Will ZEDEs Benefit Honduras?

By: Guest Contributor - Mar 11, 2015, 2:08 pm

Give Change a Chance

By Guillermo Peña Panting

The Zones for Employment and Economic Development (ZEDEs) have been hotly debated both in and out of Honduras. Most of the negative, however, is due to either a lack of information (not reading or misinterpreting the law) or the project’s association with the current president.

If the readers of this brief summary who disagree with ZEDEs are able to put aside their emotions for the moment, they will find a project with great potential for positive change in politics, economics, and the lives of ordinary Hondurans.

Living in Honduras, there is a tendency to distrust everything, especially the government. However, this project will in fact reduce the power of the state, and pass it on to local authorities under the supervision of its beneficiaries: residents and those who work in the zone.

Our Constitution establishes a tripartite model of government, divided into departments, municipalities, and a National Congress with the authority to create special zones subject to their own regulations. ZEDEs are an inalienable part of the Honduran state, and operate in compliance with international commitments and the law that creates them.

Existing international treaties, the Honduran Constitution, the Penal Code, and all other criminal laws are in full effect within each ZEDE. Moreover, the 25 conventions on labor protection from the International Labor Organization (ILO) are also in force, and all internal ZEDE regulations must comply with existing human-rights laws.

Twelve percent of all tax revenues that ZEDEs collect will be delivered to the national government to strengthen the judiciary, fund community projects, infrastructure, and social security. The money will also go toward municipal projects and national defense. In order to earn the support of the people both within and around the area, ZEDEs must be socially inclusive and free of the original sin of forced expropriation, ethnic oppression, or physical threats to their neighbors.

The Constitution states that sovereignty and state power is derived from the people. ZEDEs represent a decentralization of decision making in governance, in which the power to establish rules of coexistence resides in the people and their local communities. Far from losing sovereignty, the ZEDEs give it back to who it really belongs: the Honduran people.

As Nassim Taleb’s writings suggest, decentralized countries have the most “antifragile” governments, which are strengthened when stress is applied to them. When the central government’s power is limited, there is less uncertainty about the next head of state. In Honduras, the struggle is for control of the government, without asking why someone would want this power. When the central government’s budget surpasses 50 percent of GDP, it becomes clear why they fight for the throne.

The notion that ZEDEs have the potential to improve the quality of life of Hondurans is based on the economic theories of various Nobel Prize Laureates*, whose work has explored the role of institutions and incentives on human behavior and, consequently, the economic and cultural development of societies.

It’s true that “Nobels don’t put food on the table,” as some critics say. However, several countries have already implemented many of these theories and begun to solve their economic problems. Unlike the siren song we hear from populist politicians, these economists present well-grounded ideas.

Let’s give change a chance to fix our broken system and the impunity it has bred. While it may not be perfect, this alternative is many times better than where we are now and where we’ve been for the last 50 years.

Guillermo Peña Panting is a political analyst and economist. He currently works as the executive director of Eléutera, a public policy think-tank based in San Pedro Sula, Honduras. He received his BA in Political Science at North Carolina State University. Follow @GuillermoP_HN.

*James Buchanan, Public Choice Theory (1986); Ronald Coase, Economic Analysis of Law (1991); Gary Becker, behavioral economics (1992); Vernon Smith, experimental economics (2002).

Honduras Is Not for Sale

By Beatriz Valle

EspañolIt is important to begin by clarifying that we are in no way opposed to foreign investment. On the contrary, we understand the need for nations to attract local and foreign investment to contribute to national development.

Such investment, however, must conform to certain basic principles, such as a respect for human rights, the environment, and protected areas, as well as territorial, legal, fiscal, and administrative sovereignty that is established in our Constitution.

Investment should always contribute to the development of Honduras and the welfare of her citizens, and not just help a few people get rich.

What are ZEDEs?

The Zones for Employment and Economic Development are territorial spaces that the state grants to nations or corporations, either local or foreign, for their exploitation for an indefinite period of time.

They have a legal identity, a special tax regime, and can issue contracts freely without the state’s guarantee or approval.

ZEDEs have administrative autonomy, including functions, powers, and duties that the Constitution and our laws already confer to municipalities.They have their own security forces, be they police, military, or private guards. Each ZEDE also has its own courts, judges, and legal clerks, detached from the Supreme Court.

The Committee for the Adoption of Best Practices (CAMP), which oversees the ZEDEs, consists mostly of foreigners and who are granted powers that exceed their established authority. These powers allow the CAMP to expatriate or expropriate for reasons of “private utility,” limit freedom of movement, curtail the few rights workers currently enjoy, and divide the General Fund of the National Treasury into as many ZEDE territories as are established.

In order to establish this “new policy,” the Lobo-Hernández administration violated various secondary laws, international treaties, and the Constitution. While president of the Congress, Juan Orlando Hernández illegally removed judges from the Constitutional Chamber who declared ZEDEs unconstitutional. This is a shameless and criminal sale of Honduras.

