Palmerola Airport Contract Bad for Honduras?

On March 18, 2016, President Juan Orlando Hernandez representing the Government of Honduras, and Lenir Perez, representing the bid winner, EMCO, signed a contract to build an international air terminal and supporting facilities in Soto Cano Air Base (also known as Palmerola) in Comayagua.  Such an airport is necessary since Toncontin airport in the capitol city of Tegucigalpa has a dangerous approach and short runway which cannot be lengthened.  The contract was negotiated by COALIANZA, which if past practice is any evidence, makes it suspicious.  COALIANZA has negotiated a number of contracts that are not financially good for Honduras, but great for the company receiving them.

Palmerola air base was built from nothing during the 1980s by the US military to become a staging area for air support missions for the Contra's then trying to overthrow the Sandanista government of Nicaragua.  I still remember the twice weekly flights of C5a and later C17 cargo planes landing at Ramon Villeda Morales International Airport near San Pedro Sula and offloading truckloads of military supplies and equipment onto the staging area to be ferried up to Palmerola for its construction.  Today it is a key strategic foothold of the US Southern Command (SOUTHCOM) in Latin America, and home of Joint Taskforce Bravo with an 8000 foot runway.

At the time of the signing the contract terms were not publicly disclosed, but government statements outlined some of the terms.  First, the concession period in which EMCO would have the right to operate it was 30 years.  The contract required $23 million in funding from the Honduran government, and a further $53 million provided by the government of Spain.  EMCO will supply $87 million.

However, as the contract is now before Congress for ratification, terms are becoming public that lead one to question what Honduran authorities were thinking when they signed this contract, and raise questions about whether it can be ratified, even by this Congress controlled by the National party.

Salvador Nasralla pointed out that if the government of Honduras decides to keep Toncontin airport open, even if just for flights within Honduras, it will have to pay EMCO 20 million Lempiras (about $953,000) a month until Toncontin is closed .  Eduardo Facussé noted that the concession can be automatically renewed by EMCO for an additional 30 years, making it a 60 year concession, not the 30 mentioned in the press releases.  Facussé also pointed out that the contract obligates the Honduran government to close not just Toncontin International Airport in Tegucigalpa, but also Ramon Villeda Morales airport in San Pedro Sula, or face paying even higher monthly charges to EMCO.  A financial analysis of the income from the airport indicates that EMCO will not have to pay anything to the government of Honduras for the concession until years 27 or 28.  Facussé continued:

"I'd like to be in this type of business.  I don't know what kind of advisors the President of the Republic has who have told him that this is profitable for the country....The concessionary has all the advantages; that is to say that the owner of the contract for Palmerola, and the Government has a series of [financial] obligations."

Inversiones EMCO is a subsidiary of Grupo EMCO, a company founded in 2003 in Honduras.  It consists of a number of subsidiaries (Alutech, EMCO Mining, Inversiones EMCO, Constructora EMCO).Company owner  Lenir Perez is the son-in-law of Miguel Facussé, who before his recent death was the richest man in Honduras.  Perez is married to Ana Isabel Facussé.  Its subsidiary, EMCO mining began operations in San Pedro, Tocoa, Olancho in April of this year without the permission of the communities in which the mine resides, a clear violation of Honduran law.
 Another mining subsidiary, Minerales Victoria, with an iron mine in Nueva Esperanza, Atlantida has a history of human rights violations.  Perez's firm admits it kidnapped two international observers in 2014 and threatened their lives.

If Eduardo Facussé's statements about the clauses of the contract are correct, one wonders what President Hernandez's advisors were thinking in advising him to sign such a disadvantageous contract, but then, it was negotiated by COALIANZA, so we should have expected that.