Party politics in Honduras, post 2017

While the OAS has not recognized the outcome of the presidential election, Juan Orlando Hernández is proceeding as if the election is settled. Meanwhile, media and political observers from outside Honduras have pivoted to critiques of Salvador Nasralla, Manuel Zelaya, or both for supposedly playing their cards the wrong way, and for the actions each is taking now.

This seems entirely misguided to us. It is worth noting that there was never a chance that Hernández would concede that the election was fraudulent. We doubt that he would have done anything even if the US placed pressure on him, beyond what he is doing: calling for a national "dialogue" that, as in his previous dialogues, is controlled by him and excludes those who view him as corrupt and illegitimate.

Given that reality, it is worth emphasizing that having the officially reported election results come in so close was surprising, and probably not just to those of us watching from outside. Poll tallies that came in as paper documents and were not scanned at the election site appear to have been manipulated. But those transmitted directly as scans allowed the popularity of opposition to Hernández to show clearly.

Which brings us to the next steps: what is happening, and what should we make of it?

Much is being made of the fact that Nasralla and Zelaya are proceeding separately. International commentators seem to be fascinated with the personality issues involved, and ignore the fact that the Alianza was not a party. It was formed under Honduran electoral law that allows for alliances.

Technically, the Alianza joined two existing parties: Libre and PINU. The party founded by Nasralla, PAC (Partido Anti-corrupción), was originally supposed to form part of the Alianza as well.

However, PAC was taken over in May by dissidents, after the TSE declared their original primary null and void on a technicality. The Honduran press described this situation as a mess. As reports published outside Honduras made clear, this culminated a move by a faction in PAC that was tied to the Partido Nacional.

So in the aftermath of the November election, Nasralla has no party affiliation. He has announced that he is starting over again, pushing for a fuerza nacional-- a national political movement, which in Honduras is a first step to forming a party. Nasralla specifically called for participation by "the Alianza that gave him the electoral triumph"

which will be expanded with all the other sectors of the country that oppose the dictatorship such as the people who have demonstrated in the streets, workers, the church, honest businessmen, unions, the Partido Liberal, and the youth that always accompanied him.

This is playing a long game, looking forward to the next election in 2021. It represents a calculated attempt to broaden his original constituency, appealing to the remnants of the Liberal Partido, which came in third in the national presidential race, but also inviting people who may have supported the Alianza but be less comfortable with Libre's strong social democratic agenda.

Nasralla doesn't really have any other choice if he wants to influence the political future. There is no "Alianza" party of which he might be called the leader in Congress. The shell of PAC, led by his rival, managed to win 1 seat in congress (with less than 1% of the vote nationally). In fact, even in the 2013 elections, PAC only gained 13 seats in the congress. It was always a presidential movement, created by a prominent and visible person, but not anything like a traditional party.

The stakes are different for Zelaya. With the end of the presidential campaign, he returns to his position as leader of Libre. Libre is a party that was built by experienced politicians, and includes a substantial national congressional presence. Libre won 30 seats in Congress (with 23% of the vote nationally). That's a net gain of two seats.

Libre actually overtook what remains of the Partido Liberal, which saw its congressional delegation shrink from 33 to 26 (with 20% of the national vote). The Liberal Party continues to work through the aftermath of the 2009 coup, which was led by one faction within the party against the sitting president from the same party. When Zelaya created Libre, many progressives that formerly were Partido Liberal members followed him.

One of the dynamics to watch is what will become of the remains of the Liberal Party. Luis Zelaya, the candidate for president, was an unexpected choice, a university professor with no history of political office holding. Part of his motivations for seeking office parallel those that guided Nasralla: the corruption scandal in the Honduran social services agency, IHSS. He also was moved by the extra-judicial killing of a university student.

Luis Zelaya shocked most observers when he supported the assertion by Nasralla that the Alianza candidate was the real winner of the contest. He has remained firm on this point. That has led to calls from within what his supporters call the lado oscuro or Dark Side of the party for his removal from his leadership of the party. Zelaya has openly accused those calling for his removal of being in a "perverse" coalition with the Partido Nacional.

