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Honduran Politicians Need a Class in Economics

Article Summary:

Much would be achieved for the people and country of Honduras if its leaders would attend a class on economics. The problem centers on the Honduran government spending under high level of public investment with over 80% goes to salaries and running costs. But it would be well advised to watch the global economy, which can affect the processes of regional economic slowdown, causing yet another shallow economic growth rate.

Photo Credit: Estrategia y Negocios

Original Article Text From Estrategia y Negocios via Google Translate :

Honduras Begins 2012 Financial and Economic Uncertainty
Much would gain as a society if politicians in Honduras were to understand the dynamics of financial markets and the impact on tax revenues.

If so, the Government had more modest growth projections and would use the Budget of the Republic to reorient the economy.

The low expansion of the global economy and the high uncertainty and volatility in international financial markets will impact regional and Honduras is projected to grow by 3%, lower even than the year just ended (3.2% estimate).

ECLAC
For Latin America and the Caribbean in general, there will be a decline in growth this year to 3.7%, after rising 4.3% in 2011, according to a report by the Economic Commission for Latin America and the Caribbean (ECLAC) .

In his “Preliminary Overview of the Economies of Latin America and the Caribbean 2011″, the regional United Nations states that “although already during the first half of 2011 slowed growth compared to 2010, much of the region had positive performance thanks to a favorable external environment.

However, in the second half of the volatility and uncertainty complicated the global environment, prompting a further deceleration in the economy compared to 2010, when the region grew 5.9%. ”

Given this scenario, the executive secretary of ECLAC, the Mexican Alicia Barcena said that the current context determines the projections for the economy of Latin America and the Caribbean in 2012.

“We expect low growth of the global economy, which would remain the aforementioned processes of regional economic slowdown and the economic growth rate would fall again. Also, can not be ruled worst-case scenario, in which a deep crisis in the euro area have a negative impact on world markets, hurting, both real and financial channels, the economic prospects of the region, “he said Bárcena.

Barcena believes that economic growth in Honduras is linked to the U.S. recovery in exports and remittances, but the country is in a period of “cooling”.

Reflecting cooling, the ECLAC said that domestic demand is slowing, as reflected in lower rates of import growth and lower tax revenues.

In turn, the prices of major exports are down and are expected by 2012 a moderate decline in the terms of trade, linked to oil, food, and to a lesser extent mining.

Spending and debt
The problem centers on the Honduran government spending under high level of public investment. “The government budget this year than the 144,000 million lempiras, 11,000 more than in 2011, but over 80% goes to salaries and running costs,” says Ralf Flores, assistant coordinator of the Social Forum of External Debt of Honduras (FOSDEH ).

In addition to this political pressure in an election year primaries. “There will be more spending for propaganda and political destiny and this undermines the investment plans that will amount to 10,000 million lempiras,” adds the analyst.

For the Finance Minister William Chong Wong, will be a year with little room for fiscal maneuver. “It is a lofty goal of tax revenue (over 50,000 million lempiras), but if economic activity is low will have to resort to domestic debt and adjust the belt.”

Already in 2011 it inherited a fiscal deficit (spending gap) of 3.1% of annual national output of goods and services in the country. This equates to about 10,000 million lempiras, recognizes Chon Wong, an amount “manageable”, but that limits investment.

And is that with so much uncertainty and the latent possibility of abrupt changes in the global economy, countries in the region should be prepared to take appropriate measures according to their realities, to defend and strengthen the foundations of its economic and social .

BCH failed
The very President of the Central Bank of Honduras (BCH), Maria Elena Mondragon, acknowledged that not meet the goals of the 2011-2012 Monetary and should be revised downwards.

“The world economy has slowed and it will affect exports and the influx of new capital as initially expected,” he says.
And is that the BCH projected to grow between 3.5 and 4.5% this 2012, but now we talk about 3%.

The Central Bank itself had to be capitalized with funds from private banks and pay more than 3,000 million lempiras in interest.

The goal of increased prices of popular consumer goods (inflation) of 6 to 8 percent, is compromised by the effects of rising cement, fuel and the minimum wage.

Still, the Central Bank’s Monetary Program notes that several sectors of the economy will improve their performance.
These sectors are: communications, manufacturing, agriculture, hunting, forestry and fisheries, trade and financial intermediation.

“The positive change in the communications sector would be largely influenced by the investments they have been making cell phone companies, as well as by continuing to expand coverage and diversify its services, coupled with the increasing number of customers “says the BCH.

The manufacturing industry, the report adds, “will be driven by the improvement in international demand and domestic consumption, leading to rising levels of production activities.”

But Daniel Facussé, president of the Honduran Maquila Association (AHM), believes that “at least in maquila, much will depend on U.S. recovery and the impact of minimum wage and electricity.”

The energy sector has millions in investment projections for 2012.

But bankers and Jorge Bueso Arias also look less lending by the global financial uncertainty, lack of approval of the agreement “Stand by” with the International Monetary Fund (IMF) and public safety problems in the country.
Rafla Flores of FOSDEH, is categorical: “There is no good the picture. The IMF put on hold the last revision of the program with Honduras, USA, Europe and even China have lowered their growth rate and here are still talking about increasing spending, more deficit and a political year. ”

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