Wilfredo Cerrato, Honduras's Finance Minister, told the assembled press on March 7 that Honduras will seek to place $1 billion in bonds in the international market in 2015, and that he would head a delegation traveling to Washington, DC later this month to learn what conditions must be met for Honduras to re-establish a borrowing agreement with the IMF, which he also hopes will be in place sometime in 2015.
The Honduran press only covered one part of this story. Can you guess which?
The international press primarily reported on the bonds story, though some did lead with the IMF trip. Cerrato told them the bond placement was specifically to convert short term high interest internal debt issued by the Honduran banks to long term, lower interest, international bonds. Two year high-interest bonds will be replaced by 10 year lower interest bonds.
This kind of short term debt was largely shunned until Roberto Micheletti Bain, head of the post-coup de facto government, was forced to make deals with Honduran banks in 2009 because no international placement of bonds was possible after the coup.
That use of Honduran banks, that benefits the upper class of Honduras which owns them, continued under Porfirio Lobo Sosa. So government debt payments went from $65.8 million per year in 2008, to a yearly debt payment of $789.6 million when Lobo Sosa left office in January 2014.
The Hernandez government projects that the 2014 debt payment will reach $930 million (!) with the borrowing it must do this year to balance the budget.
But that story is not being publicized by the Honduran press.
Instead, they chose to report only on the visit to the IMF to learn about the necessary conditions for arranging a new loan agreement. Cerrato told the press that he projected a new agreement could be signed this coming April. One wonders what that optimism is based on, since Honduras has not formally spoken to the IMF yet, and the Hernandez government has not yet begun to achieve the financial goals they set for themselves.
Honduras successfully placed $1 billion in bonds in two sales in 2013, and the proceeds from those bonds were used to pay down some of the more egregious short term loans and finance the Lobo Sosa government deficit spending for 2013. With debt service reaching nearly $1 billion by the end of this year, the Hernandez government will find itself trapped continuing to seek external financing, if it wants to avoid an austerity budget even harsher than what seems to be in the works.