Back in early 2015, Mauricio Villeda, then leader of the Liberal Party, was part of the first agreement to oppose the re-election of Juan Orlando Hernández. As recently as this spring, political strategists in Honduras were writing about his chances of leading a three-party alliance in the presidential race.

Which brings us to the next four years. If the Partido Liberal follows Zelaya, and he and his congressional delegation coordinate with Libre, they would form a voting bloc of 56 members, facing the Partido Nacional's 61 (based on a national vote of just under 48%).  This is enough on its own to block some of the constitutional moves that have been a staple of Hernández' consolidation of power.

And they could do more, with sufficient focus. The remaining 11 seats in Congress went to minority parties. The remnant PAC is suspected of being a National Party adherent. Other small parties that were floated as potential participants in a National Party alliance were the PUD, PDCH, FAPER and Vamos.

Only the first two of these political movements had seats in the previous congress, holding a total of five. PUD held on to its seat, but the PDCH lost three, ending up with a single seat. That brings the total votes that normally follow Hernández automatically to 63. This is two less than a majority in the 128 seat congress.

Adding the 4 congressional seats won by PINU to those of Libre, with which it formed the Alianza, would point to a core opposition of 34 votes. If the Partido Liberal under Luis Zelaya can work with Libre and PINU in the next congress on issues where they share concerns, they would still be at a disadvantage, with a total of 60 votes.

The wild card is something called the Partido Alianza Patriotica. It received enough votes in this election to receive 4 seats in congress. It ran the general who carried out the 2009 coup, Romeo Vásquez Velasquez. Not surprisingly, he ran on a tough on crime, support the military platform. In 2013, its first campaign, the party didn't even win a single congressional seat. So there's no history to go on.

And of course, there's the lone Partido Anti-corrupción diputado elected, who just may turn out to have more leverage than expected.

CONATEL attempts to shut down Cholusat Sur

(updated to link to image of CONATEL order)
The government of Honduras, in the form of the Comision Nacional de Telecommunicaciones (CONATEL), has issued an order to close the opposition TV station, Cholusat Sur, Channel 36 in Tegucigalpa in 4 days.

Why? you might ask.

For an "attempt against the economy" of Honduras. 

It all begins in June of this year, with Channel 36 covering the news story that the Banco Ficohsa and more importantly, its Honduran owner, Camilo Atala, have been charged in Panama with money laundering.

This is not speculation.  This is not rumor.  It's a fact.

Atala is head of the Honduran branch of the Consejo Empresarial de America Latina (CEAL). This was the group that hired Lanny Davis in 2009 to lobby then- Secretary of State Hillary Clinton not to declare the Honduran coup a military coup. Atala is a powerful member of the Honduran elite.

In the current news coverage, Esdras Amado López has been reporting how Banco Ficohsa in Honduras moved $1.5 million dollars (about 33 million lempiras) as part of the IHSS scandal, without fulfilling the CNBS paperwork requirements for the transfer. The IHSS scandal is what initially fueled and continues to inspire the torchlit marches against corruption that also include demands for the resignation of President Juan Orlando Hernández.

The money moved by Banco Ficohsa, Amado Lopez reports, was requested by IHSS head Mario Zelaya to pay bribes to facilitate payment of the Compania de Servicios Multiples and its subsidiary, Central American Technologies. These were payments for goods and services that were never delivered.

Amado Lopez says that both the US Department of Justice and the Fiscalia de Chile have documentation linking the Banco Ficohsa to the illegal movement of IHSS monies.

Chile is where one of Mario Zelaya's mistresses lives and she is charged in the IHSS scandal.

The US Department of Justice allegedly knows about the money sent from Honduras to Panama by the Banco Ficohsa, then deposited in MultiBank in Panama. Reportedly, the funds were then transferred to a bank in Louisiana where Mario Zelaya used them to buy real estate, property now confiscated for the government of Honduras by the US Department of Justice.

Other news sources have reported on this story, both inside of and outside of Honduras, citing court papers in Louisiana as the source of their information.

