After Hurricane Mitch, We Must Improve the Lot of the Poor

Just as Central American countries were beginning to reap the rewards of peace after years of civil war and political turmoil, in a single sweep, Hurricane Mitch undid the painstaking work of decades. As the international community organizes emergency relief packages, the cancellation of the external debt of these countries must now be a priority. The case of Honduras is especially compelling.

A delegation from the Archdiocese of Los Angeles visited Honduras to study the impact of the country’s external debt on its prospects for future development. Even before Mitch landed, Honduras was already one of the poorest countries in Central America. A 1998 United Nations Development Program report places Honduras in the bottom third of countries surveyed. With a population of 5.5 million, other reports estimate that in pre-hurricane Honduras, 44% were homeless and two-thirds of the population lived below the poverty line. In the wake of Mitch, the plight of the homeless and poor is sure to worsen as an additional 600,000 people have been displaced.

Aid workers estimate that development has been set back a generation as nearly 60% of the Honduran infrastructure was destroyed. Reports indicate that 70% of the country’s agriculture was wiped out and two-thirds of its gross domestic product has been lost. Initial estimates on the damage to roads and bridges is at $2 billion--twice the country’s annual budget. The latest death toll is 7,000 with an additional 11,000 people missing.

In surveying the damage, Honduran President Carlos Flores observed that the country is a “panorama of death, desolation and ruin.”

This latest emergency is layered on the financial crisis the country has been battling due to its external debt. In 1997, over one-third of its annual budget went to service a debt of nearly $4 billion. To put this in perspective, each Honduran’s share of the debt is $665 in a country where the average per capita GNP was approximately $650 and more than half of all Hondurans lived on less than $1 per day. With businesses and farms now mired in flood waters and the limited supplies of potable water now contaminated, human development indicators in Honduras will decline even further.

Even with its dismal human development profile, Honduras has failed to qualify for debt relief under the current guidelines of the Heavily Indebted Poor Country Initiative of the World Bank and International Monetary Fund. Nations included in this initiative are so encumbered by external debt that even the most basic social investments have been neglected. Yet, few countries have been able to meet the program’s rigorous requirements.

In the case of Honduras and other Central American countries, the test for debt sustainability no longer can be confined to their track record under structural adjustment programs or success in meeting specified performance criteria. Sustainability is more accurately measured in the rampant poverty and deteriorating social infrastructure that places an undue burden on the country’s poor.

Concerns about transparency in debtor nations should not preclude debt-forgiveness. Instead this should open opportunities to ensure that funds formerly dedicated to debt service now are used to rebuild the social infrastructure and raise human development indicators.

In his apostolic letter in preparation for the third millennium, Pope John Paul II calls for the reduction or outright cancellation of the unsustainable debt of developing nations. The Catholic Church’s preoccupation with debt relief comes from the recognition that indebtedness imprisons generations to a life of extreme poverty. Debt relief seeks to liberate those who suffer under a burden that has profound human and moral implications.

In the wake of the current disaster, there is little doubt that Honduras and other Central American countries deserve debt cancellation. If the U.S. is genuinely dedicated to the promotion of democracy in its own backyard, it must recognize that lifting the economic conditions of the poor is a requisite to political stability.