Government Reorganization: Massive Centralization Proposed

We're beginning to see the pieces of how Juan Orlando Hernández's transition team wants to re-organize the Honduran government.  We've accumulated our description through press reports (notably this, and this) and sources in Honduras with knowledge of the planning.

The names of proposed units vary, but the shape is clear: massive centralization and an emphasis on economic development, subordinating many of the functions of the executive branch to new structures of authority.

But there's a hitch: on Friday, the emerging plans got slapped down when Congress refused to authorize changes to the Ley de Administración Pública that would be necessary to implement what one Honduran source described to us as massive centralization.

Here's what the transition team proposed:

Eight super Ministries whose heads would form Hernandez's cabinet:

• Strategic Planning (Conducción Estrategica)
• Interior and Decentralization (Gobernabilidad y Descentralización)
• Economic Development (Desarrollo Economico)
• Social Development and Inclusion (Desarrollo e Inclusión Social)
• Defense and Security (Defensa y Seguridad)
• Productive Infrastructure (Infraestructura Productiva)
• Foreign Relations and International Cooperation (Relaciones Exteriores y Cooperación Internacional)
• Economic Planning and Regulation (Conducción y Regulación Economica)

The new structure demotes many of the existing Secretariats (such as Gobernacion, Justicia y Derechos Humanos, Agricultura y Ganaderia) to a director level below a super Minister.  It folds all the existing Secretariats into the eight super Ministries, if not at the director level, then as part of merged portfolios.
 Each of the eight cabinet ministers will have a series of direct reports, many of them running institutions that under Lobo Sosa were represented at the cabinet level.

Thus, Economic Planning and Regulation would include the Banco Central de Honduras (BCH), the Comision de Bancos y Seguros (CNBS), and the former cabinet-level Secretaria de Finanzas (SEFIN), among others.

Interior and Decentralization encompasses the former Interior Ministry, immigration services, and the National Registry of People (RNP)

Economic Development incorporates the Secretaria de Recursos Naturales y Ambiente (SERNA), and the Secretaria de Agricultura y Ganaderia, each previously cabinet level on its own.

Productive Infrastructure takes over the former Secretaria de Obras Publicas, Transporte, y Vivienda (SOPTRAVI).

Defense and Security essentially remains as it did under Arturo Corrales, folding together the former Secretaria de Defensa and the Secretaria de Seguridad, combining cabinet-level responsibility for the military and police.

Foreign Relations and International Cooperation replaces and continues the existing Ministry of Foreign Relations.

Takeaway? 

Power would be concentrated in a very few individuals. 

The proposed shape of the government shows the neoliberal economic agenda that is the focus of this government.  For example, the affairs of the former cabinet-level Ministry of Culture would be rolled into the new ministry of economic development.

The goal was allegedly to reduce the size of the Honduran government, and reduce its budget by some 700 million lempiras (about $35 million). But it's not clear where the savings would come from. Each super Ministry must do what all the previous Secretariats incorporated in it did.

This led Congress to reject the entire thing this Friday.

At the same time Congress was given the proposed structure, and changes to the Ley de Administración Pública to implement it, it was also given the Hernández budget for 2014 based on doing that reorganization. The rough outline of spending reportedly is:

Strategic Planning - 2000 million lempiras ($100 million)
Interior and Decentralization - 7000 million lempiras ($350 million)
Economic Development - 5000 million lempiras ($250 million)
Social Development and Inclusion - 70,000 million lempiras ($3.5 billion)
Defense and Security - 8000 million lempiras ($400 million)
Productive Infrastructure - 40,000 million lempiras ($2 billion)
Foreign Relations and International Cooperation - 855 million lempiras ($42.7 million)
Economic Planning and Regulation- 45,000 million lempiras ($2.25 billion)

Congress members said that the plan they received, along with the budget above, doesn't appear to eliminate any part of the existing government and just tacks a bureaucracy for a super Ministry on top of it, bloating the budget by 18 to 20 million per super Ministry. 

An unnamed Congressman is quoted as saying "they think they invented hot water....they sent us a bunch of foolishness and clumsy structures".

Now Congress, not Hernandez's transition team, will have the final say on if and how the government will be re-organized when they take the question up again in the next few days.