CONATEL, in its notification to Cholusat Sur that it was beginning procedures to shut down the station, said that this reporting was "an attempt against the economy" of Honduras in violation of the Constitution, the Telecommunications regulations, and the Administrative regulations.

So, it is now officially an "attempt against the economy" to report facts in Honduras.

"Central American Spring"?

The Economist published an article  that provocatively asks in the headline if the 12 weeks of torchlight marches in Honduras is "A Central American Spring".

The paper quickly repudiates that idea in the body of the article. The Arab Spring was rapid and violent.  Rather than a violent uprising, the Economist quotes Central American Business Intelligence as expecting slow, gradual change in Central America.

Slow, gradual change is not what the people protesting want: they are asking for the current president to resign.

For 14 weeks in Honduras the indignados, those upset with corruption and impunity in Honduras, have taken to the streets in all the major cities, carrying bamboo torches (not unlike the patio torches one can buy here in the US), seeking a Honduran International Commission against Impunity (CICIH in Spanish) and the removal of Juan Orlando Hernandez. 

While there are no official crowd estimates, the marches clearly mobilize tens of thousands of people in both Tegucigalpa and San Pedro Sula alone. Also remarkable is the range of cities and towns where marches are taking place. They are substantial and peaceful.

In an attempt to defuse the crowds, Hernandez has called for facilitators and mediators from the Organization of American States and the UN to oversee what he calls "dialogue".  This is in lieu of asking for a CICIH, which would be appointed by the UN to independently investigate corruption and impunity in Honduras. 

Hernandez alleges his government's efforts to reform the government are sufficient if people just give the institutions a chance to operate.

But the institutions he wants the Honduran people to trust aren't operating.

A snail's pace would be fast compared to the Public Prosecutor's office, for example. 

A trail of checks document the movement of money from the Instituto Hondureño de Seguridad Social (IHSS) through at least three front companies in Honduras into the National Party bank accounts including those of the Hernandez Presidential Campaign. When journalists made this public in May, they used copies of the checks from the actual prosecutorial case file shared with them.  Despite this financial trail, no one has been charged, and no one even questioned, about these checks, checks that implicate the leadership of the National Party in corruption. 

There are actually indications that the Assistant Public Prosecutor, Rigoberto Cuellar, may himself be linked to an influence-pedaling scandal, but he is not as yet the target of any investigation.

This is the face of impunity in Honduras. It is why the indignados are marching. And they are marching for a specific remedy that exists in action in their neighbor to the north, Guatemala.

In Guatemala, people are also marching weekly. Here, there is already an International Commission against Corruption and Impunity (CICIG in Spanish), sponsored by the UN at Guatemala's request, and funded by voluntary contributions from a number of different countries. 

This unit, as noted in the Economist article, has been instrumental in uncovering and prosecuting corruption in the Guatemalan governments past and present. The transparency of these investigations served to mobilize the populace of Guatemala tired of corruption. 

The CICIG has in fact, sought to bring charges against the President and Vice President of Guatemala for corruption. Over 100,000 people gathered last week in central Guatemala City to call for the President to resign. Their demands have now been endorsed by the country's Roman Catholic bishops.

In Honduras, at least for now, President Hernandez is not only rejecting the idea of an independent CICIH, he's actively working to discredit the idea through the public pronouncements of his advisor Ebal Diaz, who has made up "facts" to discredit the CICIG.  Officially the National Party Congressional delegation is against the proposal as well.  Mauricio Oliva, President of Congress, called it "foreign intervention".

Almost every other political party in Honduras supports the call for the CICIH. LIBRE supports it; the AntitCorruption Party (PAC) does too. 

The Liberal Party recently held a "unification" meeting to align its congressional delegation with the thinking of its directorate. The idea of a CICIH was a key source of difference. The Liberals in Congress recently voted against legislation that would have put the call for a CICIH to a public referendum, legislation sponsored by LIBRE.  At the time they said they voted against it because they thought it would delay prosecution, particularly of former Zelaya government officials. The directorate of the Liberal Party was in favor of a referendum, making the defection of its Congressional delegation a major issue. In the unification meeting, the party members agreed to vote for a CICIH if it comes up again.  But it is unclear that the Congressional leadership will allow another vote.

