US Military Considers IMF-Mandated Policies to Be Dangerous for Honduras, Declassified Document Shows

August 19, 2013

A newly declassified intelligence estimate [large PDF] from the U.S. Southern Command (SOUTHCOM) reveals that the U.S. military considers International Monetary Fund (IMF) policy constraints on Honduras to be a factor that could lead to greater unrest. The memo is dated July 22, 2011 and was originally designated as “SECRET/ORCON/NOFORN” (meaning “Dissemination & Extraction of Information Controlled by Originator” and “Not Releasable to Foreign Nationals/Governments/Non-US Citizens”).

In assessing Honduras’ “social environment,” the memo states:

Economic conditions in Honduras will have a tremendous impact on the social environment over the mid to long term. Efforts to combat rampant poverty, inequality, and unemployment will continue to be hindered by budgetary pressures. Over the medium term, IMF-established targets aimed at boosting Honduran macroeconomic stability will continue to reign in public expenditures. Should key social programs remain under- or unfunded, preexisting socio-economic cleavages between the poor and elite business sectors may be further aggravated and lead to an escalation in protests.

The document comes back to this theme in its conclusion, with the last two sentences reading:

Honduras’ progress towards compliance with IMF guidelines and recent full reintegration into the international community increase the likelihood of the country receiving expanded international aid. However, as Honduras continues to reign in its domestic fiscal policy to remain in compliance with IMF mandates, the nation will continually struggle to effectively respond to growing security and socio-economic concerns. [Emphasis added.]

A related factor is mentioned earlier on in the document: Honduras’ high proportion of very young people, who face an uncertain future, with 36 percent underemployment and “an estimated 60% of the population living below the national poverty line”:

Honduras has a substantial youth population; as of JUN, nearly 58% of the population is below age 24, with the majority under the age of 15. The most pressing demand on the government will be to provide adequate basic services to its growing population.

The memo’s warnings regarding IMF-mandated restrictions on spending and related policies echo many of CEPR’s own concerns over the impacts of such constraints on the capacity for countries to recover from economic downturns. Despite some rhetoric to the contrary, one year after the onset of the global recession, CEPR demonstrated that in 31 of 41 countries examined, the Fund was recommending pro-cyclical monetary policies, pro-cyclical fiscal policies, or both. A paper we released in January this year examining IMF policy prescriptions in Europe found, among other things, “a consistent pattern of policy recommendations, which indicates …a macroeconomic policy that focuses on reducing spending and shrinking the size of government, in many cases regardless of whether this is appropriate or necessary, or may even exacerbate an economic downturn.” More recently, we have noted how the IMF’s policy advice for Jamaica is hampering that country’s capacity for growth and its ability to escape an onerous debt burden.

The memo is also interesting in that it includes the false assertion that “Former President Zelaya was ousted from office for attempting to change presidential term limits without reforming the constitution.” The idea that Zelaya was somehow attempting to change Honduran law regarding presidential term limits is a myth that was promoted by the coup participants and supporters in 2009 in order to provide a rationale for the coup. In fact, the proposed non-binding survey that Zelaya had wanted conducted on June 28, 2009 read “Do you agree that, during the general elections of November 2009 there should be a fourth ballot to decide whether to hold a Constituent National Assembly that will approve a new political constitution?”

It also would have been chronologically impossible for Zelaya to have been reelected or had his term extended, since the November 2009 elections referenced in the survey were the same ones which were to determine who would be Zelaya’s successor. This is almost certainly why – after initially repeating the idea that Zelaya had been attempting to extend his term – most of the major media stopped reporting this. Yet SOUTHCOM included this statement in its memo despite the fact that it was incontrovertibly false.

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