Shooting Down Drug Planes 2

Oscar Alvarez, former Security Minister under Porfirio Lobo Sosa, introduced a bill in the lame duck Congress to permit the Honduran Armed Forces to shoot down suspected drug planes, among other rules. 

Yesterday, by a vote of 80 to 1, Congress passed the law.  This comes as Honduras prepares to install three radar systems it purchased from Israel after the US removed radars when the Honduran air force shot down two separate alleged drug flights in 2012, in violation of international treaties and an agreement with the US.

The new law creates an exclusion zone in the airspace over the departments of Gracias a Dios, Colon, and Olancho between the hours of 6 pm and 6 am.  The alleged goal is to prevent the arrival of narco-airplanes.  Only planes with legally filed flight plans would be allowed in the zone during those hours.  The law also establishes that no plane can fly under 18,000 feet, or slower than 300 knots during this time period in the exclusion zone.

Planes without flight plans that show up in the region or disobey the rules would be intercepted by the Honduran air force from La Ceiba (the nearest military airfield) and the interceptors would attempt contact.  If the plane fails to talk to, or obey the instructions of the interceptor, the protocol would permit shooting it down, but only with the explicit authorization of the Minister of Defense for this incident.

As we noted when Honduras originally proposed this, the country would have to repudiate its signature to several international air treaties to implement it, especially the Chicago Convention which prohibits the shooting down of civilian aircraft. 

Honduras signed the International Civil Aviation Organization (ICAO) protocol documents in 1944, and portions of it became effective in 1945 while others took until 1953 to become in effect.  A specific clause (3bis) explicitly prohibiting the shooting down of civilian aircraft without a declaration of national emergency was added in the 1990s. 

Likewise Honduras signed, but apparently never ratified, the Montreal treaty on civilian air traffic which again does not allow for shooting down civilian aircraft.

Nor is it clear that this new law will have the effect that is intended.

The conditions proposed in the law affect overflight traffic unless the plane is flying above 18000 feet and traveling more than 300 knots.  Many civil aviation aircraft can do neither.

Many planes typically used to haul drugs have no problem flying at that altitude or speed.  They are typically executive jets or planes, capable of holding 8-12 passengers or equivalent in cargo. 

The kinds of aircraft interdicted here would be those used for air taxi service to small, legal airstrips in the region, as well as seaplane or pontoon plane air taxis.  These typically hold 2-6 passengers, typically fly at speeds well under 300 knots, and altitudes well under 18,000 feet (they lack pressurized cabins and sources of oxygen). 

Because planes crossing the no-fly zone would have to be sure to clear it before 6 pm, and the height and speed exceptions are impossible for air taxis and general aviation, this law has the potential to reduce useful air service in the region.

Nor does the history of other countries that have made similar attempts suggest it will stop illegal drug flights over Honduras

The Dominican Republic passed a law allowing their military to shoot down drug planes, and they proceeded to shoot several down.  What that did was temporarily cause the cartels to switch to water based shipping, and to move air flights out into international waters except for the last few minutes of the flight, which can be done at treetop levels.  Drug overflights have since rebounded in the Dominican Republic.

Venezuela began such a policy in October, 2013, and has shot down a few aircraft.  A Mexican executive jet was reportedly shot down, creating an international incident where Mexico is still looking for answers as to how the plane, and some of its citizens, were targeted and killed by the Venezuelan air force. The new policy has not resulted in a slowing of drug flights from Venezuela to Central America and the Dominican Republic.

In Peru, the same policy resulted in at least one civilian aircraft loaded with missionaries being shot down and some of the occupants killed (gun camera video here). It's notable that Peru followed the same "protocol" specified in the Honduran law.

All of these countries still have drug overflights in similar numbers to prior to the shift in policy. 

Why would anyone expect a different outcome in Honduras?

Then there's the question of why only part of the airspace is being targeted.

The region targeted seems mostly crafted to disrupt the Zetas, who are the primary users of airstrips in eastern Honduras, leaving other parts of Honduran airspace used by the Sinaloa cartel along the Guatemalan and Salvadoran border, unchanged. Is someone crafting policy to favor one cartel over the other? 

