Gildan, maquillas, model cities and simplistic responses to complex problems

It�s amazing how simple the problems of Honduras seem to some people a few thousand kilometres away.

A handful of slogans, some recycled rhetoric and unsupported claims, and presto, a theory.

A fine example has been the blind libertarian enthusiasm for a plan to create �model cities� in Honduras, effectively independent fiefdoms, run, at least initially, by the investors.

Another was offered in a recent Internet opinion piece on Canadian textile company Gildan�s manufacturing centres in Honduras.

The 20,000 employees, the piece said, �are basically slaves, and their status will likely remain unchanged, or get worse.�

�With a growing number of U.S. military bases of occupation, and the murderous dictatorship of Juan Orlando Hernandez solidified, profits are basically guaranteed for transnational sweatshops in what is essentially a state-sanctioned Slaver's paradise,� the writer maintains.

It�s a good example of a failure to look seriously and critically at a challenging issue.

There are legitimate concerns about working conditions and the barriers to effective union representation at Gildan and other employers in Hondura�s maquilla sector, where tax-free status and other incentives have lured foreign workers.

There is also recognition that the 130,000 jobs are desperately needed and that labour standards and pay both good by Hondurans standards.

The minimum wage for maquilla workers is about $270 a month. That�s not rich, but by comparison, agriculture workers are paid $120 to $180 a month, and work six days a week.

And Gildan employees actually get the minimum wage. Between 70 and 85 per cent of Honduran workers don�t receive the legislated minimum wages. Many, including public sector workers, frequently don�t get paid at all. It�s common for employers to say sorry, not enough money this week.

The article paints a grim and unsupported picture of working conditions, too.

�By age 25, chronic work injuries, coupled with poor medical treatment, often prevent workers from performing their fast-paced tasks,� it reports. �Worse still, once a worker leaves Gildan, she is likely to have irreversible health problems which preclude her from finding alternate employment. Some women need crutches to walk; others can't hold their babies or do housework.�

It would be helpful to let readers know what �often� means in the first sentence, and what the source is for the information. (Hopefully not 'someone from Honduras told me.') 

And is there evidence to show that workers who leave Gildan are all �likely� to be permanently disabled, as the Internet piece claims? 

Workplace improvements are needed. Last year, CODEMUH, a leading women�s rights groups, filed a complaint with the Inter-American Commission on Human Rights because the Honduran government had failed to respond to health and safety issues, citing the cases of 47 women who had received disabling injuries. But there is zero evidence that all workers are �likely� to end up disabled.

I haven�t toured the Gildan plants. Those who have suggest that some improvements could be made and piecework incentives can lead to a focus on production over workplace safety. 

But that, on balance, they are not bad workplaces.

The article also states categorically �Unions are not allowed, collective bargaining is not allowed and human rights are not a concern.�

That�s false. The Gildan operations are unionized and there is bargaining. There are serious problems, including documented examples of intimidation and efforts to thwart union activities by managers. Throughout Honduras, exercising labour rights is an enormous challenge, sometimes met with violence. Those points all needed to be made.

But there have also been tripartite negotiations between the three largest national labour confederations, government and industry on wages and other issues for the entire maquilla sector and there are unions.

Maquillas aren�t an unmixed blessing.

The companies were lured by big tax breaks, including a 10-year total tax holiday. It�s hard to run a government without tax revenues. (Though tax exemptions here are out-of-control. American fast food franchises, owned by rich Hondurans, got a 10-year tax break because they supposedly encourage tourism. Teachers have, inexplicably, a permanent exemption from paying income taxes.)

And there is always the risk that some other country will come up with a better deal and the industry will collapse.

But the issues are complex and deserve serious discussion, not hyperbole.

Calling the workers� �slaves� is inaccurate and insulting. Hondurans make choices about their futures. From a more limited range of options than many - but not all - North Americans enjoy, perhaps, but they are not slaves. 

Calling Juan Orlando a �murderous dictator� is inaccurate. Last month�s elections were flawed, but the consensus of international observers was that the results - at least at the presidential level - were representative. (Nicaraguan President Daniel Ortega was one of the first to congratulate Orlando.)