Last Wednesday, the indignados held a national strike, calling for businesses to shut down and main traffic arteries in the country to be blocked. Roads were blocked for a time until the police broke up the protests, and some businesses shut down, but not most. 

Last Friday's march ended at the Consejo Hondureño de Empresa Privada (COHEP) building where marchers met with business leaders. Whether this will result in businessmen supporting the marchers' goals is an open question, but the fact that talks were entertained is significant. COHEP  supports the government; any change in support here would likely destabilize it.

Slow change indeed.

Ebal Diaz: "We've already contained the corruption"

Large Torchlight Marches (Marchas de las Antorchas) have been going on every night in different cities in Honduras for at least the last three weeks.

Participants have called for three things: an end to impunity, the establishment of an International Commission against Impunity, and the resignation of Juan Orlando Hernández, President of Honduras, due to corruption in his election campaign.

The Partido Nacional has admitted that the election of Hernández was funded in part by resources diverted from the IHSS. Nonetheless, both the party, and the government it controls, are against Honduras calling for an International Commission against Impunity.

That's the word from Ebal Diaz, a Honduran presidential advisor.

These commissions, organized by the UN, have been effective in other countries where they've been formed, such as Guatemala.

Honduras doesn't need one because, according to Diaz, "We've already contained the corruption." 

Diaz goes further, calling the Guatemala commission ineffective. He relates that it has cost $150 million over its seven year life, and successfully brought and prosecuted only four cases of corruption or impunity. 

Diaz said:

"Is this an alternative for the country?  There are the numbers; they're not something we invented.  So the Honduran people need justice...When?  In three years?  In 5 years? or now?  We're looking for solutions now by strengthening our [government] institutions."

Diaz suggests the government might accelerate its pace of cleaning up corruption and implementing training.

These actions, however, do nothing to capture and prosecute those who perpetrated the crimes, something Diaz fails to address.

The recent Congressional Commission which reviewed a series of corruption cases involving the IHSS, INPREMA, and the IP, and the assassinations of notable government officials like Alfredo Landaverde, was relatively useless.

It served only to confirm what everyone already knows: the Public Prosecutor's office is barely investigating these cases of corruption and impunity, some of which have stretched on for more than seven years in the investigative state. While it might eventually bring charges against those immediately responsible, it likely will not pursue those who planned and directed the crimes. From that perspective, then, even with the "numbers" Diaz cites, a commission like that in Guatemala would be an improvement.

The level of corruption and impunity in Honduras is hard to believe. In fact, even as the Congressional report was being released, the lead on the congressional committee, Mario Perez, was being identified in the Honduran press as a drug trafficker, based on Honduran government documents from 2012.

Impunity reigns in Honduras not because the Public Prosecutor's office is incapable of pursing these crimes. It has been endlessly trained under US and European foreign aid programs in investigation and prosecution of organized crime. 

To pursue these crimes is neither politically expedient, nor good for a prosecutor's longevity.  No government program will address either of these risks.

The previous Prosecutor against corruption, Roberto Ramirez Aldana, who had headed the IHSS investigation from the start, recently took an extended leave to assume a government post as Honduras's Ambassador to UNESCO.  He did so because the Honduran Military Intelligence agency informed him of credible death threats against him and suggested he leave the country.

One of the trails of corruption leads directly to the currently ruling Partido Nacional. But the current Public Prosecutor, Oscar Chinchilla, was appointed by that party, while Juan Orlando Hernandez was the President of Congress, during the presidential term of Porfirio Lobo Sosa.  Chinchilla sets the priorities for the office. He's focusing the department on corruption during José Manuel Zelaya's term as president, largely ignoring more recent corruption that can be linked to his own party.

Arturo Corrales, Honduras' Foreign Minister, has said Honduras will not ask for an International Commission against Corruption from the UN.

