Energia Electrica) and to programatically reduce the deficit spending from its current 5.2% of Honduras's Gross National Product to 1.7% by 2017.  Given the National Party's propensity to overspend on security (military, new police forces like the TIGRES, FUSINA, etc) and gutting of social welfare programs, this reduction would leave it with little to nothing to spend on development, infrastructure, or economic stimulation, all areas which need more investment by the government.

While the conversations were extended two days into this week, Tabora has until this Friday, October 10, to negotiate a letter of intent with the IMF. Without a signed letter of intent by the end of this week, Tabora will not be able to present to the full IMF at its November 10 Directors meeting for final approval.  Such an agreement was expected to provide between $190 and $200 million to meet this year's deficit.  Without it, the government will have to sell bonds in the internal and external financial markets at substantial interest in order to pay for its current spending.