And the �murderous� allegation is silly. There is violence and impunity in Honduras. In a six-month period before the elections, 18 candidates or organizers from Libre, the left-wing opposition party, were murdered. But in the same period, 11 candidates or organizers from Orlando�s party were murdered. But there is no basis to call the incoming president murderous.

Honduras is a mess. The government is virtually broke, inequality is staggering and 74 per cent of the population live in poverty, with 47 per cent in extreme poverty. The murder rate is the highest in the world and almost all institutions - schools, courts, police, government - don�t really function. 

But Hondurans, ultimately, are going to have to create their own solutions, with international help.

Superficial prescriptions from North America and Europe, of all political stripes, are contributing nothing to the discussion and look much like another form of imperialism.

Update: Shaky Honduran election process adds to challenges for winner Juan Orlando

It appears Juan Orlando Hernandez has won the Honduran presidential election for his National Party. 

Libre is challenging the results and alleging fraud. There probably was some, but the reports from election observers suggest it wasn�t massive. (Probably not a good sign for a democracy when the takeaway headline is �No massive fraud,� but still....)

Suspicions have rightly been aroused by the inept way the vote counting is proceeding. The polls closed Sunday at 5 p.m. Right now, noon Tuesday, a little more than two-thirds of the presidential ballots have been counted. Less than half the mayoral ballots in our town, Copan Ruinas, have been reported. And less than half the ballots for the congressional deputy election from our department have been counted and reported.

Worse, there has been no explanation for the delays and lots of reasons to wonder what has been going on.

By midnight Sunday, in the seven hours after the polls closed, 54 per cent of the presidential votes had been counted or reported.

Since then - another 36 hours - only an additional 14 per cent have been counted. Results from a large number of ballot boxes from the two cites still haven�t been reported, so it�s not a question of remote communities.

That�s bound to raise doubts about the process.

It was also odd, with National having 34 per cent of the votes and Libre 29 per cent, to have the election authorities declare Juan Orlando the winner with almost one-third of the votes uncounted.

It�s likely Juan Orlando captured the largest share of the votes. But the shaky electoral process will make his job even more difficult. 

Honduras is broke. There isn�t enough money to pay salaries or bills for the rest of this year. The government can borrow, but interest rates on the international bond market would be eight to 10 per cent, because of the risk.

The budget for next year has been prepared, then sealed in an envelope to avoid affecting the election campaign. (The proposed budget should have been a central issue in the election campaign, with all parties offering their plans. Instead it�s a secret, with weeks before the new budget year begins.)

The National Party has been in power for the last four years and has been unwilling or unable to increase tax revenues, by reducing evasion, eliminating exemptions or increasing rates. Tax revenue has actually fallen as a share of GNP. It has likewise shown no ability to reduce waste or corruption or slow spending.

So unless Juan Orlando can take the government in a new direction, the problems will just increase. And his challenges will be grow if congress is divided, as expected. (Again, it is bizarre that the composition of congress isn�t known almost two days after the polls closed.)

And Juan Orlando will have to deliver on his promise to reduce crime and insecurity by using the military to police the streets.

It�s good news, four years after the coup, that the election process went ahead, flaws and all.

But the same problems of Honduras are looming over Honduras today, with little evidence that effective action will be coming to deal with them.

With half Honduran votes counted, two candidates claim victory

Juan Orlando Hernandez (centre, white shirt) leads supporters in election night prayer

It�s never a great thing when two candidates claim election victory and the ballot counting stalls just past the halfway point.

That�s the situation in Honduras this morning, with National Party presidential candidate Juan Orlando Hernandez and Libre leader Xiomara Castro Zelaya claiming victory. (It does make you appreciate the custom in Canada of waiting for rivals to concede defeat.)

When the TSE - the Honduran version of Elections Canada - quit counting at midnight, Orlando had 34 per cent of the vote and Zelaya 27 per cent. That makes him the likely winner, but only 54 per cent of the vote had been counted. Things could change.

Juan Orlando and the National Party are right of centre, Xiomara left. The National Party has been in power for the last four years, and Juan Orlando has been the head of the Congress. The government has been hopeless.

But his campaign had a lot of money and stressed law and order, especially using the army to patrol the streets. Crime is a real issue for Hondurans, with the highest murder rate in the world and gangs practising extortion on a wide scale.