When small states are created within the national territory, what role will these newly established powers play in a divided Honduras? Municipalities, departments, the executive, legislative, and judicial branches; they all lose their entire reason for being. Consequently, our politics, democracy, and republic will likewise disappear. We will cease to exist as a nation state.

There are many other things I could list that for space requirements I will not include in this article. The scope of this disastrous neoliberal experiment cannot be predicted with certainty, since there is no other known precedent anywhere in the world.

However, we can foresee that the creation of these ZEDEs will lead to the rise of new privileged classes, and the total loss of control and sovereignty over these territories. It will cause the complete dismantling of the Honduran state, the total loss of our national assets, and further the violence, poverty, exclusion, and inequality that plagues our nation — all to favor large corporations and powerful interest groups.

Let us make Honduras a real state, where citizens fully enjoy equal rights and opportunities, and contribute to the development of the nation, rather than sell and divide the country’s collective wealth for the benefit of a few. Say “no” to the sale of Honduras.

Beatriz Valle is a member of the National Congress from the Liberty and Refoundation (LIBRE) Party of Honduras. Follow @bvallemarichal.

Ecuador’s Import Barriers Deny Consumers What They Want

By: Iván Cachanosky - @ivancachanosky - Mar 11, 2015, 10:21 am

EspañolFrom Wednesday, March 11, Ecuador is to apply a "safeguard" to up to 45 percent of its imports. This means that a surcharge will be added to certain goods that people want to import, something which will bring severe consequences for the economy. According to Trade Minister Diego Aulestia, the tax is broken down in the following way: 5 percent will be applied to capital goods and non-essential primary goods; 25 percent to tires, ceramics, television and automotive parts; and 45 percent for fully manufactured goods, including TV sets and cars. The measure was first initiated affecting only Colombia (21 percent of imports) and Peru (7 percent), but now the government of President Rafael Correa has decided to globalize it: something which will only aggravate its effects. What first raised the alarm is Ecuador's balance of payments situation due to a serious fall in the price of oil. This situation brought the government to declare these new measures to regulate the general level of imports and restore equilibrium to the balance of trade. Facing this tough scenario, the Ecuadorian government is taking measures to impose barriers on imports with the objective of avoiding a deficit. However, it's important to restate that exports and imports are two sides of the same coin. Given that exporting goods is vital to acquiring the means to importing them, the two will, over time, tend to equalize. The existence of a deficit isn't necessarily bad, just as the existence of a surplus is no guarantee of a good situation. Supply generates demand: in each act of trade one person offers a good or a service to receive something in exchange. Whether the exchange is made within or outside of national borders doesn't change the basic fact that to obtain a good, one must first offer something in exchange. International trade is nothing other than free exchange between people and companies from various countries, not between countries themselves. In the meantime, due to loans and devaluations in multiple currencies, a deficit or surplus can sometimes appear in a nation's current account balance. But Correa is worried by the growing deficit in the balance of trade, bringing him to take these measures. However, the existence of a deficit isn't necessarily bad, just as the existence of a surplus is no guarantee of a good situation. The vice or virtue of both cases depends on why they've come about. Ecuador shows a tendency towards a growing deficit: is this situation favorable or unfavorable? If imports increase, it's due to the fact that products from abroad are cheaper, bringing consumers to opt to buy foreign goods. If a person can buy the same item in their home country for US$100 and $40 abroad, it's clear what they'll go for. However, it will be necessary to offer something in exchange, or this good won't be able to be imported. If the government doesn't intervene, positive and negative fluctuations in the short term tend to balance out. For this reason, curtailing imports ultimately means curtailing exports. Furthermore, the consumer buying their goods from abroad saves $60. This is no small figure, given that if this saved capital is invested correctly in their home country, it will create wealth. Put another way, allowing consumers to buy cheaper imported goods lets them save money, and when this money is put into local economies it creates value and stimulates domestic industries. Curtailing imports could lead to some short-term benefits, but it will prove damaging in the long run. It will also hurt all the country's consumers. One other important point must be mentioned. Generally, governments of a populist hue are increasingly worried about dollars leaving their country, but they fail to show the same concern as to why dollars aren't entering. This is no coincidence, given that in general, investment comes to countries where institutions are respected, and Ecuador simply doesn't come across well in this regard. Taking a look at the World Bank's latest Institutional Quality Ranking, we can see that Ecuador takes position 143 out of 192 countries evaluated. The situation looks even worse when placed in a regional context, where Ecuador finds itself fourth from last, coming ahead of only Venezuela, Cuba, and Haiti. Ecuador is hardly a country which inspires confidence to attract dollars. Curtailing imports could lead to some short-term benefits, but it will prove damaging in the long run. It will also hurt all the country's consumers, forcing them to buy more expensive and worse-quality goods. If Ecuador really wants to fix its trade problem, it should open itself up to the market and clean up its institutions. Translated by Laurie Blair.

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