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On the right path

Hundreds of miles of roads repaired. Bridges, schools, hospitals and water systems rebuilt. A gradual recovery in farming and manufacturing output. Inflation under control. Reforms underway in key areas of the state. A revitalized democracy in which civil society groups are playing an increasingly active role. All in all, it is quite a showing for a poor country that had been brought to its knees late in 1998 by Hurricane Mitch.

These are some of the achievements the Honduran government and its people exhibited at a February meeting with delegates from donor countries and multilateral institutions chaired by the Inter-American Development Bank. The gathering, known as the Consultative Group for the Reconstruction and Transformation of Honduras, assembled in Tegucigalpa to gauge how Hondurans were recovering from the worst natural disaster in their history.

The international community’s assessment was largely positive, considering the destruction wrought by the massive flooding and mudslides triggered by Mitch and the adverse weather conditions Central America suffered during 1999.

"Honduras has legitimate reasons to feel proud of the promising beginning its national reconstruction and transformation plan has had," said the meeting’s chairman, Miguel E. Martínez, the IDB’s manager for regional operations in Central America, México, Haiti and the Dominican Republic. "We have also seen that the international community’s solidarity is turning into concrete accomplishments. Certainly, much remains to be done, but I am sure that I am not mistaken when I say that Hondurans and their friends from around the world are building solid foundations for a better Honduras," he added.

Nearly 6,000 Hondurans died and 8,000 were listed as missing due to the hurricane, which caused more than $3.6 billion in economic losses and infrastructure damage. In less than one week, hundreds of thousands of Hondurans lost their homes, their land or their means of making a living, as the floods ruined crops and washed away the topsoil.

In May 1999, the international community, at a meeting held in Stockholm, pledged to provide some $2.8 billion in humanitarian aid, long-term financing for reconstruction, and debt relief to support Hondurans’ efforts to rebuild and modernize their nation. In return, Honduras pledged to observe the principles of the Stockholm Declaration, which binds donors and beneficiaries to work together to fight poverty and promote growth within a framework of democracy and respect for human rights, transparency and good governance, decentralization and the reduction of social and environmental vulnerabilities.

Progress updates. In Tegucigalpa, the Honduran government offered detailed reports on the national reconstruction and transformation plans. The presentations included abundant information on the steps taken to secure financing for the projects and the progress achieved so far in implementing them in such areas as education, health, housing, agriculture, forestry, manufacturing, mining, tourism, financial services, roads, ports, airports, water and sanitation, energy and telecommunications.

Honduran officials also briefed the visitors about the country’s efforts to reduce poverty and environmental vulnerability and modernize its government institutions. They stressed the urgency of negotiating further relief of Honduras’ $3.9 billion external debt, which President Carlos Roberto Flores called "one of the biggest obstacles to redeeming our people socially."

Delegates also received a report from a follow-up group formed by donor nations and multilateral agencies to monitor the implementation of the Honduran plan. The report praised the fact that social spending was being targeted to benefit the most vulnerable sectors, especially in rural areas; nevertheless, it urged the government to adopt specific policies to protect indigent women and children and indigenous groups. In the case of environmental vulnerability, it commended the draft legislation for land use and forestry management and the improvement of emergency preparedness, but found that Honduras still lacked the policies needed to prevent people from settling in high-risk areas.

Another notable aspect of the February meeting was the enthusiastic participation of Honduras’ civil society. While representatives of the private sector, organized labor, peasants, indigenous and Afro-Latin groups that took part in the discussions often took issue with the government—and with each other—their interventions were viewed by many as an indication of an invigorated democracy at work. In fact Honduran authorities acknowledged that civil society groups have called for sweeping reforms in the legislative, judiciary and executive branches of government, as well as the use of plebiscites and referendums.

However, the limited disbursement of aid so far, compared with the sizeable pledges made in Stockholm, pointed to some bottlenecks. The IDB’s Martínez urged donors to work with Honduras to strengthen its ability to manage projects to speed up implementation.

Need for transparency. The Bank is working with the Honduran government to promote transparency and good governance. A central concern for Hondurans as well as for donors, the issue may weigh heavily in the Central American country’s prospects of attracting more capital to modernize its economy. Last year, Honduras ranked low in the annual survey on perception of corruption conducted by Transparency International, a Berlin-based nongovernmental organization.

The IDB and several donor nations plan to support Honduras’ efforts to make its state procurement and contracts system more efficient and transparent. As initially drafted, the program would have two phases: a temporary one to monitor projects during the post-Mitch reconstruction period and a permanent one to promote the modernization of the Honduran system of checks and balances.

During the temporary plan, an international consulting firm would be hired to perform random audits of reconstruction projects and check their technical, financial and administration performance. These inspections would be carried out in parallel to the existing controls that individual donors have for the projects they finance. The results of the audits would be released to the Honduran government, donors and the public. Given that some $2 billion could be spent on reconstruction efforts, such an auditing exercise could cost up to $30 million, the chief of the IDB’s Procurement Policy and Coordination Office, Jorge Claro de la Maza, told delegates.

The other phase—to which the IDB could eventually commit some $14 million in soft loans—is aimed at allowing Honduras to acquire as much know-how and technology as possible from the international auditors. Under that part of the program, local officials involved in procurement and contracts would receive training, and new purchasing procedures would be developed and enforced across the Honduran public sector.

While the potential cost of the project gave some delegates "sticker shock," Claro de la Maza explained that the estimate was based on a survey of auditing firm fees. He also conceeded that such controls are expensive—except when compared with the alternative of not doing them.

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