Xiomara Castro and Libre are brand new. Her husband, Mel Zelaya, was ousted in a 2009 coup and the party arose from the opposition. The showing is impressive, and Libre relegated the Liberal Party - which has alternated governing with the Nationals in a two-party system - to third place (21 per cent). Another new party, the Anti-Corruption Party, headed by a TV personality, has captured 16 per cent based on the counting so far.

The elections officials are supposed to start giving new updates at noon. It�s unclear why there is such a long delay.

Partly, it�s understandable. There�s a system for transmitting results from polling stations, but about 10 per cent don�t have electricity or Internet. 

And the ballots are complex. Honduras holds national and municipal elections at the same time. 

The national elections include Congresssional seats. Our department, Copan, gets seven seats in the 128-seat Congress. So the ballot includes seven candidates from each of the eight parties, or 56 names. Literacy is low, so each candidate�s colour picture, with a graphic to show party affiliation, is also on the ballot, making for a giant document more than twice the size of a newspaper page.

There�s no indication who will control Congress, which is also important.

The election, it appears, went better than some people feared. There were allegations of vote-buying and fraud and intimidation, probably well-founded, but international observers generally found the process worked. (It likely helped that observers and others could share problems instantly on Twitter and blogs. It�s harder to commit fraud, at least in urban areas, when so many eyes are watching.)

There was lots of unease about the aftermath. 

People feared the country�s elite would not tolerate a Libre victory. (That�s one of the problems with the coup, which ended 27 years of democracy. Once powerful forces toss out an elected president, everyone believes it could happen again.)

And others fear Libre supporters will take to the streets - at least in the big cities - if they lose and suspect fraud.

So far, all is quiet. 

The Economist published a blog update on the elections, and suggested serious protest is unlikely. �Hondurans have a history of long-suffering passivity: when their neighbours were all caught up in civil wars in the 1980s, they were almost comatose," the writer noted.

Not necessarily a good thing, perhaps, but reassuring for those hoping for a peaceful response to the election results - whenever they finally come.

League group collapse likely to cost investors $320 million

The collapse of Victoria-based League Assets, unfolding in grim fashion in B.C. Supreme Court, isn�t getting nearly enough media attention.

By the time the dust settles, this will be one of the worst investment disasters in Canadian history. 

Investors will likely get back about ten cents on the dollar as the complex web of companies is wound up. 

Some 3,200 investors gave League $363 million. League claimed to offer small investors a way into the commercial real estate market. The company promised security and great returns.

Those investors now face ruin. There will likely be less than $40 million for them to share at the end of the process.

League filed for protection under the Companies� Creditors Arrangement Act last month. Essentially, that allows a company that can�t pay its bills time to try and find a solution.

But it�s clear there is no solution. League�s assets, including the commercial real estate holdings and development projects like Colwood Corners, are worth far less than the company claimed and heavily leveraged.

CEO Adam Gant filed an affadvit last month saying the real estate had a net value of $211 million. PWC, the monitor overseeing the CCPA process, commissioned an appraisal that found the real current value is $82 million.

A lawyer for the main secured creditors summed up the situation in a letter to the court this week pointing out restructuring is not an option.

�In fact,  it appears that there is no �business� to restructure  in any event:  League Assets depended for its short-lived success on continued growth and injections of new debt, new investment, and new acquisitions that would  generate fees for the management or �head office� entities,� he writes. �When the money stopped  coming  in, the whole edifice appears to have quickly collapsed under its own weight.�

The consequences are disastrous. Rachelle Berube, a blogger who was being sued by League for comments on her blog that described the business as a Ponzi scheme, has tracked League for some time.

She shared case studies from the company�s sales material, which include investors who talk about mortgaging their homes to invest in League and counting on the investments for their retirements. 

PWC noted in a monitor�s report that this week that investors and creditors are looking at the �significant amounts� invested in League and the low value of the assets and wondering �Where the money went.� 

That�s likely to become a larger question as investors confront the loss of their savings.

Bono 10,000: Is giving poor Hondurans money creating real change?

President Porfirio Lobo hands out the Bonos... and helps his party's election campaign

Instead of all those complicated, multi-year Honduran development projects, why not just give poor people money?

The Bono 10,000 program takes that approach. Families - supposedly the poorest - get 10,000 lempiras a year, about $500. 

