Wednesday, June 13, 2012

Monetary devaluation and survival in Honduras

"But it's not bad enough that Honduras has lost its domestic ability to feed itself and is subject to up-and-down world prices for the grains that its people require to survive, now - because of this external dependency and vulnerability - the country is even more vulnerable to whimsical threats such as currency devaluations."

Marco Cáceres
Honduras Weekly 
Honduras used to be known as the "breadbasket" of Central America. It grew enough of the basic staple crops of beans, rice, and corn to feed its own people and then have enough left over to export to the region. But back in the early-1990s, as part of economic liberalization efforts by the World Bank and International Monetary Fund (IMF) to push for free trade and open up markets around the world -- the so-called policy of "neo-liberalism", these institutions persuaded Honduras, governed then by President Rafael Leonardo Callejas, to lower or eliminate import duties on basic grains, thereby opening the way for cheaper imported beans, rice, and corn. In return, Honduras received loans that it needed to pay off older loans accumulated by previous governments. And consumers benefited from lower food prices (temporarily).
But the price for Honduras' small farmers and rural communities was huge. Because small farmers were not able to compete on price with the much cheaper imports, many of them went out of business, had to sell their lands, and eventually had to move with their families to the cities to find work. (This migration of campesinos to urban areas created a whole new series of social, political, and economic problems for Honduras... but that's another story.) Suddenly, it became much harder for campesinos to feed their families, their communities, and the rest of the country's population.
Read more here.

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