The IMF and Privatization in Honduras: Impacts on the National Energy Company

Honduran public sector unions are in a crisis as a result of mass suspensions of over 5,000 public employees in the last few months. The largest suspensions to date – approximately 2,000 employees – occurred in the National Electrical Energy Company (ENEE) but job cuts were also made in the Honduran Telecommunications Company (HONDUTEL), the National Agrarian Institute (INA), and others. Thousands more are expected in state institutions already impacted, as well as others that have not yet been affected, such as the National Autonomous Water Supply and Sewerage Service (SANAA). A large majority of the suspensions were conducted in violation of the Honduran Labour Code, the Honduran constitution, General Law of Public Administration, and Conventions of the International Labor Organization (ILO).

Photo caption: ENEE lay-offs occurred weeks before Christmas. This sign in STENEE's office in Tegucigalpa reads "No Christmas in solidarity with the suspended comrades". December 2014.

The Sindicato de Trabajadores de la Empresa Nacional de Energia Electrica or the Workers’ Union of the National Electrical Energy Company (STENEE by its Spanish acronym), are calling the job cuts a “labour massacre”. STENEE is part of the recently formed National Platform of Public Unions that have held protests attended by thousands of Hondurans every Saturday for the last three weeks to demand the reintegration of employees that have recently lost their jobs.

Photo caption: Protest in San Pedro Sula against the suspensions in public institutions. September 13, 2014

The IMF, Neoliberalism and Poverty in Honduras

The on-going mass lay-offs in public institutions come as the International Monetary Fund (IMF) approves a three-year $188.6 million loan with the Honduran government. As part of the loan agreement, the IMF is insisting that the Honduran government reduce the country’s public deficit – the largest in Central America- from 7.5% of GDP to 2% of GDP by 2017. In order to reduce the deficit, Honduran people will face higher taxes (already increased one year ago), reduced subsidies particularly in the energy and transportation sector, and major changes and budget reductions in public institutions particularly in health and education.

In a country where 59% of the population lives below the poverty line and 36.2% in extreme poverty with very low employment rates – some of the major push factors of migration to the United States - mass public funding and jobs cuts will have dramatic impacts on the poorest sectors of Honduran society.

The threat to privatize ENEE has existed for years under neoliberal Central American integration plans –like MesoAmerican Project or Plan Puebla Panana (PPP) and the Central America Electrical Integration System (SIEPAC)- promoted by the World Bank, Inter-American Development Bank, and the Central American Bank for Economic Integration. The supposed 'new’ plan for the Central American region and ‘solution’ to the migration crisis- the Plan of the Alliance for the Prosperity of the Northern Triangle- is simply an extension of the integration plans proposed for the region. The Alliance for Prosperity plan calls for more private investment, the expansion of SIECAP, and major changes in the Honduran energy industry amongst other initiatives. Confronting the recent assault and the historical threat to the energy industry, the Honduran people and STENEE have strongly defended their national energy company and up until the past few months, small consumers in Honduras have received energy at much lower costs than neighbouring countries that have undergone privatization in their energy sectors.

IFIs, and the US Government In Bed With the Honduran Economic Elite

Some of the greatest proponents of privatizing ENEE are the economic and political elite of Honduras, a handful of families that have dominated the economy and Congress for decades. These same families orchestrated the June 2009 military coup in Honduras that ushered in enhanced neoliberal policies and shortly later, was accompanied by large, on-going increases in violence and poverty in the country.

The economic elite supported by international financial institutions, are very much behind the historical and current privatization efforts in ENEE. As early as 1999, meter reading services were contracted out to a Honduran financial services corporation owned by Arturo Corrales, currently the Honduran Ministry of Security and one of the key actors in the 2009 military coup. Under the Callejas Presidency in the early 1990s, private companies owned by the economic elite – the Nasser family being one - were given thermal energy contracts that requires ENEE to purchase over 50% of their energy supply from the private thermal generating companies despite its high costs. In 2011, the Honduran government signed a contract with a US-Honduran company – one representative being the nephew of former President Callejas - called PHP Energy, marking the beginning of what STENEE believes to be a slow hand-over of public assets to private companies. STENEE has since challenged the PHP contract in Honduran courts and is blocking the entrance of PHP Energy personnel into the installations where the project is proposed to be build.

Photo caption: At the entrance of ENEE's El Nispero installations in Santa Barbara, STENEE hung a banner protesting the contract with PHP

The changes in ENEE are being facilitated by the National Electrical Industry Law that was approved in January 2014 and expected to be fully implemented in June 2015. The law splits ENEE into three sectors – energy distribution, public lighting, and transmission – and hands the management of these sectors over to three Honduran banks. Ficohsa, Banco Altantida, and Banco Continental are now managing ENEE’s finances through trust funds, and once the National Electrical Industry Law is fully implemented, will be responsible for seeking and managing investment in the three sectors. In other words, the latest reforms supported by the IFIs hollow out the Honduran state energy company and ENEE will be forced to compete with private companies offering similar services.

Ensuring the so-called ‘stability’ of the Honduran economy, the IMF loan will encourage foreign investment in Honduras for transnational corporations seeking new and ‘emerging’ markets in the so-called ‘Global South’. The United States currently has the greatest weight in the IMF. The Congressional Research Service reports, the US has a “voting share of 16.75%” the highest of all IMF members, followed by Japan at 6.23%. The US is the “only country able to unilaterally veto major IMF decisions” and one of the handful of countries that have a lot to gain from privatization of public institutions and market liberalization in Honduras.

Photo caption: Road blockade preventing the entrance of machinery attempting to build the Agua Zarca dam, Rio Blanco.

One of the most detrimental impacts of the privatization of ENEE and the financial ‘stability’ guaranteed by the IMF loan, will be the further push to construct and/or expand hydroelectric dams and energy substations around the country. Beginning in 2007 and picking up pace since the June 2009 military coup, various concessions of Honduran rivers were approved by the National Congress. The long and on-going struggle of the Lenca indigenous community of Rio Blanco is an example of how private, large-scale, internationally financed dam projects have serious social and environmental impacts. The attempt to construct the Agua Zarca dam in Rio Blanco violates the rights of indigenous peoples to be consulted about projects in their territories as mandated by ILO 169. Community resistance to the construction of the dam was met with repression, threats, and assassinations of community members and their supporters. Similar struggles of Lenca communities are occurring in Santa Elena, La Paz in south-western Honduras where communities are attempting to stop the construction of another dam project owned by Gladys Aurora Lopez, the Vice President of the Honduran National Congress. With a more “stable” environment for foreign investment and the relevant legislation in place, it is more likely that concessions to build dam projects will receive the financing needed to begin construction.

STENEE’s Attempt to Defend the Integrity of ENEE

Mismanagement, corrupt political dealings, and strong interests in privatization are at the center of the problem that STENEE is now confronting. Since the President of ENEE is appointed by the political party in power, management of ENEE is at the whim of strong political interests. Knowing well what they are up against, since the job cuts began underway STENEE has fueled the debate about the role of the economic elite and the IMF and their interests in privatization. STENEE President Miguel Aguilar announced in a recent press conference that 37 high paid employees in ENEE are family members of high-level officials and congressional representatives in the Honduran government including the daughter of the President of the National Congress and the niece of the Honduran President Juan Orlando Hernandez.

Since the June 2009 military coup, the IFIs and the political and economic elite in Honduras have had it out for public employees in Honduras. Since a major point of interest of the IMF in the agreement negotiations with the Honduran government is eliminating state energy subsidies and slashing public costs, STENEE is facing an assault on the integrity of a public institution that is set to undergo major changes and fragmentation in the coming months.