That�s big money. Many people work full-time for $2,000 a year or less. When it�s Bono time, trucks full of campesinos head into Copan Ruinas and other centres, several families, moms, dads and kids, standing in the back of each pickup. 

This year, smiling politicians from the governing party have been on hand to give out the money, and remind recipients who to vote for in Sunday�s elections.

The Bono program is a good primer in development issues.

Start with the whole short-term, long-term challenge.

International funders like projects that promise long-term change. Helping families grow new cash crops, or working with communities so they can hold government accountable. 

Frontline workers with Honduran agencies know the people in the communities and see their immediate problems. They will sometimes settle for short-term fixes - money for a dozen bags of better corn seeds and some fertilizer.

The Bono 10,000 program tries to promote long-term change. Parents have to promise to send their children to school and adopt some preventive health-care practices. Healthier children are expected do better in school. 

And there is some program money to expand access to education past Grade 6. (Access to education past Grade 6 is only available in one-third of rural communities. Education quality is dismal.)

The Bono program has only been in place since 2010. But the Inter-American Development Bank, one of the big funders, has done an evaluation that seemed positive. Participating families spent more. That�s unsurprising, but it did help the local economies. Children of participating families were somewhat more likely to go to school. Also good.

But there are problems.

Like politics, corruption and inefficiency. 

In a country where 74 per cent of the people live in poverty and 47 in extreme poverty, identifying the target group for the Bonos is difficult. 

But there are complaints of favoritism and politicization, especially in this election year. Smiling politicians are on hand to give out the Bonos to big crowds, sometimes with tragic results.

The Bonos, for example, are supposed to go to 200,000 poor families this year. But the government has decreed that the families of people in the army, police and fire departments should get the payment. That could be up to 30,000 families.

It�s a political gesture and a way to take money that�s supposed to be supporting social development and use it to cover government expenses. (The army, police and firefighters are poor; police are paid about $150 per month.)

In another political gesture, one of the three serious contenders for the presidency has pledged to extend the program to 800,000 families.

Which raises the whole question of sustainability, another big development issue.

The IDB is the main funder of the program, and almost all the money is in the form of loans, not grants. 

Every year the Bono 10,000 program runs, Honduras goes deeper in debt. The program, at current levels, is adding $100 million a year that, theoretically, will have to be repaid. (Theoretically because the government is effectively broke and its capacity to repay debts highly doubtful.)

The debt is fine if the program is going to bring healthier, better educated people and future economic gains. But that�s not likely without other big changes - less corruption and crime, half-decent roads, better schools. 

Then there�s the related dependence issue, which features in any development discussion. Is the Bono program helping families build bettrer futures? Or is it encouraging them to count on someone else to come along and give them some money?

There are no simple answers. It�s easy to warn against the risk of dependence when you�re in a developed country talking about aid theory. It�s harder when you�re looking at a population where 31 per cent of all kids under five are malnourished. Long-term solutions alone are going to come too late for them.

The Bono 10,000 program looks mostly like a useful stopgap measure, especially if its administration and equity are improved.

But Honduras needs a lot more profound structural changes - better schools, less corruption, a functioning justice system, adequate infrastructure if it�s not to be perpetually dependent on such short-term aid.

VLTs on ferries open door to new wave of gambling expansion

The B.C. government�s idea of putting VLTs on the ferries so people would lose money - on top of the soaring fares - looked at first like a distraction.

The government announced ferry service cuts at the same time. A few headlines about gambling might be preferable to an analysis of the damage done to coastal communities by the service cuts.

But there might be much more going on here.

There are 12,224 slots machines or VLTs in the province. (They are really the same thing.) They take an average $93,000 each from losing gamblers, or about $1.1 billion a year.

Put 80 on each of the five big ferries - the Spirits and Coastals - and at that rate the gambling machines would pull in $37 million a year, to be shared between BCLC, BC Ferries and any middlemen.

Of course, VLTs on ferries will take in a lot less. Casinos and �community gaming centres� are open up to 24 hours a day. A ferry likely allows about 10 hours of gambling time. 

The government�s betting shops attract hardcore gamblers and some addicts, people who lose a lot. And they serve alcohol, which encourages people to make bad decisions and lose more.

Still, ferry VLTs could be a tidy revenue stream.