The new policy might have the effect of shifting the pattern of drug overflights, but planes can continue to land in Yoro and Atlantida, where they often use roads as landing strips.  This would match the experience of other countries that have tried this policy where it resulted in changes in the patterns of transshipment of drugs, but failed as an interdiction strategy.

Finally there's the question of the US response. 

While the Southern Command has been known to promote such a policy for countries that we support in the war in drugs, the United States also has a strict policy since 1994 to not share intelligence or data with countries that do so, lest information we supply lead to such a downing, which under US law would make the information providers accomplices to an illegal act. 

That's why the US packed up its radar and stopped sharing information with Honduras in 2012 when Honduras shot down two alleged drug planes using US provided information.

Instead of temporarily withdrawing support for Honduras, support could be permanently withdrawn under current US policy if Honduras adopts this law.

Shooting down planes is bad policy.

It hasn't worked elsewhere.  It won't work in Honduras.  It doesn't work.

Congressional Maneuvers

On the same day on which the National Party Congressional delegation announced it will let Juan Orlando Hernandez choose its Congressional leadership, the Congressional delegations of the Anti-Corruption Party, LIBRE, and PINU signed an accord to work together on certain projects in Congress.

Wilmer Velasquez, a National Party Member elected to Congress in November, told the Honduran press that the National Party Congressional Delegation had met and decided to let Juan Orlando Hernandez select its candidates for Congressional leadership. 

This is supposed to be a sign of unity, though he admitted there were several names being floated for president of Congress.  Velasquez told the press that Hernandez was in the best position to choose who was best for Honduras. 

Any nominees will still have to gain a majority of the votes of all Congress members.

At the same time, the Congressional delegations of the Partido Anticorrupción  (PAC), Libertad y Refundacion (LIBRE), and Partido Innovación y Unidad (PINU) came to a meeting organized by PAC's presidential candidate, Salvador Nasralla, and agreed to work together to achieve certain goals.  The full pact can be read here.

Election law changes are one of these goals. The allied parties will seek to mandate electronic voting to disrupt the traditional forms of election fraud. 

Also among the agreed-upon goals:

• a rollback of the tax package the current Congress just put into effect
• try to regulate the salaries of government employees 
• work to democratize the Congressional rules and reform the election law
• an overhaul the anti-corruption law

This does not mean they will always be working as a bloc with a combined roster of 51 members of Congress, but that they will work together on the specific issues agreed upon.  

Notably missing from either announcement was the Liberal Party, which declined to participate in the PAC sponsored meeting. 

Yani Rosenthal, current head of the Liberal Party Congressional Delegation (until January 20) said the party was between a rock and a hard place.  He faulted internal party decisions for the Liberal Party not having a clear position on the new Congressional leadership, citing Mauricio Villeda's call ordering Liberal Party Congressional Delegates not to participate in Congressional leadership discussions. 

Villeda's order came after twelve party members had held conversations with Juan Orlando Hernandez on the topic.  Rosenthal said that there were problems for the party no matter what it does.  If they ally with the National Party in Congress, for many that would be a death knell for the party.  An alliance that includes LIBRE would mean joining with a party that damaged the Liberal Party.  Another possibility would be to not ally with any party, but according to Rosenthal that, like all the other possibilities, would mean rejecting some of the current party values in order to maintain viability as a political party. 

Separately, Manuel Zelaya Rosales announced he was stepping down as coordinator of LIBRE as part of the separation of the Frente Nacional de Resistencia and LIBRE.  He has occupied this office since July 2010.  Zelaya will remain part of the Frente, and is part of LIBRE's new Congressional Delegation.

All of these moves are crystallizing the new political landscape in Honduras, against a background of furious legislative action by the current, National-party dominated, lame-duck congress, intended to give Juan Orlando Hernández as much as possible before he faces a Congress that will not automatically do what he wants.

Political Smokescreens

 Juan Orlando Hernández is still in campaign mode. And he's running against LIBRE.

How? by repeating a theme from the campaign trail: that LIBRE is allied with narco-traffickers.

LIBRE party leaders reacted strongly.

Enrique Reina, who was a candidate for LIBRE in the past election, said

It is dangerous that he links Libre with organized crime, we see it as a political theme of the president elect to generate a smoke screen and divert attention from the problems in health, security, and others.

