Sunday, October 18, 2009

Honduras political crisis approaches conclusion

Sources: Wall Street Journal - Honduras Negotiators Move Closer to a Deal Financial Times - Honduras crisis talks edge forward The Economist - Time on whose side? Yahoo (AP) - Honduras, already poor, sinks further after coup

Honduras inched closer to a resolution regarding its current political crisis over the past week. The crisis started on June 28 when the Honduras military, by order of the Supreme Court, removed President Manuel Zelaya from power. The Supreme Court ordered Mr. Zelaya’s exile based on allegations that he had attempted to change the constitution through a reform process that would allow him to run for reelection when his term was up at end of the year. Robert Micheletti took power following the dismissal of Mr. Zelaya. Most of the world saw Mr. Zelaya’s removal as a coup and did not accept the Supreme Court’s decision. Those who supported the removal of Mr. Zelaya do so on the insistence that the Supreme Court exercised its constitutional authority in replacing Mr. Zelaya. Opinion polls in the country suggest that 60-70% of the country does not oppose Mr. Zelaya’s removal.

Honduras is one of the region’s poorest countries, and the removal of Mr. Zelaya further eroded its economy. Before his removal, Honduras’s economy was already suffering from the financial crisis. Immediately after the removal of Mr. Zelaya, countries cut foreign aid to Honduras and Multi-lateral lending organizations cut off the country’s access to credit. The foreign aid that was cut equaled over 6% of the country’s GDP. Tourism has dropped significantly in the country, with one tourist center reporting a drop of nearly 85%. Retail sales in the country’s two largest cities have also dropped by nearly 30%. Although many countries in the region have begun recovering from the financial crisis, the economic situation in Honduras continues to worsen because of the political crisis.

Negotiations between former President Mr. Zelaya and current President Mr. Micheletti began in June and the negotiations over the past week have brought the two parties the closest they have been to resolving the crisis. Representatives of Mr. Zelaya asserted on October 15 that the parties reached an agreement on restoring “powers of the state to where they were before.” Mr. Micheletti’s group of negotiators, however, asserted that no deal was reached that would return Mr. Zelaya to power. The negotiations will likely lead to Mr. Micheletti stepping down. The remaining issue separating the parties is who will lead the country in the interim period until the election in January 2010. The conclusion of this crisis should result in the resumption of foreign aid and access to credit through Multi-lateral lending organizations. This should allow the country’s economy to stop contracting and resume expanding.

Discussion Questions:

Should countries and Multi-Lateral lending agencies have cut aid and access to credit to Honduras during the middle of the financial crisis?

Should the world community have taken a different approach to Honduras given that many people within the country did not view the removal of Mr. Zelaya as a coup?

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