And the decision would set an important precedent in expanding VLT locations. If ferries are OK, what about BC Place? Resorts? Bars?

Remember, the Liberals ran in 2001 with a campaign promise to halt the expansion of gambling because it would hurt families, damage local economies and create a province of losers, in Gordon Campbell�s words.

There were 2,400 slots in the province then. The government immediately set out to double the number, and then doubled it again to today�s 12,000-plus. The government�s share of gambling losses was about $565 million. Now it�s about $1.1 billion.

The government initially twisted itself in knots trying to deny gambling was being expanded, including a claim new slots would only be introduced in existing or already planned casinos.

But that wasn�t producing enough money from losers. So new casinos were opened and the government pushed �community gaming centres� - bingo halls converted into mini-casinos. There are 19 of them now, with 2,500 VLTs.

There doesn�t seem to be room for expansion.

Maybe this isn�t just about ferries.

The government has claimed keeping VLTs in casinos and gaming centres ensured some controls on the negative effects - addiction, money-laundering, loan-sharking and social damage. 

But it�s apparently willing to abandon that principle to move VLTs onto ferries.

Which, given its record of broken promises on gambling, should leave citizens wondering where the money-sucking and addictive VLTs will show up next.

In Honduras and Canada, the strange political silence on inequality

Ten days left until the Honduran national elections, and I�m thinking about inequality.

It�s stunning in Honduras. There are the obvious signs - the contrast between the lavish malls in the cities and the squatters� shacks along any stretch of highway where there is a precarious place to cobble together some sticks and tarps and corrugated tin.

And there are the statistics.

The UN does a useful Human Development Report each year.

This year�s HDR report shows the top 20 per cent of the Honduran population have average incomes 29.7 times greater than the bottom 20 per cent. The only countries with more inequality, based on that measure, are Angola and Micronesia.  Even the failed states of Africa don�t reach that level.

Lavish malls...

In Canada, by contrast, the top 20 per cent have incomes 5.5 times as high as the bottom 20 per cent. Imagine how different the society would look if the richest Canada took the same share of incomes as their Honduran counterparts.

The HDR also uses another, broader measure of inequality. Based on that, Honduras still ranks as one of the most unequal countries in the world - only the Seychelles, Micronesia, Haiti and four African nations having greater inequality. (I hadn�t even heard of Comoros, one of the African countries.)

The myth is that inequality just happens, a result of hidden economic forces. Kind of like gravity, except only some people get held down.

But that�s not true, in Canada or Honduras. Governments make decisions that increase or reduce inequality. Reduce public health care, as I noted here, and you increase inequality. Cut taxes, and the result is the same. Raise the minimum wage, and you reduce inequality.

... and dismal shacks

In Honduras, for example, taxing an extra two per cent of the incomes of the highest-earning 20 per cent would fund a 60-per-cent increase in the incomes of the poorest one-fifth of the population. (Those people are really poor. About 74 per cent of Hondurans live in poverty, and 47 per cent in extreme poverty.)

Or the money could pay for a better education system or other measures which could reduce inequality in the long term. (Honduran schools are generally terrible.)

Instead, the government has been collecting less in taxes. I don�t now if that�s policy or corruption or incompetence or a combination of all those factors and more. Tax evasion is the norm; the director of the revenue department estimates it loses 43 per cent to tax scofflaws.

The government went through a huge exercise earlier this year that was supposed to eliminate some of the many tax exemptions. Nothing came of it. A 2010 study found 69 corporate tax breaks. Fast food franchises, mostly owned by a few of the elite, got a 10-year break on all taxes and a permanent exemption from paying import duties on the dubious claim they were good for tourism. (Come to Honduras, and eat a Big Mac.)

Social spending has also been cut, from 13.3 per cent of GDP in 2009 to 10.9 in 2012, according to a report on the Honduras post-coup economy by the Center for Economic and Policy Research.

The same report found that from 2010 to 2012, the top 10 per cent of Hondurans received more than 100 per cent of the benefits of economic growth. The average incomes of the other 90 per cent shrunk.

But, as in Canada, there is not much discussion of inequality.

Security, corruption, crime - they have been big issues in the election campaign.

Reducing poverty, of course, has been on the agenda, though not in an especially coherent way. 