Reina underlined  that Hernández, as head of the Congress during the Lobo Sosa administration, deserves blame for the current situation in Honduras:

He replaced the Justices on the Supreme Court, named all the lawyers in the Public Prosecutor's office.... He governed for the last four years and things remain the same or worse in the country.

In what was described as a confrontational manner, Hernández repeated the charge at a ceremony to honor the general in charge of the intelligence service:

The people who extort, the gangs, organized crime, they have few friends.  Among their few friends are some leaders of the Libre Party, which supports them.  They will not continue to do so, because if they do, they will be caught in collusion [with them].  The good Hondurans, those that wish to live in peace as God ordered.  We are more and I know that we will recover the peace of this country.

The new National party boss in Congress, Celine Discua, supported Hernández, saying

this is the time to assert the 'mano dura' and as he said he will do what he has to bring peace to the country.

Manuel Zelaya objected, and asked Hernández to name names. But it wasn't just LIBRE reacting skeptically to the latest airing of this accusation.

Lino Mendoza, a former member of the investigative committee that threw out the previous Public Prosecutor, Luis Rubi, and reorganized the Public Prosecutor's office last year, called on the Public Prosecutor to open an investigation.  He said of Hernández,

He better name names and once and for all end these signals that many times don't result in anything.

Omar Rivera of the Civil Society Group (which claims to represen  the poor of Honduras), reportedly said that

to launch such an accusation, the President-elect, the Public Prosecutor's office, and the police should initiate an investigation to confirm or deny the accusation.

Assistant Public Prosecutor Rigoberto Cuellar told the press,

We are not going to open an investigation based on the declarations of one person; we can't do that; everyone is in charge of their actions and you have to consider the context in which he [Hernández] said it, and for me, those factors are unknown.

Cuellar continued:

People are responsible for crimes, not a political party; whoever commits a crime, its not a political party but rather individuals.

Cuellar said that the Public Prosecutor's office was willing to investigate illicit acts committed by individuals, regardless of their party affiliation, religious beliefs, or ideology.

If the history of the campaign is any guide, though, Juan Orlando Hernández won't be accusing any specific people. As Enrique Reina said: this is a smokescreen, meant to divert attention.

From what? Maybe from the weaker position he faces in the incoming Congress, and the alliances that might form between the three other major parties.

And then there's the vocal public opposition to the tax package passed on his behalf by the lame duck congress dominated by the National Party.

It would be convenient for JOH if people would stop paying attention to how he's governing and get caught up in a witch-hunt.

Or a smokescreen.

Renewable Power Down in Honduras

Despite having increased its installed base of renewable energy generation sources, Honduras is actually getting proportionally less energy from renewable sources than it previously was.

The result of this lower generation has been roving blackouts all across Honduras this year. This comes despite policies of the Lobo Sosa administration.

In 2010 they approved 47 renewable energy projects, with a combined generation capacity of 750 megawatts.  Only four of those projects have actually broken ground to begin construction, and only one, a small hydroelectric project generating 12 megawatts, is actually operating.

In 2010, Honduras generated  6,744.3 gigawatt hours of power, split as follows:

• 3,449.6 gigawatt hours (52%) from oil fired plants
• 3,080.3 gigawatt hours (44.8%) from hydraulic generation
• 142.1 gigawatt hours (2.1%) from biomass 
• 22.1 gigawatt hours (0.3%) from imported power

From 2010 to 2013, Honduras saw a slight increase in installed capacity, from 1610 megwatts to 1734.9 megawatts.  That's a 124.9 megawatt increase, nearly all of it because of a single wind power farm, Cerro Hule (102 megawatts), coming on line.

There was a slight increase in biomass generation by 2013 as well, from an installed capacity of 91.4 megawatts to 105.5 megawatts, primarily from sugar cane processing.

By installed capacity, in 2010 renewable sources represented 38.4% of the generating capacity of Honduras.  In 2013 that had risen to 43.7% of installed capacity, as the director of SERNA reported earlier this year.

But despite representing almost 44% of the generating capacity, renewable installations actually generated only 40% of the power produced in Honduras this year.

Why was this?

There was an overall drop in power generation in Honduras between 2010 and 2013.  In 2010, Honduras generated 6744.3 gigawatt hours of power.  In 2013, it generated 5898.8 gigawatt hours, a decrease of 845.5 gigawatt hours.

