IMF Policies & the Privatization of the National Energy Company Hits Honduran Households

A hot topic of discussion and protest at the moment is the new policies related to the distribution of electrical energy in Honduras. All over the country, people are infuriated by the power outages, higher energy prices and the extra tariffs being added to electrical bills.

An announcement was recently made by the new private company, Energy Company Honduras (EEH by its Spanish acronym) that 250,000 pre-paid electrical meters will be installed in houses where users have not been diligent paying their bills or in areas where electricity is siphoned off from small transmission lines. In other words, meters are expected to be installed in poor neighborhoods where families struggling to pay electric bills simply cannot pay for the rising cost of electricity.

 A picture of an ENEE bill that is circulating on social media. The bill includes an extra charge of 2000 Lps (~$90 USD) that is being said is a "payment guarantee"

A picture of an ENEE bill that is circulating on social media. The bill includes an extra charge of 2000 Lps (~$90 USD) that is being said is a "payment guarantee"

EEH is a Colombian-Honduran company that took over energy distribution from the now-privatized National Electrical Energy Company (ENEE) and began operations last month. One Honduran entity part of EEH is the Union of the ENEE workers (STENEE) led by ex-STENEE President, Miguel Aguilar.

EEH won the internationally bidding process late last year that was adjudicated by the Promotion for Public-Private Alliances (COALIANZA), an institution that was created in 2010 as part of the neoliberal policies ushered in by the post-coup regime of Porfirio Lobo. COALIANZA has since been involved in auctioning off infrastructure projects and national institutions including the ENEE, the shipping ports, and major Honduran highways amongst others, to private companies. But it hasn’t worked alone. What Honduran households are really experiencing with the increases in tariffs and the installation of energy meters, are the impacts of the privatization of the ENEE led by the International Monetary Fund (IMF).

EEH is facing serious pressure from all over the country as a result of their own policies but also because Honduran households are now staring a privatized energy system and its consequences square in the face: rising energy prices, no state subsidies; and for-profit policy decisions by private companies.

The IMF begins talks with governments long before agreements are signed. An obsession of the IMF and other International Financial Institutions (IFIs) for a long time has been the privatization of ENEE. According to a report written by a consultant contracted by the InterAmerican Development Bank (IDB) in November 2014, “The Government of Honduras reached an agreement with the IMF in the month of October and one of the principle IMF requirements is that it executes an adjustment plan that guarantees that the [energy] sector is profitable and financially sustainable at the time, as a measure of reducing the fiscal deficit.” The report goes on to highlight financial and technical reviews and evaluations of ENEE carried out by US firms like PricewaterhouseCoopers and DES Consulting, most of which were paid for by the IFIs themselves. 

The report also mentions that the ENEE “has been strongly deteriorating since 2010” but it didn’t go into much detail as of why. When the topic was discussed in the media, losses on the transmission lines or high number of ENEE employees and the burden of their salaries are cited as reasons why the economic situation of the company was so dire. Although these reasons may be partially true, they certainty cannot explain all of ENEE’s problems.

After the 2009 military coup, an interesting list of unpaid ENEE bills between 1999 and 2009 circulated in the social networks. I wonder if ENEE executives (the majority of which are appointed by the political party in power) went knocking on the doors of the following companies with debt to ENEE?:  Shell, Honduras – Owing 79, 961,111 Lps; Lovable de Honduras (Owned by wealthy Canahuati family) – Owing 96 million lempiras; and Quimicas Dinant (owned by wealthy Facusse family) - owing 126 million, amongst other transnationals and companies owned by the 10-12 families of the wealthy Honduran elite.

Its also worth mentioning that many family members of the National party were given key ENEE management positions after the 2009 coup: Rina Maria Oliva Brizio, daughter of the current President of Congress, Mauricio Oliva given a salary of $56,942 lempiras ($2,486)/month and Margi Graciana Hernandez Padilla, President Juan Orlando Hernandez’s niece maintained a salary of 77,695 Lps ($3,393)/month amongst others. Also, no effort is made to address the hefty and overpriced contracts granted by the Honduran National Congress to thermal companies owned by the wealthiest families of Honduras such as Canahuati, Kafie, and Nasser. 

Instead of addressing the mismanagement of ENEE and the expensive contracts for thermal energy generation, the willing post-coup Honduran regime gave into pressure from the IMF and other IFIs and privatized the state company by passing an important law in January 2013. Now ENEE has been split into three parts: energy generation, transmission and distribution, and as a consequence, in 2014 and 2015 hundreds of public ENEE employees were laid off.

So far, a private company has only taken over distribution (defined as management of electricity from the substations to households). In terms of energy generation, a large number of solar, wind, and dams are being constructed and generated electricity will be sold to ENEE. I would expect as more dams are built by private companies, electricity prices will increase. This is terrible news for Honduran families that unfortunately, have yet to see the full impact of the privatization of their energy company.