The platform of Libre, a new party challenging the established Liberal-National party duopoly, includes measures that would address inequality. But even its campaign has talked much more constitutional reform than growing inequality.

The silence on such an important issue is as puzzling here as it is in Canada.

Six thoughts about the Rob Ford disaster

I�ve resisted adding to the flood of words about Rob Ford. But no more. Here are six thoughts.

First, this is sad. Ford, as a human being, is a mess and any compassionate person should feel empathy watching him struggle. Especially because he seems to have no one in his life to say �I care about you, and you have to stop this.�

Second, Ford�s hypocrisy is appalling. A month ago, a photo emerged of a Toronto employee with his head on his desk, apparently asleep. Ford wanted the employee and his manager fired if he was sleeping. Not suspended, or disciplined. Fired. 

But he uses illegal drugs and shows up at the workplace staggering drunk and violent, yet feels it is fine to keep his job. Ford supports tough-on-crime policies and harsh penalties for drug use - but not for himself. It is entitlement and ignorance gone mad.

Third, the jokes about Ford and the obsession with crack suggest a certain collective eagerness to forget that his problem is alcohol. Yes, crack is a reckless drug to use, and being in a drunken stupour is not a great defence. 

But the evidence suggests Ford�s problem is alcohol. 

Maybe we are in collective denial. In B.C., in the 12 months ending Sept. 30, we spent $986 per adult on alcohol, at the LDB price. That�s about 2.5 litres a week per adult of alcohol of all kinds. Many people aren�t drinking at all, of course, which means others are drinking much more.

Fourth, the political posturing was ugly. People in every walk of life struggle with substance abuse, addiction and self-destructive behaviour. It�s patently stupid to claim people of any political stripe have a monopoly on these problems. 

Fifth, this has not been, overall, a great time for the media. The Toronto Star has done fine and difficult work on the story. The Globe and Mail as well. 

But there has been so much rubbish written, from pieces arguing that this is what happens when you give people who live in suburbs the right to vote to columns suggesting the public doesn�t really need to know more about Rob Ford�s problems.

And sixth, this has been a worse time for political service and public life. Rob Ford is reckless, irresponsible and a liar. He has no sense of accountability, or honesty. Yet he is the mayor.

What are young people supposed to conclude from this ugly spectacle? They would be kicked out of their high schools in a flash for much smaller offences, but Ford is above such accountability, and still has his defenders. 

The rules only apply to people outside the club. 

Which is ironic, given that Rob Ford has always portrayed himself as one of those outsiders. Until he needed to claim the privileges of power.

The anti-regulation crowd should visit Ciudad de Angel

Governments of a certain stripe are always complaining about red tape, those darn regulations that stop people and businesses from getting on with things. 

Their supporters should come down to Honduras.

I pass Ciudad de Angel, a big new housing development, on my way out of Teguicgalpa. It looks pretty nice, although perched precariously on a hillside.

Too precariously, as it turns out. The new 200-home development is falling down around the devastated homeowners, who had hoped to stake their claim to middle-class status. (Prices ranged from $60,000 to $120,000, upmarket for these kind of developments around the edge of Tegus and San Pedro Sula. It was supposed to have a community pool and, of course, security.)

The construction was hopelessly substandard. The project was built on unstable hillsides. The developer dumped dirt and waste in several small ponds and then built on top of them.

Now the homes are falling down, literally. Four collapsed yesterday. Hundreds more are damaged, the roads are cracking along the fault lines. Owners complain of cracked walls, tile floors lifting, sewage flowing into their homes.

And the Honduran emergency commission wants people to abandon their homes because the entire development is unsafe and all the houses have severe damage.

Some residents have sued the Guatemalan developer, but the courts are hopeless. The worst in a bad region according to a report today.

Canadian homebuyers haven�t always been protected by regulation or the courts, of course. The leaky condo disaster plucked some $1.5 billion to $2 billion from people who thought they could safely buy a home, a huge loss. They had no legal remedies, because the developers shut down their companies and started anew.

But neither do Canadians face the risk of putting their life savings into a development that falls down around them.

It�s easy enough to trot out examples of unnecessary regulation.

But the notion that all rules and regulation developed by government are �red tape� designed to ensnarl people who just want to get something done is destructive rubbish. As is the notion that buyers should somehow do their own geological surveys before they buy a home in what looks like a legit development.

