Honduras seeks fresh funds to appease creditors, unpaid workers

TEGUCIGALPA Mon Feb 18, 2013 12:00am EST

TEGUCIGALPA Feb 18 (Reuters) - The Honduran government is pushing to grant concessions and sell shares in its ailing public utilities to ease its growing public debt and pay companies and workers clamoring for their salaries.

Honduras, one of Central America's poorest countries, closed 2012 with a deficit of 6 percent of GDP, its second highest in ten years. The fiscal gap was exceeded this decade only in 2009, when a military coup ousted former president Manuel Zelaya.

The lack of budget resources and growth in outstanding payments has fueled protests since the end of 2012, with thousands of public employees taking to the streets to demand their pay.

More than 100 infrastructure projects have been suspended by construction companies for non-payment and firms that supply drugs and services to state hospitals have threatened to suspend their services over growing debts.

President Porfirio Lobo is seeking to attract private investment to capitalize the state-owned National Company of Electric Energy, ENEE, and the Honduran Telecom Company HONDUTEL, which, like the National Port Company ENP, operate with losses that cannot be covered by the state.

"The government is making an effort to deal with the problem so that we can have the stability we need to honor our debts in the coming months," said Julio Raudales, minister for planning. He said one of the government's biggest problems was the "fiscal gap" at HONDUTEL, ENEE and ENP, which notched losses of $15 million, $200 million and $6 million respectively in 2012.

Raudales also said the country hoped to boost its tax take through improved collection and by closing some of its tax exemptions, which deprive the government of about $1.15 billion a year.

BOLD CONCESSION

Earlier this month, the government leased Puerto Cortes, Honduras's most important port, to the Philippine company International Container Terminal Service Inc, for a 30 year period.

The concession, the country's boldest in almost a decade, accounts for 90 percent of ENP's operations and will require an initial investment of at least $624 million to modernize port infrastructure, officials and company executives said.

"The state has a lack of investment capacity, a lack of borrowing capacity and is seeking mechanisms that might be attractive to private investors, like public-private alliances or the sale of some company shares," said Jose Antonio Pineda, president of the state's Commision for the Promotion of Public- Private Alliances, COALIANZA, which promotes plans to capitalize the ailing companies.

The commission is seeking $400 million each for ENEE, which operates as a monopoly in the electricity sector and HONDUTEL, which competes against Mexican magnate Carlos Slim's Claro and another firm.

Honduras tried unsuccessfully in 2001 to sell a 51 percent stake in HONDUTEL for $300 million, but its highest bid - from Teléfonos de Mexico (Telmex) - came in at just $106 million.

"The government has no choice, it has to seek private capital for the state-owned firms to prevent them from going bankrupt or becoming paralyzed. It's also its only way to boost the economy to a certain extent," said Roldan Duarte, President of the Honduran College of Economists.

Honduras's fiscal woes have helped the public debt balloon from $672.7 million in 2008, or 4.7 percent of GDP, to $2.776 billion last year, or nearly 15 percent of national output.

FILED UNDER: