Table of Contents

Just a few more than 8 million people live in Honduras, generating an official gross domestic product (GDP) of $20.93 billion in 2015—meaning, if it were divided up evenly, that everyone would get about $2,527 per year. But like most Latin American countries, Honduras has a grossly unequal distribution of income,14 and an even more unequal distribution of wealth. In other words, a great many Hondurans make due with much less. Agriculture, including timber, accounts for nearly 14 percent of GDP, and industry, such as textile manufacturing, twice that, though the latter category includes processed agricultural goods such as sugar and coffee. A full 18 percent of GDP is provided by remittances sent home by Hondurans working abroad,15 with at least one-fifth of households benefiting from such assistance.16 No sign of the bloated illicit sector—the drug trade, the lively traffic in consumer goods or migrants or weapons—is to be seen in such official figures, so they present a highly distorted picture of the economy.

Leaving Bananas (But Not the United States) Behind

The original exemplar of the pejorative term “banana republic,” Honduras at the turn of the twentieth century was dominated both politically and economically by three competitive U.S.-owned banana growers.17 In a symbol of these companies’ raw power, the owner of one of them, Samuel Zemurray, fomented a coup in 1910 to secure desired land and trade concessions.18 While not formally a U.S. colony, in other words, Honduras resembled one in many aspects of its political and economic structure. When practices stopped short of violent regime change, the banana industry still sewed corruption into the fabric of the state, regularly bribing and leaning on officials, pursuing self-enriching land policies, and eventually drawing the Honduran government into a protracted intra-banana-company feud.19

Hit by crop blights and the Great Depression in the 1930s and 1940s, banana exports declined and the local economy diversified a bit.20 A professional middle class began emerging;21 the government made investments in infrastructure and paid down its public debt;22 and legislative reforms opened the way for labor and peasant (campesino) leaders to organize.23 But the preoccupation of the then president, former general Tiburcio Carías Andino, with maintaining his grip on power during this relatively stable period forestalled the germination of robust democratic institutions at a time when rising expectations were about to clash with the landed aristocracy’s sense of entitlement.24 Political and economic upheaval marked the 1950s and early 1960s.25

Tensions over demands for social reforms, such as labor and social protections but especially land distribution, came to a head with a coup in 1963.26 Honduras embarked upon two decades of rule by the military, in loose alliance with landowning elites. The social justice aspirations of the rural and urban poor went largely ignored.27 Compared to neighboring Guatemala and El Salvador, however, the Honduran military practiced relative restraint and allowed for a measure of civic pluralism. Honduras was largely spared the death squads, disappearances, and torture that plagued other Central American countries.

Domestic discontent with economic stagnation and a procession of corruption scandals—but also pressure from the human rights conscious administration of then U.S. president Jimmy Carter—prompted the military to organize first a vote for a constituent assembly in 1980, and finally a presidential election in 1981.28

But, hemmed in as it was by its more violent neighbors, Honduras could not escape the repercussions of conflicts in Nicaragua and El Salvador. Ronald Reagan’s administration demanded that the country serve in one case, and not serve in the other, as a rear base for rebel groups from both countries.29 The militarization of the 1980s substantially impacted the character of Honduras.

Referred to as the USS Honduras due to its launching function for American troops,30 the country received hundreds of millions of dollars in U.S. military aid through the 1980s—when the United States was gripped by outsized fears about the national security threat emanating from Nicaragua—with an average annual assistance of $57.7 million during the peak of the Contra conflict.31 Significant increases in funding for the military expanded its power, and though Honduras remained under civilian government during this time, political assassinations, kidnapping, and disappearances all increased.32

The combination of military power and ideological context brought with it persecution of leftist activists, including the well-publicized kidnapping and torture of union leader Rolando Vindel González, and purges of left-leaning faculty from Honduran universities.33 Impunity was the rule in these cases, with no repercussions for military units or officers widely believed to have been involved in human rights abuses,34 even as evidence of state terrorism, secret detention centers, and hidden cemeteries and mass graves came to light.35 U.S. involvement at this time also served to empower the growing drug-trafficking sector in Honduras, as the United States contracted with narco-entrepreneur Juan Ramón Matta Ballesteros’s air fleet to distribute arms to the Contras.36

