Honduras a dónde vas?

The president of Honduras Manuel Zelaya was kidnapped by the Army on June 28, 2009 and expatriated to Costa Rica. What a great political problem this is for Honduras and Latin America as well. Why do I discuss this on Public Private Partnership blog? Well the reason is very clear – there is a connection between political stability and PPP in particular and foreign direct investment in general. This is also reason why World Bank has set up MIGA to insure this kind of political risks to investors. The Honduras already weak rating S&P long-term debt B+ is the fourth-lowest non-investment grade and can be further downgraded on the basis of political risk, which would make almost impossible for Honduras to refinance its debt and also can have major implications for infrastructure development and certainly will discourage foreign investors from investing in Honduras PPPs.

Honduras has been in past years very interested in developing PPPs. I remember last year, when World Bank Institute hold a capacity building event in Tegucigalpa, how well attended this is event was by the political leaders and personally by president Manuel Zelaya. Manuel Zelaya has participated on the top government “only” seminar and during the lunch he did sit with us and discussed his visions for the Honduras infrastructure development using PPPs. His minister of finance Rebeca Santos has participated for most of the time during whole event and did speak about PPPs with great interest and insight. While the government was at the seminar, they were already working on the action plan, defining next steps to implement PPPs. Rarely seen commitment at the highest political level was very encouraging and at the time I had no doubt, that this government is able to make substantial and quick steps to develop Honduras. Every PPP professional will confirm that political support is a first essential condition to build PPP market and the case of Honduras is teaching us about the second essential condition – and this condition is political stability.

I can hardly judge what is best for the people of Honduras, but I would say that military regime is the worst option and should this situation continue for years to come, one thing is clear as well, nobody will invest a dollar in Honduras, for a very long time.