Rigoberto Chang Castillo, currently Minister of Justice, the Interior, and Decentralization, went further: he made up a criterion for when such a commission is necessary: "Only when there's a high degree of ingovernability". Chang Castillo claims that "Honduras isn't worthy" of such a designation.  These kinds of commissions, he continued,

"uniquely can be asked for by the government of the Republic when the country is in a state of ingovernability and there is no confidence in the institutions of the State....This is requested when the Judicial system has collapsed."

The irony is, Chang Castillo precisely describes the Honduras that the Torchlight Marchers see.

"If" Makes All the Difference: Hernández on the Corruption Scandal

Honduras president: graft-linked companies helped fund my campaign

That's how Reuters titled their story, datelined Tegucigalpa today.

Which would be an incredible step forward in taking responsibility for the corruption scandal that has led to torchlit protests uniting supporters of two of the opposition parties in Honduras.

Unfortunately, the story appears to be slightly less than the headline promises. The basic points it reports are easy to summarize:

Facing a wave of protests calling for his resignation, Honduran President Juan Hernandez said on Wednesday that his 2013 presidential campaign took money from companies linked to one of the worst corruption scandals in the country's history.

But he said he and his National Party were unaware of where the money came from and hoped that an investigation would find and punish those responsible for breaking any laws.
...
Hernandez said the probe found 3 million lempiras (about $148,000) in campaign financing was tied to those companies, without giving more details.   

That would be considerably less funding channeled to the campaign than the $90 million that sources other than the PN have reported went to the party's coffers.

And while Hernández begrudgingly admitted some funds came to his campaign from the companies set up to loot the IHSS, he insisted he personally had nothing to do with it:

Hernandez told reporters that "me, myself, Juan Orlando, I have nothing to do" with the scandal.

Needless to say,  leaders of the protests against JOH were not placated. Salvador Nasralla of the Partido Anti-Corrupción underlined that corruption is corruption, saying:

"It's like saying that a thief who steals a little is less guilty than one who steals a lot".

The Honduran press, meanwhile, took quite a different tack in its coverage, leaving a much more ambiguous impression about what the president has or has not admitted.

El Heraldo's article was headlined "JOH: Partido Nacional should return funds to the IHSS", but the statement attributed to Hernández is conditional:

Hernández insisted that if it were proven that businesses connected to the embezzlement at IHSS issued checks in favor of the Partido Nacional, the funds should be returned...

That "if" disappeared in the Reuters story. But it, and similar hedged language, is all over Honduran reporting.

JOH, while seeming to call for his party to admit guilt, actually used the opportunity to undermine one of his political rivals, ex-mayor of Tegucigalpa Ricardo Alvarez, stating

"I am not the president of the party, but this was my suggestion more than eight months ago; I said that once the Fiscalía and the Judicial branch demonstrate that those resources came from something unseemly, the Partido Nacional is under an obligation to return those resources.

The head of the Partido Nacional who, this passage implies, did not take JOH's good advice, while unnamed in this article is Alvarez, who would have been likely to be the strongest candidate for president from the PN, before the Supreme Court decision allowing re-election.

In reporting by La Prensa, Hernández is quoted as explicitly saying "some of the checks were in the period when Ricardo Alvarez was president of the Party", continuing

"I don't know right now if he has given his statement or not, but everyone has to give a statement, everyone has to give his version and afterward, the court has to make its
finding".

It is no accident that El Heraldo ended its article with Hernández' response to a question about re-election:

In regard to my electoral participation, it seems to me that I should leave space for all political actors, but if they are in agreement, I have no problem in participating.

El Tiempo, reporting the response almost word for word as El Heraldo, added "Nonetheless, [Hernández] said that he had not spoken of re-election".

So-- no admission of guilt at all, contrary to what Reuters reported, is found in the Honduran coverage.  La Prensa de Honduras actually headlined its story  "I have nothing to do with the corruption of the Seguro": Juan Orlando Hernández.

Curiously absent from the Reuters story is what Hernández had to say about those protesting about the scandal. In Tiempo he is quoted as saying

"Why have the people come out? just like me, I was angered when I realized the depth of the problem, of the avarice of the human being who could act at the moment of being an administrator"..."I am certain that the majority of the people, like all of us, are angry about what has happened and many people legitimately come out and march, but also there are people who come out and march because they do not want other cases to be known ..."

