Hiking in Honduras

My weekend adventure in a thousand words...

Economics & Coffee

Remember way back to my first post, What is "El Ritmo de Cambio", where I mentioned this blog's title has two meanings, one pertaining to the rhythm of change, and the other to the rate of exchange? We have now come to my first post on the exchange rate and current state of the Honduran economy.

Why have I waited this long?


Well, the exchange rate for Honduras hasn't changed since 2005. That is, until now. The value of the Honduran Lempira (HNL) back in 2001 was 15.54 Lempiras to the Dollar (HNL/USD) and fell to 18.89 in 2005, where it has remained ever since in its ‘de facto’ fixed exchange rate regime (Historic exchange rates). Note: When the value of a currency falls in comparison to another, the quantity of lempiras required to purchase one dollar rises. This is why 15.54 to 18.89 HNL/USD is a decline in the value of the lempira. This past July, the Central Bank of Honduras decided to reactivate the exchange rate bands at +/- 7% with respect to the established base. Since reactivation, moneychangers have entered the market looking to make some money. There are some unspoken rules here that make things interesting. The Central Bank is accused of having a monopoly on foreign dollars (USD), meaning none of the other banks are allowed to hold on to the dollars they receive from remittances or tourists. They are required by law to sell these dollars at a fixed rate to the Central Bank, who can then take advantage of the variance in the exchange rate and sell those same dollars back at current rates to the banks and companies that demand them.

This change comes at an interesting time. It may very well be a direct consequence of the country’s revised credit rating in June. Standard & Poor's (S&P) country outlook for Honduras was revised from ‘stable’ to ‘positive’ and their credit rating was promoted to a 'B', good news despite the remaining 5 levels before investment-grade status is achieved. This means that S&P is slightly more confident that Honduras will be able to repay its debts. This is due in part to the country’s Stand-by Agreement with the IMF and “continued progress in strengthening tax collections.”

Taxes on coffee exports have also strengthened the ability of Honduras to reduce its fiscal deficit in the coming years. When this tax was imposed, it originally led to an increase in the amount of coffee being smuggled into Guatemala. Guatemalan coffee is very well-known, due in large part to Starbucks featuring Antigua Guatemala coffee, for its quality. This means coffee in Guatemala has been able to fetch higher market prices – higher than Honduras. Since much of the country’s coffee is produced near the border already, why not drive it to a Honduran “storage facility” located in Guatemala and then sell it at above-Honduran-market prices? Well, the tax has funded an increase in the availability of technical assistance to producers to help boost production, leading to an increase in quality and market prices available to Honduras. Ultimately, the trafficking has decreased in recent years and Honduras has emerged as the largest coffee producer in Central America (where it has always been, though unofficially).

Ritmo de Cambio: 18.8693 HNL/USD

A Day in the Mountains

I had planned to put up an interesting post about Honduran economics and exchange rates; however, I had such an adventure yesterday I couldn’t resist sharing with you all.

7:15  Get up as usual, get ready, and eat breakfast – hot milk with stale cornflakes.

8:15  Arrive at the cooperative. I’m told there’s a meeting today at 9:00 with some of the organizations that support us and I’ll be the one giving the presentation.

10:00  Meeting starts: introductions, prayer, and presentation.

11:45  We jump into trucks to visit the beneficio (processing plant) where we’ll be installing the solar panels.

12:40  We arrive back at the cooperative and the visitors take off. We realize that our 12:00 meeting with the socios (cooperative’s members) in the mountains will be delayed (on time?). The president suggests we just go and grab some avocados for lunch on the way.

12:43  Truck pulls up to the cooperative. It’s some of our financiers for an unscheduled meeting and they want to visit the beneficio, too!

12:45  I sneak home to eat lunch

1:45  Jump into the back of a truck for our trip to visit the socios.

2:15  Arrive in Buena Vista (tiny town in the mountains). The president tells me there are only a few people at this meeting and I should head with the rest of the group to the next town, Bella Vista (different tiny town in the mountains). “¡Está cerquita!” “It’s close!” Never believe a campesino(farmer) when they tell you something is close. I think the definition is if they’ve been able to walk there in a day, it’s considered ‘close’. And nothing is close when you’re on a spine-wrenching uphill-downhill ride through the worst dirt roads imaginable in the back of a truck with no shocks.

3:00  Arrive in Bella Vista

3:01  Starts raining.

3:02  Full-on rainstorm, presumably washing away at least half of the road we came in on.

3:05  We start our meeting at near-yelling volume to overpower the sound of the rainstorm on the tin roof.  The meeting is to remind the socios of their responsibilities in maintaining our certifications and to obtain information about each of their fincas (farms). The rain lets up and starts again a few times during our meeting.

5:30  We finish the meeting and rush out to leave before the rain starts again.