Just ask the people in Ciudad de Angeles.

Footnote: Ian Reid has a look at another aspect of regulation here.

Another grim year for Postmedia, and what lies ahead

It�s tough to pick the biggest problem for Postmedia, Canada�s largest newspaper company. And it�s just as hard to figure out where the corporation is going.

Postmedia released its quarterly and year-end results Thursday. They were grim, and  things are getting worse, not better. (The corporation's Powerpoint presentation on the results is here.)

Print advertising, about 60 per cent of total revenue, fell 13.4 per cent in the fiscal year ending Aug. 31. That�s worse than the 10.3-per-cent drop in 2012.

For national and retail advertising, about 60 per cent of total print ad revenue, the fourth quarter was the most grisly, meaning losses are continuing to grow.

Stripped of the buzzwords, Postmedia�s strategy appears to be to cut costs, try to find ways to get readers to pay more for products on various platforms and attempt to persuade advertisers to pay more for ads that work better.

The company launched a three-year �Transformation Program� in July 2012 that aimed to cut expenses by 15 to 20 per cent - $102 million to $135 million. It�s achieved $82 million in annualized savings so far, and is on track to reach the goal, management says.

The problem is that, in the last two years, revenue has already fallen by $147 million and Postmedia predicts more revenue losses in 2014. 

The cost-cutting targets sounded ambitious 15 months ago. But the corporation is not even halfway through the exercise and the targets are turning out to be much less than is needed to to offset revenue losses. 

That creates a worrying prospect of endless cuts as revenue losses continue, until there is nothing left. And, in the interim, of more falling revenues caused by cuts that hurt quality and service to readers and advertisers. 

The plans to find new revenue - getting readers to pay more and increasing digital revenues - haven�t worked. 

Since Postmedia took over Canwest�s newspaper assets in 2010, the corporation has been talking about �Digital First� strategies. But three years on, it hasn�t come up with an effective approach. (In fairness, almost no newspaper companies have.)

In the last two years, traditional print advertising and circulation revenues have fallen by $151 million, or 19 per cent

Digital revenues, a priority for the company, have risen by $4.2 million, or 4.8 per cent. They are roughly keeping pace with inflation, despite starting from a small base and the corporation�s big emphasis on �Digital First.� (In a conference call for analysts on the quarterly report, Driving.ca was touted as an example of digital product development. It was launched this month after almost a year or work, the company said. There is some slick customer-targeting work going on behind the scenes, but the site doesn't look particularly innovative.)

The results of paywalls, intended to get money from people to read the newspapers� websites, aren�t wildly encouraging.

It�s too early to judge, as paywalls were only introduced on a group-wide basis in May. Postmedia says it now has 120,000 people registered as website digital subscribers to its 10 dailies. But that includes print subscribers who registered for their free digital subscriptions, and the company didn�t reveal how many people are actually paying $10 a month to read the websites.

So what�s ahead? Cuts, of course, and well beyond the original �transformation� project launched last year. Real estate sales, which will give Postmedia some money to pay down its $489 million in debt.

And more of the same on the revenue side. 

There are changes offering some promise. The Vancouver Sun has named newsroom �champions� for tablets, mobile, web and print. The notion is apparently that they will work on deciding what content belongs on each platform, and the best way of sharing it. It might be late, and it falls short of La Presse�s $40-million bet on tablets, but it�s good thinking.

But on balance, things don�t look good. If the revenue and expense lines stay on the same track they have been on for the last two years, Postmedia could have trouble coming up with the cash to pay interest on its debt by 2015 or 2106. 

That�s not much time to fix things.

For now, the lenders who financed the papers� purchase appear to be happy receiving interest and required payments on the principal. About 60 per cent of the debt carries 12.5 per cent interest rates and the rest is at 8.25 per cent.

That could change quickly if the bad news keeps getting worse and those interest payments look to be at risk.

Footnote: I wrote a four-part series of blog posts on newspapers' problems and solutions earlier this year. Find them at Part One, Part Two, Part Three and Part Four.

A Honduras aid program, a crushing crowd, a baby dead in her mother's arms

Santos Pineda: 'No one is to blame, it's what God wanted'

I had a blog post mostly done about the Bonos 10,000 progam, a Honduran government plan that is supposed to give $500 a year to the poorest families.