So in JOH's view, he is on the side of the just protesters, while some others are nefariously participating in protests to prevent the disclosure of their own corruption, or for other, undisclosed, purposes, as El Heraldo quotes him saying

"It could be that some would like to use this movement for other purposes..."

And in case the innuendo is lost on readers, Proceso Digital ran its story under the headline Marchas tienen un componente legítimo pero tambíen intereses oscuros: Presidente Hernández. Where other Honduran media stopped quoting JOH's comments on the protests after he expressed his support for the "legitimate" outrage (in which he included himself), in Proceso Digital the statement took a more disturbing turn:

"but there is another group that is asking that I should not be in the government ever since I took office, the people that were against extradition, it is all one sequence, these are different sentiments, these are people that want to stop the fight against organized crime.

For JOH, protests against generalized "corruption" are fine, because he has nothing to do with it. But when the call is for him to step down-- well, that's quite another thing: you must be on the side of organized crime.

Reuters reported the part of Hernández statements that speaks to the over-arching narrative being constructed about corruption and protest in Central America, in which Guatemala and Honduras are merged. But each country has its own issues, and what gets left out from original coverage is where we find the traces of real politics.

It may be reassuring to suggest that the president of Honduras has admitted his party did something wrong, and has directed it be corrected. But that doesn't seem to actually be what has happened; holding himself above the fray, Juan Orlando Hernández minimized the depth of corruption, and managed to use the opportunity to continue to undermine political rivals within and outside his own party.

Protests, Claims of Conspiracy Against Juan Orlando Hernández

Juan Orlando Hernández, elected President of Honduras in November 2013 with about 37% of the popular vote, has ruled as if he had an electoral mandate.

For the last couple of weeks, however, things have been a little rougher in JOH's Honduras. Rough enough that English language media have taken notice.  

The International Business Times covered the story with a headline "Juan Orlando Hernandez Resignation Scandal", summarizing the issues concisely:

Hondurans demanded the resignation of President Juan Orlando Hernandez Wednesday during demonstrations across the violence plagued capital city of Tegucigalpa. Protesters outside the National Congress questioned Hernandez's involvement in a social security scam involving some of the nation's most influential businesspeople and politicians...

The Honduran Institute of Social Security funding scam allegedly involved officials transferring large sums of money from the nation's federal coffers to the ruling National Party during the 2013 presidential elections.

The Tico Times adds that the Partido Nacional is accused

of having accepted approximately $90 million from IHSS to finance Hernández’s campaign in 2013, a cut of more than $300 million in diverted funds from the IHSS.

The investigation of corruption at the IHSS is ongoing. What has been alleged, citing the Consejo Nacional Anticorrupción, is that funds were paid to false-front businesses that provided no services. Some of these businesses then wrote checks to the central committee of the Partido Nacional, which used the proceeds to fund the presidential campaign, according to Salvador Nasralla, leader of the Partido Anti-Corrupción.

Consejo Nacional Anticorrupción (CNA

Leer más en: http://www.elheraldo.hn/pais/710497-214/entre-320-personas-se-repartieronel-multimillonario-desfalco-al-ihss
Síganos en: www.facebook.com/diarioelheraldo y @diarioelheraldo en Twitter

The allegation that a large part of the money diverted financed Hernández' presidential campaign has fueled demands that he step down.

Which leads to the strangest part of this story: the pushback, which has tried to recast this all as plotting to undermine the president, even to carry out a military coup.

As the IHSS scandal was unfolding Marvin Ponce, a former member of the Honduran Congress, and current advisor to the president, claimed that there was a "conspiracy" to spread rumors about JOH involving the US government:

I am glimpsing a dangerous thing. There is a high profile TV company in the country that has had meetings in the Department of State and with the Department of Justice. They have initiated a very strong campaign against the president. What we are seeing is that there is a campaign through two routes, David Romero [a prominent Honduran broadcaster] with accusations, and on the other side a strong strategy by other powerful sectors of the country to force him to yield and to avoid his seeking re-election."