5:35  Truck doesn’t start. I offer to give it a try. The main problem isn’t so much that the truck won’t start, but that the key won’t turn. I attempt to straighten the key slightly and give it another go, using increasingly more leverage.

5:36  Key breaks off in the ignition. Blank stares are exchanged.

5:38  Everyone climbs out of the truck and we start walking towards the entrance to the town to find a jalón (ride).

5:50  We hop into the back of another truck, which actually has some shocks, and head back to Subirana.

6:35  Arrive in Buena Vista to pick up the rest of our team. We, in good humor, recount the tale of me breaking the key in the ignition to explain why we’re in a different truck. The president then tells me the key I broke was for the gas tank, and we should have used the other key on the keyring! Whatever, I just want to go home!

7:05  We arrive in Subirana. Thank God it hadn’t rained since we left!

7:30  I get back to the house wet, sore, and tired.

8:00  Eat dinner and head to bed.

Plenty of jokes were made about me breaking the key. I just told them it was too boring otherwise and that I wanted a little more adventure, so I broke the key off in the ignition. My other workmate acknowledged this, and said that’s why he gave me the chance to break it. This all took place with 9 of us in the back of a truck, on a dirt road, in the dark. We were all kind of afraid we might have to stay the night in the mountains, so we were relieved to be returning to our beds. It’s amazing the things that don’t matter when you’re tired. As long as you know your bed is waiting, you can just relax and have fun!

And I still have the broken key to remember it all...

Charter City in Honduras = Development?

It started in 2007. The idea, that is.

Paul Romer, an economist and Stanford professor, began to reconceptualize the idea of economic development. Dr. Romer had considered our basic economic growth models which use inputs like labor, capital, wages, etc. and came to the conclusion that they lacked ‘ideas’ as an input. What if there was a way to create a city, like an embassy, that had a different set of rules by which it was governed so as to instigate development? In 2009, the idea had made its way to the TED stage in Oxford, England. TED stands for Technology, Entertainment, and Design and has become a premiere annual conference for presenting ground-breaking ideas such as this one. Here’s the idea in Dr. Romer’s own words:

When I was in Chicago, when I was a professor there before I went to Stanford, there was a woman who worked for my wife and me. My wife was in a residency program, so this woman helped cook and clean in our house. And she lived in the Cabrini-Green housing project in Chicago, which as many of you know is one of the most desperate failures in our public housing system. And the question that struck me, when I saw her and these two young children she was raising, is why she didn't have a chance to move to a city which could offer simple things like relatively low-cost housing and low crime. She simply didn't have that option in the United States. And I started to ask: why couldn't it be possible to create entirely new cities that could offer options like that for someone like her.

One of the models Romer frequently references is Hong Kong in the 1950s. The British entered into a sort of joint venture with China and took governing control of the island. They created a different set of rules, or ‘norms’ if you will, from China and allowed people to voluntarily move into this zone. The economic conditions of this area created opportunities that had not previously existed. Development of the island has been booming ever since. The charter city is similar, though it would operate more like a joint venture (a business concept) as opposed to a colony governed by a global power. Another similar sounding idea is a free trade zone, though the difference between these zones and the city is the scale. Free trade zones are designed around one idea: trade. However, a charter city would be designed around achieving complete self-sustainability in every regard: infrastructure, education, industry, healthcare, etc.
The idea continued to spread and was discovered by Xavier Arguello, Zelaya's presidential aide, and others in Honduras (WSJournal Article; full text). The idea then spread quickly to President Porfirio Lobo (pictured right), who met with Paul Romer in Washington D.C. to discuss the viability of a charter city in Honduras. This brings us to 2011, where Dr. Romer shared another TED talk in California, applying his charter city model to Honduras. In January, the Honduran Congress voted almost unanimously to change its constitution to allow for these types of developments within its borders. Allow me to reiterate a couple key points before continuing: This charter city utilizes unused land and residency is voluntary. Also, Honduras initiated contact in this interchange of ideas; it is not being thrust onto them by the US or any type of development organization. (Another WSJ article)

The charter city works like this.

First you have to determine who wants to play this game. Honduras has offered itself as the petri dish for this experiment. Discussions are underway with other governments like Canada, Denmark, Switzerland, and other well-established, more or less neutral countries that would enter into this charter city like a joint venture. The responsibility of these countries would be to act as a guarantor in the venture – someone who would ensure fairness between the residents that live there and the companies that operate there.
Second, a zone or location for the city is established. The last article I read said they were proposing a site just outside of Trujillo on the north coast. The second step would be to establish the charter itself – the rules, a point which Romer strongly emphasizes. Rules make the difference between nations; between opportunity and hopelessness; between North Korea and South Korea. Setting up the right kinds of rules with the right incentives and consequences is the key.

Third, you open it up to foreign investment. The appeal of a charter city is its potential. The initial investments for infrastructure will be made in order to reap the benefits of water and electricity payments for decades to come. Other companies will move in to establish themselves under this new, favorable set of rules and take advantage of the semi-cheap labor that exists here. Let’s remember that any residents are relocating voluntarily, and as Romer mentions, the risks associated with moving to this zone are far less than the risks already being taken by those illegally crossing the border to work in the States. Also, remember the governments that have chartered this city are acting as guardians to ensure that no abuses take place on either side – the people or the companies (this goes back to the rules). The companies are driven by profit to operate within the zone and perform well, which means its employees also do well and opportunities are made available for them to prosper.

Romer mentions that roughly 3 billion people live in cities, and this century we will see another 3 billion migrate to cities before we reach some sort of world population equilibrium. This means that the opportunity to implement new ideas for cities, like charter cities, will only exist in this century. And it’s clear that people are looking for different types of solutions after seeing previous methods fail, as is the case in Honduras. There exists some pessimism about the idea, but that’s not unlike any other great idea of the century. Ultimately, there’s only one way to know if it will work.

Peace Corps Challenge: Honduras

As part of Peace Corps' 50th Anniversary celebrations, PC has created the Live Like a PCV (Peace Corps Volunteer) Challenge. Now there's more to being a Peace Corps Volunteer than just dealing with the living conditions, but you can be sure it's no easy task. Maybe we could add to the list that you can't offend anyone! Below I've included the rules for the Honduras challenge.

I don't necessarily live with the harshest conditions listed here, but I would say I live with 90% of them daily. So if you're up for the task, I would challenge you to live like a PCV (i.e. ME!) for a week. Even if you decide you can't hack the challenge, you can read the list to get an understanding of what rural Honduran life is like. If you are doing the challenge, please let me know and comment on this post to share your experience.

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For one week you are asked to give up some of the everyday conveniences we do without. The levels are arranged from more common to less common living conditions of PCVs in Honduras while also taking into account the difficulty of completing the challenge in the US. So while none of us have a car, it ranks quite high in the challenge as it is much more difficult to do without one in the states. Honduras is known as the Banana Republic, which is why we have named our levels from the smallest type of banana to the largest.

First decide which month you want to participate. The first week of the month you choose (the 1st-7th) will be when you need to give up your items.

Next, look through the list below and decide which one of the five levels of difficulty you want to take on, and which items you will give up (although youʼre items may come from multiple difficulty levels you are only trying to complete one level, the most difficult you think you can manage).

Finally, let us know that youʼve taken up the challenge by completing the Accept the Challenge section of the general Live Like a PCV document. (This document is to accompany another if you did not receive that other document which outlines the general nature of this Challenge please visit LiveLikeaPCV.org)

When asked to roll a dice that number represents hours, and should be rolled each day (a regular 6-sided die).

DÁTIL – Difficulty Level I:

Choose 2 of the following

•  You canʼt use running hot water, you may only use water you boiled (yes, this includes baths)
• You canʼt use any microwave
• No checks, no debit cards or credit cards, cash only all week.
• No washing machine or dish washers - plus you must wash all articles of clothing you wore during the week by hand.
• No flushing your toilet paper

MANZANO – Difficulty Level II:

Choose 2 of the following plus 1 from Dátil

• You cannot watch television, but may watch soap operas and soccer at a neighborʼs house.
• Must keep all valuables (cash, phone, ID) hidden. Some options include bra, socks, hats, etc. Get creative.
• No sitting on couches for the week.
• Internet only every other day and for only 1 hour each time.
• Men and women may not wear shorts in public (only choose this item if you live in a warm climate).

CHATA – Difficulty Level III:

Choose 2 of the following plus 1 item from Manzano or 2 items from Dátil

• You can use your toilet but you must manually fill the tank or do a bucket flush (turn off the water to the toilet).
• Power outage: Have someone else throw a dice every day for how many hours you will be without power (5am - 11pm). He/she cannot tell you how long it will be out for, and he/she must turn off your power breakers.
• You can only use one burner on your stove and no oven.
• Say hi to everyone (including strangers) and make a comment about the weather to people you know.
• No supermarkets.

GUINEO – Difficulty Level IV:

Choose 2 of the following plus 1 item from Chata or 2 items from Manzano or 3 items from Dátil

• Reduced living space. You may only use your living room, bathroom and kitchen.
• No driving. You can use public transportation, bike, or walk.
• Cannot leave your house after sunset or before sunrise.
• No running water from your house, you must go fetch it from somewhere else (a neighbor’s house is fine).

PLÁTANO – Difficulty Level V:

Choose 1 from each level

• No English for the entire week
• Lack of temperature control. No heater or air conditioner in your house or car.
• You can only use your cell phone for 10 minutes per day.
• Your diet for the week must include (bad) coffee twice a day with 4 tsps of sugar with each cup or drink soda twice a day. Also must eat tortillas, beans, and eggs daily (absolutely no butter).

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Let's remember how most of the world lives and be thankful for our luxuries. Good luck!