2017
REGION: Western Hemisphere

In “When Corruption Is the Operating System: The Case of Honduras,” author Sarah Chayes paints a detailed picture of Honduras’s struggle with a corruption apparatus that has infiltrated some of the country’s most critical institutions. This web of actors, which the author refers to as a “kleptocratic network,” encompasses major portions the country’s private sector, public sector, and criminal sector. Chayes also highlights the importance of external “enablers” who play an important role in perpetuating corruption, often unintentionally. In conclusion, she emphasizes the importance of acknowledging the nature of this kleptocratic network so that policy can be adjusted to target its components. Specifically, she recommends that policy-makers tailor inputs so they do not enable corruption and instead divert attention to supporting indigenous community initiatives, as well as alternative development models.

Public Sector

The existence of this kleptocratic network in Honduras depends on the weakening or manipulation of public institutions to advance the interests of network members. In this regard, the author notes that, since a 2009 military coup, congressional and judicial power have diminished while presidential power has grown. In 2012, the president removed four out of five Supreme Court justices and appointed justices sympathetic to the network’s activities. The author also draws attention to the government’s efforts to significantly undermine standards for transparency, allowing officials to continue their corrupt practices without fear of discovery.

Institutions charged with developing the impoverished country are actively enriching network members. The Secretaría de Energía, Recursos Naturales, Ambiente y Minas (cabinet level agency responsible for regulating energy, natural resources, the environment, and mining) uses a group of “‘academics’ […] who can be counted on to rubber-stamp environmental studies” that “accommodate what constructers want,” in some cases after bribes are paid for permits. This has allowed the private sector to enjoy revenue from clean-energy projects that in fact have devastating environmental consequences, often to the detriment of marginalized local communities. Another example comes from the Secretaría de Desarollo e Inclusión Social (cabinet level agency responsible for social and public welfare programs), through its Bono Vida Mejor program, which is tasked with providing cash transfers to the poorest Hondurans. The report’s interviewees consistently noted that this program distributes resources to secure votes and buy support for the president.

The Public-Private Partnership Law (2010) is highly illustrative of Honduras’s deliberate efforts to curb transparency. The law allows businesses to engage in public works projects under extremely flexible agreements that are not publicized. Similarly, a law passed in 2014 makes it exceptionally difficult to obtain information on government actions and allows the government to refuse to disclose information if it is “likely to produce undesired institutional effects” or be “counter to effective development of state policy or normal function of public sector institutions.” Audit institutions tasked with overseeing the activities of these government initiatives have not brought a significant money-laundering case in recent history and have yet to audit a single public works or public-private partnership project.

Private Sector

The majority of corruption in this sector occurs in the context of public procurement of private sector goods and services, including banking, energy and natural resources, export agriculture, and construction. These industries are commanded by a select few wealthy families who also maintain ties with the public and criminal sectors of the network. The author criticizes Honduran corporate law for helping to mask this reality by loosening requirements for companies to disclose information about ownership to the public. Complicating this situation further, more than half the country’s finances are controlled by three banks whose contracts with the government are shielded from scrutiny under Honduran law.

Recently, renewable energy in Honduras has proven a lucrative industry for private sector stakeholders. Assistance from abroad in creating carbon-neutral energy generation has been heavily exploited by network members, who have used these resources to create infrastructure that is unnecessary, environmentally harmful, and often against the wishes of local communities. At the same time, the country’s construction industry benefits significantly from government contracts with extremely favorable terms.

Other areas with reported heavy corruption include the palm oil business, the meat and dairy industry, and the nonprofit sector. Palm oil has become a popular money-laundering source that is further stimulated by its status as a clean biofuel. Network members’ efforts to accumulate land for palm oil cultivation has also been accompanied by a number of human rights violations. Network members’ fast-food businesses have sparked growth in the ranching business, an industry notorious for its connections with drug trafficking. Finally, nonprofit organizations participating in internationally financed efforts to develop the country have served as easy sources of revenue for the kleptocratic network.

Criminal Sector

Criminal elements of the network have deep roots in the public and private networks, to the point where distinguishing between them can prove difficult. Politicians at both the local and federal level frequently have close relationships or even family ties with members of criminal organizations. The author notes that President Juan Orlando Hernández has in fact had some success in curbing organized crime and violence, although author hypothesizes that information about Hernández’s alleged links to drug traffickers has put him under pressure to cooperate with U.S. counter-narcotics efforts.

The criminal sector in Honduras is not limited to the illicit drug trade, however. Criminals also traffic unaccompanied minors fleeing Central America, for example, as well as sex workers, weapons, and counterfeit goods. The author notes there is even evidence that in some cases the police have used gangs to act on their behalf, and vice versa. Gang members are responsible for a number of assassinations of high-level figures, including activists who speak out against the regime.

External Enablers, Service Providers, and Conditions

The majority of groups encouraging this cycle of corruption do so unintentionally, often with the complete opposite aim. Among them are development-lending financial institutions. Despite their mandate to finance projects that improve the welfare of the country, the author argues that there is very little follow-up on project reporting and disclosure requirements. Projects are evaluated based on their return on investment, rather than on whether they serve the well-being of the Hondurans they are meant to benefit. For example, despite a number of projects meant to increase the electricity generation capacity of the country, Honduras has one of the least efficient grids in the hemisphere and struggles with domestic electricity access. Civilian overseas development assistance has a similar effect on the network. Not only is money for projects channeled through corrupt government entities, but new governments, coups, and other massive government changes have a tendency to further delay or erase progress.

“External service Providers” include lobbying firms whose advocacy perpetuates the kleptocratic network’s activities. For example, the author argues that lobbyists representing Honduras were instrumental in influencing Washington’s perceptions of the 2009 coup. As a result, according to Chayes, then Secretary of State Hillary Clinton refused to use the term “coup” in characterizing the developments in Honduras. Law firms and facilitators who assist in creating shell companies outside Honduras reportedly have also played a role in cultivating the network.

Finally, the author sheds light on a number of external conditions whose effects yield more opportunities for the kleptocratic network. Chief among these conditions, says Chayes, is an emphasis on free trade, which the network has exploited through public-private partnerships and a number of other private sector initiatives meant to improve the economy. To take another example, Chayes argues that the U.S. Government’s counterterrorism-style approach to combatting drug trafficking, has empowered corrupt elements of the Honduran government and largely ignores the underlying incentives driving young people to crime.

Conclusion

The author asserts the highly complex kleptocratic network that defines corruption in Honduras is not being adequately acknowledged or addressed by policymakers and other stakeholders, and that recognition of this network’s members and their dynamics is the first step in dismantling it. The author also points to a number of community groups who, despite their success, receive little support from donor governments and other institutions. She points to a number of promising alternative development models promoting local autonomy and well-being that have been successful. Finally, she stresses the importance of applying these lessons from Honduras in worldwide efforts to improve development assistance, reduce inequality, and preserve natural resources.


NOTE: This summary is produced by the Rule of Law Collaborative, not by the original author(s).

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