The Economy: Battered And Restructured

In the 1990s, Honduras (like many other countries worldwide) embarked on a process of privatization, economic liberalization, and insertion into the globalizing economy, promoted by the United States and many multilateral institutions.37 International Monetary Fund (IMF)–sponsored structural adjustment programs called for curbs to government expenditures, and an opening of the market to foreign investment, new export commodities (including sweatshop textiles), and tourism.38

In mid-October 1998, a swirl of high winds that had been making its way across the Atlantic from West Africa churned into the Caribbean. Stalling and jerking forward again on its westward drift, dumping several feet of rain in places, the lumbering system took a full week to reach Honduras. But when it did, Hurricane Mitch wreaked historic destruction. Storm surges, flooding, and mudslides resulted in over 11,000 deaths across the region, left 3 million people homeless and displaced, and tore up as much as three-quarters of crops in the field, alongside other economic losses.39

The Honduran government, led by the recently elected president from the Liberal Party, Carlos Roberto Flores Facussé, was ill-equipped to deal with the most destructive storm to hit the region in two centuries, and moved to concentrate power to manage the crisis.40 On October 29, Flores declared a state of emergency, deploying the military to the most affected areas to impose public order and prevent looting. He suspended civil liberties and imposed a curfew on November 3.41

To tackle the longer-term recovery from the crisis, Flores brought in a new cabinet of five ministers. Inaccessible to local officials and congressional representatives alike, according to critics, the team designed the national reconstruction plan largely in secret.42 In early 1999, shortly after the government unveiled the blueprint, then human rights commissioner Leo Valladares reported on alleged widespread misuse of foreign aid.43

The economic wreckage, nationwide disorientation, and crisis atmosphere made it easier to implement contested economic restructuring: further opening the Honduran market to foreign investment, including expansion of the maquiladora textile, export agriculture and tourism industries, and sales of public infrastructure. Many of the initiatives were tied to IMF debt renegotiations, described by proponents inside the government and abroad as vital.44 Disproportionately benefiting a small group of families, these initiatives propelled the class of immigrants from Syria and Palestine, of which Flores was a member,45 to prominence and gave them control of much of the “modern” economy.46

Unsurprisingly, given the devastation wrought by Mitch, abrupt shifts in economic practices, and deportations from the United States, the same period also saw a proliferation of gangs and a rise in urban violence.47 This crime boom was further fueled by the rising importance of overland trafficking routes through Central America for U.S.-destined cocaine, among other illicit goods.48

The Road Almost Taken

In 2005, amid frightening levels of crime and unrest, Liberal Party candidate Manuel Zelaya narrowly won a presidential bid on a platform that emphasized rehabilitation of violent offenders—a departure from the more traditional mano dura (tough on crime) approach of his predecessor—as well as a more inclusive exercise of power.49

Indeed, although Zelaya belonged to the old power structure,50 he seemed to pivot away from the inner circle of elite business families when he became president. He adopted an ostentatiously populist personal style, appointed a number of bona fide reformers to his cabinet, and took such provocative steps as increasing the minimum wage and opening investigations into violent land disputes between farmers in a fertile valley along the Caribbean coast and palm oil producers, including one belonging to the enormously powerful patriarch of the new business elite, Miguel Facussé.51 Zelaya overhauled the way Honduras’s fuel was sourced and distributed, reducing profits for the principal families in the energy business. Neither they nor the United States appreciated his decision to seek cheaper fuel from Venezuela, or his growing friendliness with that country’s president at the time, Hugo Chávez.52

When Zelaya began campaigning in late 2008 for a referendum on constitutional reform, military and economic elites drew the line, seizing on the move as an attempt to eliminate presidential term limits and extend his time in office. The streets filled with demonstrators for and against the referendum as the political crisis grew acute, and the U.S. embassy organized several meetings in 2009 to try to chart a way through it.53

