Catalyst for a Better Future

The devastation caused by Hurricane Mitch in Central America has led to facile consensus among U.S. foreign policymakers that a long period of reconstruction will be required. Preliminary estimates of $4 billion in losses for Honduras and $1.5 billion for Nicaragua indicate that both countries would need at least two decades to get back where they were. But should we aim over the next decades to return to a situation similar to 1998? Or will we have the vision and courage to build a better future?

Along with Haiti, Nicaragua and Honduras rank among the poorest countries in the hemisphere. The belief that, after several years of painful postwar reconstruction, Nicaragua’s economy was about to take off is highly disputable. While some macroeconomic indicators offered optimistic signs for selected business sectors, lack of equal economic opportunities and perverse social effects indicated a bleak future for most. Meanwhile, Honduras’ growth, sustained for years by the aid package it received in exchange for its cooperation during the U.S. covert war against the Sandinistas, stagnated in the 1990s.

A strictly project-oriented infrastructure rebuilding approach led to bitter experiences in the past. Governments stole, wasted and frittered away the large amounts of international aid that followed the 1972 earthquake in Nicaragua and Hurricane Fifi in Honduras in 1974. The result was social and political disaster. If the international lending community and Central Americans want to break with that past, it is imperative to learn from it. We need a strong check on corruption, but we must also face the future with an innovative spirit. Why not take advantage of the crisis to revise a development strategy that was not working well anyway?

On Dec. 10, a group of international donors led by the Inter-American Development Bank will meet in Washington to discuss alternative aid options for Nicaragua and Honduras, including the urgent request of foreign debt relief. Here are some ideas for the debate:

* Any long-term effort will be sustainable only if it relies on solid national institutions embedded in the nations’ socioeconomic and political structures. Durable social pacts, not technical recipes imposed by lending institutions, are needed.

* Aid recipient governments should be made accountable not only to international donors but also to their own civil societies. This imposes the challenge of promoting domestic political reforms.

* National governments must be more capable, accountable, fiscally healthy, in sync with local governments and responsive to citizenship demands.

* National armies, now under civilian rule, played a key role during relief operations. Further reforms should aim to make them more compatible with such national development objectives as protecting natural resources and supporting rural infrastructure projects.

* Incentives to long-run reforestation programs and state regulatory frameworks are necessary to avoid further land loss. But what is really needed is a broader vision to reinforce and restructure the peasant economies.

* Rural development will be crucial to avoid massive migration to local cities and to the United States. To this end, a distinct feature of the reconstruction process might be to offer small and medium rural producers long-term development assistance.

In a world characterized by decreasing foreign aid, an extraordinary opportunity has been opened to Honduras and Nicaragua. The easy choice is to rely on the promised aid to rebuild the past. The more challenging option is to move ahead exploring a new kind of relationship between Central America and the international donors, so that socioeconomic and institutional reforms would become a permanent substitute for violence and exclusion.