1. Honduras: Solving the Puzzle of Developmentless Growth
Captain Emanuel Araica USMC

2. Agenda Introduction Path Dependence Model
Map Overview
Evidence
Human Development
The Question
Path Dependence Model
Contemporary Development Struggle
Past Developmental Failures
Framing a Solution

4. Evidence Gross Domestic Product growth of 4.02% from 2000 to 2016.
The highest 30% of Hondurans as of 2017 receive 92.3% of the income.
2016 United Nations Development Program, Honduras ranks 130 out of 188 countries and territories in their Human Development Index (HDI) report.
Honduras’ HDI value of is well below the Latin America and Caribbean average of

5. Human Development Index

6. The Question
Why has Honduras experienced developmentless growth over the last 16 years?

7. Path Dependence Model Christendom Authoritarianism
Colonial History
Christendom
Spanish Patrimonialism
Caudillism
Revolutionless Independence Movements
Contemporary Struggle
Authoritarianism
Hyper-Presidentialism
Neopatrimonialism
Landed Aristocracy
Political Economy in Honduras
Extractive Political and Economic Institutions.

8. Contemporary Developmental Struggle
1990 Neoliberal Reforms have led to tremendous growth.
Implemented by Rafael Callejas of the National Party.
Despite growth very little development.
Growth accumulated in the hands of elite families.
Totaling around 300 individuals.
Complete control of Political and Economic Institutions.
The story of Honduras is one of elite incentives.

9. Honduran Elites Monopoly on violence.
Accumulate power and wealth at the expense of development.
Epitomized during coup of President Zelaya in 2009.
In 2010 alone:
43 politically motivated assassinations.
130 protesters killed.
250 human rights violations.
Precluded Honduras from making the jump to a “modern state” but instead has kept the country in the “traditional state” form.
It benefits elites to keep the economy based on commodities and tourism.
No incentive to develop.

10. Past Developmental Failures
International
Washington Consensus
Inter-American Development Bank
$200 million loan
Land redistribution
Failure due to peasants owning land in name only.
Domestic
Honduran Open for Business Investment Campaign.
Using tourism as a developmental tool.
Failure due to political corruption.

11. Framing a Solution
Neoliberal reforms of the 1990s in Honduras were a positive first step toward.
‘One Size Fits All’ approach will not work.
Washington Consensus failure
Rent seeking behavior by the elites will not disappear.
Neopatrimonialism is here to stay.
Any solution must work within these constraints.
Developmental Neopatrimonialism
Tim Kelsall in Business, Politics, and the State in Africa

12. Step 1: Centralize Rent Seeking
Develop a Top-down patron-client relationship
Officials unable to operate independently to maximize their own take.
Only have to pay rents to one agent.
Corruption is predictable.
Honduras is already headed in this direction
Recent accumulation of power by the Honduran President

13. Step 2: Extend Time Horizon
Incentivize elites to long term rent seeking.
Allows businesses to grow long term with the promise of greater rents in the future.
Move resources from commodities to infant industries that in long run will compete internationally.
The development of industry will incentivize the development of people.
Current model does not incentivize development because it is too short term in nature.
Commodities are making money now why change?
Tourism is as easy as selling off some indigenous land.

14. Step 3: Visionary Plan Land title reforms. Bias towards education.
Industrialize with an export oriented economy.

15. Final Thoughts
It is not about the type of government but the quality of said government.
Government must work with market and not against it.
Specialists in violence must realize that they can best survive and prevail by promoting the prosperity of their economic base.
Bullish on Honduran future.