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Is Honduras Central America’s Greece? Experts Warn of a Bailout

Article Summary:

The perilous state of Honduran public finances, combined with a level of unsustainable debt have some experts saying that Honduras is headed for an imminent bailout.

Photo Credit: La Prensa Honduras

Original Article Text From La Prensa Honduras via Google Translate :

The Government of Honduras is in a Fiscal Emergency: Fosdeh

The perilous state of public finances, combined with a level of debt that some consider the brink of unsustainability, makes experts predict that the Honduran State is headed for an imminent bailout.

Tax revenues do not improve enough, the level of government spending remains high, as interest rates offered by the Government to place financial instruments, which financial analysts consider to be symptoms of a disease that could culminate in a insolvent government need to be rescued financially.

“It is reaching a level of impossibility of debt, and some speak of between 35 and 40% and we understand that, according to the budget execution, could reach 34.6%, according to the 2013 budget would be at a rate of 36% , which means already be on the level of unsustainable debt, “said Santiago Herrera, director of CIES (Centre for Economic and Social) of Cohep (Honduran Council of Private Enterprise).

The economist recommended to the Government to “take a strategy to restructure these obligations in some way and find alternatives to reduce debt service imposed, because these are causing the deficits and the need to seek new financing.”

A similar opinion was expressed Mauricio Diaz Burdett, coordinator Fosdeh (Social Forum of External Debt and Development of Honduras), noting that “the government is in the category of fiscal emergency, so it will be necessary to consider a rescue Financial “.

According to the economist, the rescue should have at least three components: restructuring the portfolio of internal and external debt, reprogram the 2012 budget to try not to spend all that has been extended and try to have a 2013 budget more in line with the financial situation, as the L20 billion that have been added in relation to the 2012 budget is “not sustainable”.

Herrera added that the government must “find ways to improve revenue, but not with new taxes, but with a greater exercise of tax collection or expand the tax base, on the other hand, there is an urgent need to rationalize spending.”

Finance: It’s manageable
For Evelyn Bautista, Vice Minister of the Ministry of Finance, the debt level of the country is at an appropriate level, or at least manageable.

“The level of indebtedness of the Government of Honduras is 34%, which is considered an appropriate level because international bodies established as a manageable level between 34 and 37% (of GDP) and we are below that level maximum. Other Central American countries are above 40%, “the official justification.

Bautista also said that Finance is taking steps to ensure that corresponding departments with large budgets and run health and education “as they were established in its operational program.”

However, analysts note that in the calculations made by the government are left out important figures of debt. “One thing is that he draws Finance amounting to 51 billion lempiras, but still missing the floating debt or public debt will be significant anyway, because at this time of year is going to be very difficult to have enough fund to honor a spectacular amount of money, “says Diaz Burdett.

“We have to be clear about the debt that is now recognized as debt, whether it is in a condition that has not been officially accepted,” added the economist.

Official figures from the Ministry of Finance published its latest report on debt, which includes the results through the third quarter, indicating a level of total public debt estimated at 6167.5 billion, although according to the coordinator Fosdeh, that amount could reach $ 6.400 million next year.

Some analysts like Carlos Urbizo argue that the Honduran economy can withstand higher levels of debt, “debt is measured relative to GDP, and Honduras is the lowest (35%).

America has a debt of 105%, Italy 130%, Greece 170%, Japan 225%, “he explains, adding that” the debt service payments are only 13% of the budget. ”

As a counterargument, Burdett Diaz says that “the issue (debt) is so delicate that private banks are no longer lending money to the country, and there are problems to accept bonds”, while recalling that “the demada of Government money is still there. ”

Analysts have urged the creation of a plan immediately, as this problem will be inherited to the next government.

Link to Original Article:

From La Prensa Honduras

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