To no avail. In the early hours of Sunday, June 28, soldiers marched on the presidential palace, disarming the guard and shooting out the locks, broke into Zelaya’s bedroom, handcuffed him, and bustled him onto a plane bound for Costa Rica. A forged resignation was produced in Congress (the date was wrong), which swore in its president, Roberto Micheletti, as interim president of the country.54 Though soldiers carried out the final acts of this drama, the military did not have the type of independent grievance against the government that, for example, ill-paid and -supplied Malian forces did when they toppled their president in 2012. The 2009 Honduran upheaval is best understood as a corporate coup.55 Semantics matter, though, as U.S. law provides for automatic cutoffs in aid in the wake of a military coup.

Strikes, protests, and civic disruption were met with widespread arrests, disappearances, and beatings; meanwhile, media outlets and lobbyists launched both a national and an international campaign to legitimize the new government.56 At the end of November, under international pressure but amid an atmosphere of insurrection and ferocious crackdowns to quell it, another election was held, resulting in the victory of a National Party stalwart, Porfirio Lobo.

The attitude to these events struck by then U.S. president Barack Obama’s young administration, beset by two wars in the Middle East and an epic financial meltdown, has sparked heated controversy. After an initially firm reaction to what the U.S. ambassador unequivocally termed a coup57—including condemnation and a suspension of non-humanitarian aid58—Washington reversed course. Urging Zelaya not to seek reinstatement, then secretary of state Hillary Clinton pushed for speedy elections to normalize the situation.59 (The role of her longtime friend and lobbyist, Lanny Davis, in this change of direction is discussed below, pages 99–100.)

The 2014 elections that allowed Lobo’s successor at the helm of Congress to rise in his foot-steps to the presidency itself were only somewhat less problematic than the violence-wracked polls of 2009.60 The victor, President Juan Orlando Hernández, is now campaigning for re-election in November 2017—precisely the purported ambition for which Zelaya was toppled.

In two phases, then, this difficult history has helped shape today’s Honduran political economy, selecting for certain groups and practices. In the late-nineteenth and early twentieth centuries, colonial worldviews perceived and treated less-developed countries as suppliers of raw materials and agricultural inputs for the benefit of the dominant industrialized powers. The United States played the latter role with respect to Honduras. Later, the Cold War and deep concerns about leftist subversion defined U.S. policy.

These phenomena have been discussed and argued over elsewhere at length, and this report does not purport to re-litigate them. However, external actors had a heavy hand in creating today’s Honduras, and thus, in our view, bear a responsibility to help fix what they have wrought.

Notes

14 Honduras had a GINI coefficient of 50.64 in 2014, where 0 is perfectly equal. The U.S. scored 41.06 the same year. See “Data: Honduras,” World Bank, http://data.worldbank.org/country/honduras.

15 “Honduras,” CIA World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/ho.html, and “Data: Honduras,” World Bank, http://data.worldbank.org/country/honduras.

16 Katherine Brogan and Elizabeth McGuiness, “FIELD Report No. 19: Assessment of Remittances in Honduras,” USAID, ACDU/VOCA, and FHI360, October 2013, https://www.microlinks.org/sites/default/files/resource/files/FIELD%20Report%20No%2019%20Honduras%20Remittances%20Assessment.pdf. Note that internal remittances are also
important, as city-dwellers send part of their wages back to family members who have remained on the land.

17 Thomas M. Leonard, The History of Honduras (Santa Barbara, CA: Greenwood Publishing, 2011), 83.

18 Ibid., 84–85.

19 See Kirk Bowman, “The Public Battles Over Militarization and Democracy in Honduras, 1954–1963,” Journal of Latin American Studies 33, no. 3 (August 2001): 539–60.

