Honduran government in chaos can't pay its bills, neglects basic services

Street surveillance cameras in one of the world's most dangerous cities were turned off last week because Honduras' government hasn't paid millions of dollars it owes. The operator that operates them is now threatening to suspend the police radio service as well.

Teachers have been demonstrating almost every day because they haven't been paid in six months, while doctors complain about the shortage of essential medicines, gauze, needles and latex gloves.

This Central American country has been on the brink of bankruptcy for months, as lawmakers put off passing a government budget necessary to pay for basic government services. The country is also grappling with $5 billion in foreign debt, a figure equivalent to last year's entire government budget.

The financial crisis adds to a general sense that Honduras is a country in meltdown, as homicides soar and drug trafficking overruns its cities and coasts.

"There are definitely patients who haven't been able to get better because of this problem," said Dr. Lilian Discua, a pediatrician. "An epileptic who doesn't take his medicine will have a crisis. This is happening."

Many streets are riddled with potholes, and cities aren't replacing stolen manhole covers. Soldiers aren't receiving their regular salaries, while the country's education secretary says 96 percent of schools close several days every week or month because of teacher strikes.

Some government offices must close because they don't have ink to take fingerprints. The country's national registration agency has been shuttered for 10 days because of unpaid salaries.

"In many ways, the state is no longer functioning," said Robert Naiman, policy director of Just Foreign Policy, a Washington D.C.-based organization aimed at reforming U.S. foreign policy. "If they keep not paying their soldiers, those soldiers are probably going to stop being soldiers and maybe take some other action."

Experts say a mix of government corruption, election-year politics and a struggling economy has fueled the crisis.

The local chapter of the international watchdog group Transparency International issued a study in December that alleged some lawmakers had spent money on plane tickets to a tennis tournament in Spain, Mother's Day gifts and other personal expenses, the report found.

The study's author, Ludin Ayala, said the country's Congress is the most expensive in Central America, although Honduras is known as the second-poorest country in Latin America.

"The Congress doesn't have rules for making these expenses, which are at the discretion of the (legislative) president," Ayala said. "I don't know if it's shameful, sad or disgusting that in the National Congress, there doesn't exist any type of transparency."

Former presidential candidate and legislator Olban Valladares said much of the public money has indeed gone into campaigns ahead of November's elections, in which the president, mayors and 128 congressional representatives will be elected.

"Sadly, we have a great number of candidates who are state officials and their tendency is to abuse state resources that they control to fund their campaigns," Valladares said.

Congress President Juan Orlando Hernandez said that ousted former President Manuel Zelaya and his allies created much of the current mess.

"They are the ones who have left us today with an enormous debt ... leaving us a country that's unsafe, indebted and isolated in the world," Hernandez said in a news release.

Although Congress goes on recess Friday, lawmakers have only partially passed a budget so that the government can pay some of its employees and contractors. That leaves undecided the budgets of autonomous institutions such as utilities and the port authority.

Instead, lawmakers are discussing proposals already declared unconstitutional by the Supreme Court and don't deal with the immediate financial problems. On Tuesday, for example, Congress approved a law that would allow any elected official to be impeached.

Hugo Noe Pino, an economist at Honduras' Central American Institute for Fiscal Studies, noted that Congress approved the sale of an additional $750 million in bonds last November without resolving any of the core budget issues.

"In this political year, the state resources can be used for political campaigns," Pino said. "If they haven't discussed the budget, why are they approving the financing (through bonds) of a budget that doesn't exist?"

Financial fraud isn't limited to the government. Tax evasion, for example, is widespread, with the government missing out on an estimated 43 percent of revenue due, said Mario Lopez Steiner, Honduras's tax director.

"The culture of tax evasion is incredible in Honduras," he said.

The institutional paralysis has also spread to the justice system. The Constitutional Chamber of the Supreme Court has not met for a month and a half because President Porfirio Lobo accused the magistrates of being part of a conspiracy to overthrow him.

Congress, whose majority belongs to Lobo's party, dismissed several judges without an impeachment trial. Meanwhile, the fired judges continue to enjoy the use of their offices and cars with drivers, even as other government employees go unpaid.

Because Congress hasn't replaced the dismissed judges, no one can rule on their appeal to be reinstated because the court's other justices have recused themselves from the case.

"Public power has been turned upside down in a brazen way," said Oscar Cruz, a former prosecutor in charge of defending the constitution.

The government and the ruling bloc have at least one idea to solve the fiscal crunch: They've introduced a bill that would create the country's first sales tax while eliminating tax breaks for companies that import goods. Such firms make up about 70 sectors of the economy, among them fast food franchises, airlines, power generation companies, agribusinesses and companies that sell spare parts for machinery and heavy vehicles.

The bill's supporters predict it will generate an additional $1.2 billion in revenue, which would double the government's yearly tax intake.

Businesses such as fast food franchises have long been exempt from taxes because they supposedly promote tourism even though many of them "are neither in tourist zones nor do they attract tourism," said Lopez Steiner.

Such tax breaks have been "approved as payments for political favors and as a result of the financing of election campaigns, which are always linked to tax favors," he said.

Legislators have so far suspended all tax exemptions for 60 days while a commission reviews whether to reinstate them.

Some families have survived the government vacuum with remittances sent by some of the 1 million Hondurans living in the United States. Their money equals 19 percent of the country's gross domestic product, according to the World Bank.

Yet it isn't enough for government workers such as teacher Daniel Espunda, who have lost paychecks to the political crisis.

"Now they owe me five months of salary. January will be the sixth I haven't been paid," Espunda said. "No one says anything about when the payday will come."