The good news is that wind power and biomass generation increased.

The bad news is that everything else decreased.  Oil-fired plants generated 22 gigawatt hours less electricity in 2013 versus 2010.

The biggest drop in generation came from hydroelectric.

In 2010 hydroelectric plants generated 44.8% of the power used in Honduras.  In 2013, only 33.7% of the power generated in Honduras came from hydroelectric, a drop of 11%.  Total hydraulic generation dropped by nearly a third, from 3083.3 gigawatt hours in 2010 to 1999.1 gigawatt hours in 2013.  Part of this is due to mismanagement of the El Cajón dam, built on the Comayagua River in the 1980s.

The amount of water in its reservoir has been lowered to reduce pressure on the dam, which is reportedly leaking more than 2000 liters per second through cracks that threaten to flood the turbine room.  Reduced water pressure means reduced production of electricity.

Another factor contributing to this decrease in hydroelectric generation is drought.  Much of the southern half of the country has been experiencing a multi-year drought.

The renewable energy strategy of ENEE places a higher emphasis on hydroelectric projects than any other form of renewable energy.  The majority of the 47 renewable energy projects approved in 2010 were hydroelectric projects, mostly small.

Honduras is at continuing risk for drought going forward, according to climate change maps.

Other types of renewable power would seem like better options for the future, and would lower the confrontations caused with local people-- often rural farmers, and in many cases indigenous people.

Unfortunately, when Honduras strikes out into renewable energy, it is just as likely to grant contracts to companies with no expertise.

So the hydroelectric projects that can be done with local resources keep on coming. But the power generated does not.

New Taxes, Old Economic Problems

The lame duck Honduran Congress is now piling on taxes to try and make up for the last four years of spending as the Lobo Sosa administration prepares to give way to the presidency of Juan Orlando Hernández.

On Saturday, December 21, the Congress passed a new, extensive series of taxes and rule changes designed to bring up to 4000 million lempiras ($200 million) in new revenue to the government over the next year.  The same measure imposes restrictions on the transfer of income between government branches that is expected to bring about a further 12000 million lempiras ($600 million) in savings.

Everyone will pay a new "special contribution" of 3% on all sales.  This is on top of the already existing sales tax of 12%.

All customs tax exemptions (commonly used by religious institutions, businesses aimed at tourism, newspapers, and power generation companies) are cancelled.  Telephone and cable television service will be subject to the 15% tax, but internet service will continue to be taxed at 12%.

Everyone except those given an exemption under legislation called the Regímenes Especiales de Importación y Turismo will pay a further 5% tax on taxable income greater than 1 million lempiras ($50,000).

Consumption taxes are in general regressive-- they disproportionately affect the poorest members of a population. In addition to the general impact that the Honduran poor will experience from the added special contribution tax, other aspects of the new law will sharply affect their use of energy.

Some consumers receive a subsidy on their electric service.  Until now, that subsidy has been for those who consume less than 150 kw/month.  From today forward, the subsidy will only be for those who consume 75 kw/month or less.

Gasoline will be taxed a further 5.3 lempiras/gallon ($0.25/gallon). The income is supposed to be earmarked for infrastructure and social welfare projects.

But the poor are not targeted by the new sweeping tax increases: property owners will see sharp increases in taxation as well. 

The central government will retain 10% of the gains from the purchase or sale of property, bonds, rights, and titles as a capital gains tax. Dividends will be taxed at 10% as well.

Consumption and property transfer taxes make sense as policy because Honduras has a poor record of tax collection on basic income tax. But that doesn't mean income tax rates were left alone, either.

Foreign companies will pay a tax of 10% on gross income in Honduras. Honduran companies will pay 1.5% on their gross income over 3 million lempiras ($150,000) except if their business is selling cement, services given to the government, pharmaceuticals for human consumption, petroleum products, or supplies for baking, which will pay a tax of 0.75%.

The tax law also contemplates retaining more money for the central government at the expense of entities it owes fixed levels of funding.