20 Tim Merrill, Honduras: A Country Study (Washington, DC: Federal Research Division, Library of Congress, 1995), 29.

21 Leonard, The History, 135–36.

22 Merrill, Honduras, 32.

23 Leonard, The History, 138.

24 Merrill, Honduras, 32.

25 Leonard, The History, 143. See also John A. Booth, Christine J. Wade, and Thomas W. Walker, Understanding Central America: Global Forces, Rebellion, and Change (Boulder, CO: Westview Press, 2010), 211; and Thomas P. Anderson, Politics in Central America: Guatemala, El Salvador, Honduras, and Nicaragua (New York: Praeger Publishers, 1982), 112.

26 Anderson, Politics, 113.

27 Booth, Wade, and Walker, Understanding, 210–12.

28 Ibid., 212.

29 Ibid., 213.

30 Ibid., 213.

31 Ibid., 347.

32 Nancy Peckenham and Anne Street, eds., Honduras (New York: Praeger Publishers, 1985), 194.

33 Ibid., 211–18.

34 Ibid., 211.

35 See James LeMoyne, “Testifying to Torture,” New York Times, June 5, 1988, http://www.nytimes.com/1988/06/05/magazine/testifying-to-torture.html?pagewanted=all.

36 “Honduras,” InSight Crime, December 6, 2016, http://www.insightcrime.org/honduras-organized-crime-news/honduras.

37 Booth, Wade, and Walker, Understanding, 220.

38 Ibid., 219.

39 “1998- Hurricane Mitch,” Hurricanes: Science and History, 2015, http://www.hurricanescience.org/history/storms/1990s/mitch/; “Mitch: The Deadliest Hurricane Since 1780,” National Climate Data Center, January 23, 2009, https://www.ncdc.noaa.gov/oa/reports/mitch/mitch.html; and “1998: Hurricane Mitch slams into Central America,” History.com, http://www.history.com/this-day-in-history/hurricane-mitch-slams-into-central-america.

40 Vilma Elisa Fuentes, “Post-Disaster Reconstruction: An Opportunity for Political Change,” in The Legacy of Hurricane Mitch: Lessons From Post-Disaster Reconstruction in Honduras, ed. Marisa O. Ensor (Tucson, AZ: University of Arizona Press, 2009), 106.

41 Ibid., 106–7.

42 Ibid., 107.

43 Ibid., 113. See also Naomi Klein, “The Rise of Disaster Capitalism,” Nation, April 14, 2005, https://www.thenation.com/article/rise-disaster-capitalism/. For a look at an interesting twist on this “disaster capitalism,” see Benjamin F. Timms, “The (Mis)use of Disaster as Opportunity: Coerced Relocation From Celaque National Park, Honduras,” Antipode: A Radical Journal of Geography 43, no. 4 (2011): 1,357–79.

44 Booth, Wade, and Walker, Understanding, 221.

45 William Aviles, “The Political Economy of Low-Intensity Democracy: Colombia, Honduras, and Venezuela,” in Corporate Power and Globalization in U.S. Foreign Policy, ed. Richard W. Cox (London: Routledge, 2012), 146.

46 Ibid., 147. See also the section on private-sector network members, pages 67–76.

47 Booth, Wade, and Walker, Understanding, 221.

48 “Honduras,” InSight Crime, December 6, 2016, http://www.insightcrime.org/honduras-organized-crime-news/honduras.

49 Booth, Wade, and Walker, Understanding, 223.

50 For a history of the Zelaya family, see Will Weissert, “Zelaya Hometown Provides Look at Divided Honduras,” San Diego Union-Tribune, July 7, 2009, http://www.sandiegouniontribune.com/sdut-lt-honduras-divided-070709-2009jul07-story.html. For links between Zelaya and the Sarmiento family, see Steven Dudley, “WikiLeaks: Zelaya and Organized Crime,” InSight Crime, December 12, 2010, http://www.insightcrime.org/investigations/zelaya-and-organized-crime; and “Un hijo de Ulises Sarmiento sustituye a ‘Mel’ Zelaya en Olancho,” El Heraldo, October 6, 2016, http://www.elheraldo.hn/pais/1004221-466/un-hijo-de-ulises-sarmiento-sustituye-a-mel-zelaya-en-olancho.

