Neo-liberalism and Hurricane Mitch
Honduras's role as a geo-political lynchpin diminished after Reagan left office and both the Contra war and the civil war in El Salvador were resolved. As the military became less obvious in day-to-day life, forced conscription was ended and most of the US troops stationed in Honduras were recalled, the country's endemic economic and social problems were thrown into stark relief. National Party president Rafael Leonardo Callejas came to power in 1989 and introduced a neo-Liberal austerity programme, floating exchange rates, privatizing the state sector and cultivating foreign and private investment. Successful in the short term, particularly in forging relations with international lenders, the programme led to a sharp rise in poverty levels and failed ultimately to secure significant investment. Jurisdiction over legal and government affairs was slowly wrested back from the military by a resurgent judiciary, but monitoring groups reported that human rights abuses were still common. Callejas also singularly failed to tackle the issue of corruption, and was himself formally indicted for misappropriation of public funds in 1994. In 1993, the widely respected Liberal candidate, businessman-turned-politician Carlos Roberto Reina , was elected president. Faced with an economic recession and rapidly devaluing Lempira, Reina put his claims to be capable of engineering moral renewal to the test by taking action on most overt cases of high-level corruption. He was not able, however, to prevent the economy sliding further into recession, or to halt a steadily worsening spiral of social instability. This last, fuelled by growing poverty and greater involvement with drug-smuggling between South and North America, affected the north coast in particular. Reina's successor, Liberal Carlos Flores Facusse , took office in January 1998, after elections marred by allegations of corruption and vote-rigging on both sides. Facusse immediately set about trying to reduce Honduras's massive international debt, organizing a series of meetings with the IMF and World Bank. Though Flores had been elected with a campaign pledge to reverse the cycle of deepening poverty and social despair through investment and a programme of national conciliation, he largely maintained the free-market economics of his predecessors. Corporation tax was slashed and sweeping privatization plans were proposed in an austerity package formulated to gain debt relief, while sales tax was hiked from 7 to 12 per cent. But just as these policies were being implemented, and before debt relief had been granted, Hurricane Mitch began brewing offshore in October 1998. The category-five hurricane first battered Guanaja, laying siege to the Bay Island for three days before ripping across mainland Honduras, unleashing colossal volumes of rainfall in an apocalyptic trail across the country. After causing landslides and storm surges that killed over a thousand people in the capital Tegucigalpa, Mitch pursued an erratic path back across Honduras, triggering devastating mud slides and floods in neighbouring Nicaragua and along the path of the Chamelecon and Ulua rivers from the Western highlands to San Pedro Sulfa. Though the final death toll will never be known, it's estimated that Mitch killed over 7000 people in Honduras, 4000 in Nicaragua and around 400 in Guatemala and El Salvador. Thousands more remain unaccounted for. President Carlos Flores declared that Mitch had set Honduras back fifty years, and the world's media reported a cataclysmic picture of damage and devastation. These initial assessments came to seem over-pessimistic, however, as the nation - aided by teams from all over the world - steadily pulled itself together again, quickly patching up much of the key infrastructure. A year after the hurricane, all the main highways were open and most of the hundred bridges damaged by Mitch had been or repaired or rebuilt, and tourists were returning. Yet reconstruction aside, it quickly became clear that Mitch had seriously exacerbated the nation's fundamental weaknesses and inequalities. The economy remains critically weak and almost totally dependent on inward investment, which chiefly goes into the maquila garment-assembly factories of the north. This industry, dominated by Korean and US companies, enjoys tax-free status and pays notoriously poor wages, while prestige technology companies opt to settle in the stable pastures of Costa Rica, where they can draw on a well-educated workforce. Crime rates have soared since Mitch, as violent gangs settle turf wars in the streets of San Pedro Sula and cocaine trafficking has become a key industry. The discredited police force retain a reputation for systematic corruption and have been implicated in the widespread killing of street children in the large cities. As the December 2001 elections approached, life for most Hondurans remained a struggle in a country gripped by poverty and lack of opportunity, with unemployment, the state of the economy and law and order being uppermost in people's minds. The new president faces other formidable challenges: renegotiating Honduras's massive external debt and co-ordinating the fundamental developmental reforms with the numerous international organizations that have settled in Honduras after Mitch
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