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Hernandez Takes Honduras Presidency Vowing Drug War Fight

Honduran President-Elect Juan Orlando Hernandez
Honduran President-elect Juan Orlando Hernandez will oversee an $18.4 billion economy that has struggled under violence fueled by drug gangs with ties to Mexican cartels and an agricultural virus that cut coffee output in Central America’s biggest producer. Photographer: Orlando Sierra/AFP via Getty Images

Honduran President Juan Orlando Hernandez took office promising to work with a fragmented Congress and stem the highest homicide rate in the world.

Hernandez will oversee an $18.4 billion economy that has struggled under violence fueled by drug gangs with ties to Mexican cartels and an agricultural virus that cut coffee output in Central America’s biggest producer. In his inaugural speech, he said he’ll work with regional leaders to better coordinate efforts to counter drug trafficking.

“Eighty percent of the drugs shipped to the United States go through here, leaving behind a trail of death, crime and pain,” Hernandez, 45, said at the national stadium in Tegucigalpa, wearing the blue and white presidential sash as military helicopters circled overhead. “In the following months there will be a reduction in the number of homicides, acts of violence and extortions.”

Hernandez defeated Xiomara Castro, wife of deposed former President Manuel Zelaya, to win the Nov. 24 vote. Yet with his National Party holding just 47 seats in the 128-member Congress, down from 71 under outgoing President Porfirio Lobo, Hernandez will have to build alliances to rein in a widening deficit, fight crime and boost growth. Castro’s Libre Party has 39 seats, while the Liberal Party holds 26.

“It’s clear that looking at the new composition of Congress he’s going to have to work with other parties,” said Miguel Gandolfo, an emerging-market analyst at F&C Asset Management Plc in London.

$800 Million

Hernandez last week signaled he is willing to negotiate changes to an $800 million package of tax increases and spending cuts put in place following the election, including a 15 percent tax on basic food items. The legislation was meant to help stem a deficit projected to reach 6 percent of gross domestic product last year, up from 3.9 percent in 2011.

“I invite all members of all political parties that have representation, because we are all Honduran brothers, to sit down and have a dialog, all of them,” Hernandez, a lawyer with a Master’s degree from the State University of New York, said.

Investors betting that Hernandez will hold down the budget deficit and seek aid from the International Monetary Fund helped the country’s debut dollar bonds return 6.3 percent since the vote, compared with a 1 percent loss for Latin America debt over the same period, according to data compiled by Bloomberg and JPMorgan Chase & Co.

“A swift dialog with the IMF, which doesn’t have to be rushed, but to reassure his commitment to open a program with the fund would be a positive signal,” Gandolfo said.

Drug Violence

Speaking to Radio HRN before the inauguration, new central bank President Marlon Tabora said a narrower budget deficit combined with an accord with the IMF would give the country “access to international resources that is fundamental to have stable public finances.”

Economic progress during Hernandez’s four-year term may depend on the government’s ability to control drug violence in a nation bordered by Guatemala, El Salvador and Nicaragua. Hernandez backed Lobo’s strategy of deploying 4,000 military policemen to the streets to lower the homicide rate of 83 per 100,000 inhabitants, according to data from the Honduras National Autonomous University.

“Honduras remains exposed to the threat of well-armed, well-funded transnational criminal organizations,” the U.S. State Department said in a 2013 report.

The country of 8.4 million people has become a transit point for drug shipments, with 87 percent of all cocaine smuggling flights departing South America for the U.S. stopping in Honduras in 2012, according to the State Department.

Hernandez’s inauguration comes as voters in two other Central American nations, Costa Rica and El Salvador, prepare to go to the polls in a first-round vote on Feb. 2. Gang-fueled violence has been a top concern during the El Salvador campaign, while controlling a widening budget deficit is on the agenda in the Costa Rican race.

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