Ponce's claims of US involvement are, to be charitable, questionable. They would require us to credit that preventing presidential re-election (recently authorized by the Honduran Supreme Court) is more important to US foreign policy than supporting a government doing precisely what the US calls for in security, immigration, and economic policy.

But even these claims do not hold a candle to other rumors about supposed plotting against JOH.

These came from Hugo Maldonado, the current head of Honduras' Human Rights Commission, who claimed that political opponents of the Honduran president were conspiring to remove him in a coup d'etat.

The ex-head of the Honduran Armed Forces, Romeo Vasquez Velasquez-- who actually was responsible for the execution of the 2009 Honduran coup-- denied the charge vigorously, and colorfully:

He shouldn't go making things up, unless my wife and I alone are going to carry out a coup d'Etat. I'm not in the Armed Forces-- who am I supposed to commit a coup with?

That wasn't the only reporting that waded into dubious waters.

The Honduran paper La Tribuna published an article-- really more like a political speech by a very enthusiastic supporter of the Partido Nacional-- on May 14. In between boasting about the strength of the PN and of JOH, it sketches out a supposed plot fueled by methamphetamine use, backdated to March, in which political advisors to José Manuel Zelaya supposedly outlined a campaign to undermine Hernández, amazingly, through public protests in May about corruption.

The conspiracy allegedly involved David Romero, and Salvador Nasralla of the Partido Anti-Corrupción as well, thus tidily blackening the reputations of all three.

The one thing in this lurid story that has some truth to it is that both PAC and LIBRE are calling for JOH to resign due to the IHSS scandal.

Meanwhile, the Tico Times estimated 5000 people took part in the latest march in Tegucigalpa, a night-time torchlit rally that was supported by both LIBRE and the Partido Anti-Corrupción.

Investigations of the IHSS continue; and for his part, JOH is trying to stay above the fray, while his party launches counter-accusations, smearing opponents and suing Salvador Nasralla for "defamation".

Please Buy My Bonds.....

Honduras is broke.

It can't pay government employees, contractors, or suppliers.  Its not unusual for teachers to go six months between paychecks under Porfirio Lobo Sosa.  Road construction has stopped again due to government debts to the construction companies.  It stopped paying the IHSS, the government health provider, the fees it collected from government employees to pay for their health care, prompting IHSS to threaten to cut off government employees.

So what does a bankrupt government do?

Honduras is now seeking to privately place over $750 million dollars in bonds.  In that private placement, it is using Barclays and Deutsche Bank as its agents.  These two banking firms have been hired by the government of Honduras to set up meetings with potential investors.  Meetings have now been set up in London (March 4), New York (March 6), Boston (March 6) and Los Angeles (March 7).

But there's a last minute hitch. Congress, which had to vote to allow the issuance of these bonds, changed the term from 8 years to 10 years.  This increases the amount the government of Honduras will have to pay out to investors by prolonging interest payments for two more years.

If that wasn't enough, both Moody's and Standard and Poor's dropped Honduras's bond rating this week because of what they called the risk of investing in a country where there the government cannot pay its existing debts.  Moody's also changed their outlook from "stable" to "negative".  This in turn will raise the interest rate that Honduras will have to pay on the bonds.  Moody's indicated that the downgrade was caused by

a worsening in the external finances of the country's economy, reflected in an increase of the deficit which is only partially covered by foreign direct investment.

The public debt in Honduras, according to Moody's, is about 35% of its gross domestic product, which is moderate. 

But that is not the whole story. Because of the temporary cessation of international funding under the de facto regime that ruled in 2009 following the June coup d'etat, the country had to rely on internal credit markets, which were costlier, raising the government's debt payment burden.  Debt service (principal and interest payments) was about 10% of the budget last year, up from 3% of the budget in 2008.  Much of this increase is due to the debt shift from external to internal credit markets under the seven month de facto regime.  Both Moody's and Standard and Poor's cited the increased costs from using internal credit markets in their downgrades.

So off to market with $750 million dollars in bonds with a newly downgraded credit rating and an extended term of payment, just a week before the private placement meetings kick off in Europe and North America. Not the kind of bargaining position anyone would like to be in.