After 2009 socio-political turmoil caused by the constitutional crisis, Honduras has been slowly recovering and reintegrating into the international community. However, the deterioration of confidence in public institutions continues, posing a serious threat to the country’s future development.
Over the past couple of months, Honduras has experienced several major corruption scandals. This past September, Hondurans were stunned when Mario Zelaya, former executive director of the Instituto Hondureño de Seguridad Social (IHSS) was caught and accused of fraudulent transactions, including bribery, money laundering, and misappropriation of public funds. The reputation of IHSS has been seriously damaged.
According to La Prensa, the national newspaper, Zelaya is accused of stealing more than 942.7 million lempiras ($47 million) from the IHSS. Together with coworkers, friends, and relatives, Zelaya created “ghost companies” to justify substantial financial transactions from the IHSS. This has been decried as one of the worst thefts from a government entity in Honduran history. Zelaya’s punishment, which will be determined next year, could range from 49 years to 87 years in jail.
La Empresa Hondureña de Telecomunicaciones (Honduran Telecommunications Company), also known as Hondutel, is at the center of another recent scandal. Last month, La Prensa indicated that Hondutel has been militarized to prevent social workers from entering the facilities. Hondutel’s poor economic performance, paired with substantial corruption, has led the company to temporarily lay off more than 700 employees for more than four months, with the threat of permanent terminations if Hondutel does not fully recover. The company’s performance started to wane last April when the El Tribunal Superior de Cuentas (TLC) accused Hondutel of misappropriating more than 75 million lempiras ($3.18 million) in public funds. In the past, both IHSS and Hondutel were major drivers of job creation, but both have been paralyzed by the controversies.
One result has been a decline in the country’s overall economic freedom. Honduras’s score in The Heritage Foundation/Wall Street Journal’s2014 Index of Economic Freedom dropped 1.3 points, with most of the decline driven by the erosion of the rule of law as assessed by measures of property rights and corruption. Even though the country has shown notable improvement in the area of open markets, with progress in foreign investment and trade, the level of corruption and weak institutions will continue to undermine Honduras’s development, affecting the lives of millions.
Lourdes Bautista is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please click here.
