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Cent. America Has Hard Times Ahead

November 15, 1998

OJOCHAL, Nicaragua (AP) _ Ricardo Santeliz looks over the land where his family’s farm once stood. What had been fertile fields of peanuts is now a wasteland of caked mud.

Where the family had grown sorghum, beans, sugar cane and soy, the gnarled roots of huge trees claw up from the earth.

``Now the situation is very critical regarding the question of food,″ the young man said, adding that his family would look to move elsewhere. ``Here there is no hope.″

Santeliz is just one of an uncounted number of Central Americans whose livelihood was destroyed by Hurricane Mitch. The disaster, which killed as many as 10,000, will be felt in the region’s economy for years.

Governments, overwhelmed by the need for relief work and stymied by broken communication links, have yet to calculate the full magnitude of the economic loss.

The storm destroyed as much as 70 percent of important crops such as bananas and coffee in Honduras and Nicaragua, along with most of the roads and bridges needed to carry produce from the rural mountains to central markets.

The Inter-American Development Bank has estimated up to 90 percent of roads and other infrastructure was destroyed in Honduras, the worst-hit nation.

Rebuilding bridges across Central America’s rugged terrain could take two to four years, analysts say.

The economies of Central America’s two largest nations had been hurting before the storm. The global economic crisis had forced a drop in prices for their key exports, said Francisco Larios, a senior emerging markets economist with Standard and Poor’s DRI in Lexington, Mass.

Now with the damage caused by Mitch, ``you’re probably going to see not only recession but severe drops in growth,″ Larios said.

Agriculture is responsible for a quarter of Honduras’ economic output and employs nearly two-thirds of the workforce. In Nicaragua, it accounts for 15 percent of the gross domestic product and employs more than 40 percent of its workforce.

Nicaragua’s Labor Ministry said this week that Mitch surely had put thousands of people out of work.

To offset the damage, the government has offered 10,000 temporary jobs, such as helping clean debris from roads and highways at a weekly salary of 100 cordobas, or $10.

Similarly, aid groups are supplying rice, beans and other staples to men and women clearing roads in the province of Chinandega, home to the city of Leon and the village of Ojochal.

Labor unions, though, see the job programs as a threat to other workers. The work will be temporary, and when it ends, the hurricane victims will be left wanting.

``The rural populations will find it hard to come back, and you will see a deepening of poverty,″ said Larios, a native of Nicaragua.

The Nicaraguan Labor Ministry said many companies have asked to suspend their businesses temporarily to recover from the storm’s damage.

In some regions, schools and factories have shut down to shelter hurricane victims.

Meanwhile, Nicaragua and Honduras, citing the need to rebuild their countries, have asked for forgiveness of the combined $10 billion they owe in foreign debt.

France agreed to the requests last week. Nicaraguan President Arnoldo Aleman called it ``a message of optimism which surely will stimulate other countries to take the same decision.″

Nicaragua owed $70 million of its $6 billion foreign debt to France. Honduras owed $4.2 billion, $30 million of it to France.

Cuba also announced it was canceling Nicaraguan debts of $50 million, nearly all of which apparently was borrowed by the nation’s leftist Sandinista government in the 1980s.

The governments also could try to persuade private lenders not to demand scheduled payments, to extend repayment deadlines and to cut interest rates, said Sung Won Sohn, chief economist with Wells Fargo Bank in Minneapolis.

Added Larios, ``For all practical purposes, Nicaragua and Honduras will be unable to repay, at least in 1999, because of the magnitude of the tragedy.″

The countries will be under internal pressure to quickly rebuild and put the millions of dollars it is receiving in foreign aid to good use.

In Nicaragua, bad memories remain over the government’s slow reconstruction efforts and misuse of foreign aid after a devastating 1972 earthquake. The scandal helped build support for the leftist Sandinistas, who seized power in 1979.

``The governments will be keen to avoid the perception that this is dragging on too long,″ Larios said.

``These are among the poorest countries in the Western Hemisphere. What is now an economic disaster could very quickly erupt into a political problem.″

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