Tuesday, March 17, 2009

Limping Lempiras

While in Honduras last week I got a glimpse of the deteriorating financial situation there. Since I have no formal training in economics (except that one class at the community college) I will give you my observations with a boldness normally seen only in criminals and idiots.

In January President Manuel Zelaya raised the minimum wage in one big jump from $157 to $289 per month. That's an increase of nearly 60%. If you're earning the minimum wage in Honduras, it's good news for you unless, of course, you get laid off because your employer can no longer afford to pay you!! And that is exactly what has happened.

I discussed the state of the Honduras economy with my favorite Honduran taxi driver / electrician, Sergio. The Surg, as I like to call him, has had it rough in the last few months. Since more and more people are loosing their jobs, fewer people are taking the taxis to get around. So there is a taxi glut. The city has stopped issuing new taxi permits. Surg's revenues dropped in half from December to January. Drivers are competing for fares and driving longer hours and more dangerous routes to make ends meet.

Unfortunately, Surg has been robbed by gang members in his taxi three times since Christmas. Two times were at gun point. They took his cash and cell phone. Because of this he no longer drives after 7:00 PM. When we return in May, we are going to stay at a new hotel outside the city which should be safer. It's more expensive, however, so we'll have to double up in the beds to stay on budget. Oh well, at least it's on the beach.

(Surg, Blaine, and I looked for a new hotel. This one in Jutiapa was the closest to our villages, but it was just too run down. Their was no hot water, and it was expensive for the quality, but the worst part was the night club on the third floor. The music would likely keep us awake every Friday and Saturday night. No gracias.)

The economic stress also means fewer people are depositing cash into bank accounts, so lenders have to charge higher interest rates to make money. We spoke to a bank about the process of obtaining commercial loans for our capital expenses, and we were told the interest rates are between 18-24%! ¿Exc├║seme? I couldn't believe it! You might as well put it on a credit card! And to get this lousy loan you need land or a building to serve as collateral. So our plan of borrowing and using the equipment (generators, for example) as collateral is now dead in the water.

I came home from my trip somewhat deflated and defeated from this news. But there was some good news too. More on that in my next post.

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