51 “Noticia: Plantaciones de palma in Honduras,” Salva la Selva, February 4, 2011, www.salvalaselva.org/noticias/3324/plantaciones-de-palma-en-honduras.

52 Fiona Forde, “Oil Negotiation Between Honduras and Venezuela Rankles Washington,” Irish Times, May 20, 2006, http://www.irishtimes.com/news/oil-negotiation-between-honduras-and-venezuela-rankles-washington-1.1005625; “Can President Zelaya Be Brought Back to the Fold?” (U.S. Embassy Tegucigalpa cable to Washington), WikiLeaks, September 19, 2008, http://wikileaks.redfoxcenter.org/cable/2008/09/08TEGUCIGALPA863.html. We heard one account from a former minister of a speech by Zelaya in which a patriarch of one of the families issued a direct threat, to the effect that an attack on any of their interests would be treated as an attack on all of them.

53 Booth, Wade, and Walker, Understanding, 224. For the contemporary view from the U.S. embassy, see “Honduras: A Political Crisis Brews,” WikiLeaks, June 25, 2009, https://wikileaks.org/gifiles/docs/16/1687739_honduras-a-political-crisis-brews-.html; and “Zelaya and the Fourth Urn” (U.S. Embassy Tegucigalpa cable to Washington), WikiLeaks, June 9, 2009, https://wikileaks.org/plusd/cables/09TEGUCIGALPA438_a.html. It is worth noting that Zelaya himself never mentioned eliminating term limits. And now that President Juan Orlando Hernández has announced his plans to run for reelection, it is clear that this ostensible reason for toppling Zelaya was a pretext.

54 Booth, Wade, and Walker, Understanding, 225. See also, for example, Elisabeth Malkin, “Honduran President Is Ousted in Coup,” New York Times, June 28, 2009; or William Finnegan, “An Old-Fashioned Coup,” New Yorker, November 30, 2009. One former official showed me cell-phone video of a group of golpistas entering his office with a forged resignation letter and demanding he read it, which he refused to do.

55 Much thoughtful and sometimes fraught study and analysis has been devoted to this question. U.S. policy response to a “coup” uses the terminology “military coup,” so much effort has been devoted to proving that it was indeed that. For a selection of some of the more substantive analysis, see Leticia Salomon, “Conozca las diez familias que financiaron el golpe de Estado en Honduras,” El Libertador, August 8, 2009, which identifies Jose Rafael Ferrari, Juan Canahuati, Camilo Atala, Fredy Nasser, and Miguel Facussé, among others, as its primary architects. See also Geoff Thale, “Behind the Honduran Coup,” Foreign Policy in Focus, July 1, 2009. This anonymous slide presentation, oddly branded with an Israeli flag, is suggestive: “Esquema del golpe de estado en Honduras el dia 28 de junio 2009, SlideShare, August 9, 2009, https://www.slideshare.net/xatruchmorazan/esquema-del-golpe-de-estado-en-honduras-el-dia-28-de-junio-2009.

56 Salomon, “Conozca las diez.”

57 See “Open and Shut: The Case of the Honduran Coup” (U.S. Embassy Tegucigalpa cable to Washington), WikiLeaks, June 28, 2009, https://wikileaks.org/plusd/cables/09TEGUCIGALPA645_a.htm.

58 See Arshad Mohammed and David Alexander, “Obama Says Coup in Honduras Is Illegal,” Reuters, June 29, 2009; Ben Feller, “Obama’s Stand on the Honduran Coup,” Associated Press, June 30, 2009; and Tim Padgett, “Why Obama Won’t Use the M-Word for Honduras’ Coup,” Time, September 5, 2009.

59 See, among multiple analyses during the 2016 presidential campaign, Robert Naiman, “Did Secretary of State Hillary Clinton Enable the Coup in Honduras?,” Huffington Post, February 19, 2016; or Tim Shorrock, “How Hillary Clinton Militarized U.S. Policy in Honduras,” Nation, April 5, 2016.

60 Booth, Wade, and Walker, Understanding, 228.