The new law freezes the 2014 budget for the central government at 2013 levels. But it also changes how amounts specified in the constitution for other government entities, such as municipal governments and the National Autonomous University, are calculated. Some kinds of income that previously counted in calculating the amounts to transfer will be exempt from being counted now. This means that all dependencies specified as receiving a fixed percent of the government income will receive a budget cut, while the central government will retain more.

On top of all this, there is yet another revision to the security tax.

This revision extends the security tax to cover previously exempt bank accounts with deposits under 120,000 lempiras.  Now, all savings and checking accounts will be taxed. COHEP, one of the principal business organizations in the country, warns that this might lead to capital flight.

So why is Congress doing this now?

Part of the answer is that Honduras simply has to find more revenue or the government cannot continue. And some of the answer is partisan politics, with a hand-off of government from one National Party president to another, something that has never happened since the new Honduran constitution was set in place in the 1980s. Even with the new taxes and savings envisioned under this law, it will not close the fiscal deficit under which the government operates.

Right now the lame duck Congress has enough National Party members to pass anything they want, short of a constitutional amendment. The new Congress might not be so amenable.  The National Party will not have sufficient representation to do what it wants.  It will need to make alliances with other parties in order to enact legislation, making laws like this one difficult to pass.

Most of the Liberal Party members in the present Congress opposed the new taxes, and suggested that the press headline their coverage "National Party passes new taxes". The Liberal membership in the incoming Congress will be joined by LIBRE and PAC contingents that can also be expected to be less inclined to automatically agree with the ruling party's legislative direction

The Lobo Sosa government used 1.4 billion dollars in borrowing to make ends meet this year.  Under the new tax law's projections, the increases will, at best, cover half of that.

It will be up to the next government to figure out how to cover the other half, while improving actual tax collection enough to cover those projections. And that is presumably why, along with changes in the leadership of the police and military, the first choices for government offices made by Juan Orlando Hernández included a new head of the Dirección Ejecutivo de Ingresos (Executive Office of Income), Miriam Guzman, reportedly already at work.

Tigre Bonilla and Rene Osorio Canales Out

Porfirio Lobo Sosa  is letting Juan Orlando Hernández start making changes in the Honduran government before he is sworn in this coming January, underlining the collaboration that exists between these two Partido Nacional administrations, while highlighting their differences in key changes in the police and military leadership.

On December 17, Lobo Sosa gave his Ministers until the end of the day to hand in their resignations so that Hernandez could install his choices once he made them.  The first act was to shuffle the command in the police and military.  The new holders of these positions have already been sworn in by Lobo Sosa today, with Hernández speaking at the ceremony.

Juan Carlos "Tigre" Bonilla is out.  Ramon Antonio Sabillon Pineda is the new police commander.  Sabillon previously was the commander of the special investigations division of the police. 

Bonilla is rumored to have had differences with Arturo Corrales, the Security Minister, who Hernández is considering keeping in that office. 

Felix Villanueva Mejia will be the assistant director of the police.  The preventative police will be headed by Javier Leopoldo Flores Milla, while Hernández will keep the current director of the transit police, Abencio Atilio Flores Morazán, in that position.  The director of the investigative police (Dirección Nacional de Investigación Criminal) will be Jose Leandro Osorio.  The special investigative police will be headed by Ruben Martel Garcia,while Hector Ivan Mejia will serve as director of the police academy.  Abraham Flores Marcelino will be head of the police special unit, and José Leonel Enamorado will be the police commander of the joint military and police task force.

The high command of the Honduran Armed Forces was also changed significantly. 

In the place of the current military commander, Rene Osorio Canales, will be Fredy Santiago Diaz Zelaya.  In December Zelaya received his fifth star, along with Julian Pacheco Tinoco, who will remain as commander of the Military Intelligence service.  Rigoberto Espinosa Posadas, who was promoted in December, will be second in command of the Honduran Joint Chiefs.  Miguel Palacios Romero will be the military Inspector General.  Jorge Alberto Fernández López will command the Air Force, and Héctor Orlando Caballero Espinoza will command the Navy.

Lobo Sosa also let Juan Orlando Hernández name and install his head of the Dirección Ejecutivo de Ingresos (DEI), the Honduran equivalent of the IRS. 

This important government unit, which failed to meet its quotas all through the Lobo Sosa government, will be Miriam Guzman.  She also has taken the reins of her government unit already.