Then I read about Santos Pineda and his wife Aida Fajardo, and their four-day-old baby. The little girl died in a hugely overcrowded room where the family had waited in a disorganized crowd for two hours to get the Bono. She apparently suffocated in her mother�s arms in the crush of people.

The baby could have died anywhere, of course. She had spent three days in the hospital in an incubator after an early C-section delivery and just been released the day before, according to La Prensa. 

But the crush of people - 700 were crowded into a hall that is supposed to hold 200 - and the long wait to see if the family would be among the recipients would not be good for a sickly infant.

A Bono official said she had told Pineda not to bring his wife and the newborn, because the crowds would be dangerous. 

So why did Aida Fajardo and the baby - not named before she died - accompany him, while their three other children stayed in their neighbourhood? Who knows.

Maybe Aida Fajardo was more literate than her husband and needed to be there to read the forms. Maybe she didn�t want to be alone four days after giving birth.

Maybe they thought they would be more likely to make the Bono list with an infant in arms.

The internationally funded program is supposed to select recipients based on objective criteria - need, their commitment to have children attend school and health-care clinics, things like that. 

But there is only enough money to provide Bonos to half the poorest families. There are complaints of favoritism and political influence, with supporters of the governing National Party getting the Bonos while others are rejected. 

Elections are a month away, and candidates for the National Party were on hand  in La Casa de Cultura in Santa Barbara to help distribute the money. (The party, according to the polls, is in a close fight with the new leftish Libre Party.)

The crowds, the pushing, the struggle to find out if families are eligible have been repeated around the country, La Prensa reported.

That�s not surprising. The Bono provides 10,000 lempiras a year - about $500. It�s paid every four months, so the fortunate families were to get $166.

A labourer might get $5 or $6 a day in Honduras. About 40 per cent of the population have incomes under $1.50 a day. (People do grow their own corn and beans when they have access to land.) 

Police at family home

On average, the Bono represents a 20-per-cent increase in average income for the families. It can be the difference between hunger and enough to eat or a child who stays in school or gets needed medical care.

Fajardo checked her baby when they finally received the Bono, and found she wasn�t breathing. People cleared a path to the door, but the process of handing out the money continued.

"It's sad what happened to this girl,� Matias Pineda, one of the people waiting for a Bono, told La Prensa. �But you have to line up here because there is no work, no land to cultivate, the crime is brutal and you have to go to the politicians because they�re the ones who have the money.�

No one reported the baby�s death. The vice-mayor of Santa Barbara took them to buy a coffin and arranged a ride home. 

But police and prosecutors saw the news story and in today�s paper promised an investigation to see if anyone was negligent - the doctors who discharged the baby, the parents, the event organizers. Nothing will come of it.

Fajardo went back to the hospital to seek medical help. Pineda is looking after the other children, and chalks the whole thing up to God�s will. The Bono delivery program moves onto the next town, with a new set of politicians.

Just another Honduras story.

Lots of words in throne speech, but inequality not one of them

Throne speech wordcloud

Stephen Harper�s throne speech was an amazing 7,240 words long, a modern record and three times as long as the Conservative�s first throne speech.

But not once was inequality mentioned in all those words. That�s particularly striking in a speech that tried to touch on every possible theme that might appeal to a subgroup of voters.

Conservative strategists decided not to mention an issue that 75 per cent of Canadians identified as a problem in a poll last year.

To the Conservatives, growing inequality is not an issue for government.

But it is. 

There�s a myth that increasing inequality is some natural outcome of inevitable economic forces.

That�s false. Government policy changes increase or reduce inequality.

Taxes can redistribute income. Transfer payments  like disability assistance, unemployment or training benefits or pensions, can increase the income of those at the bottom of the pile.

A 2011 Conference Board of Canada report, for example, found that between 1976 and 1994 the tax and transfer system increasingly reduced income inequality.

But after 1994, the trend reversed and the polices increased the income gap. In 1990, for example, about 83 per cent of unemployed people were eligible for EI benefits; by 2009, that was chopped to 48 per cent. That promotes inequality.

Any policy decision has to balance many costs and benefits. But governments that don�t even mention inequality in an epic throne speech aren�t likely to give the issue any real attention.

They should. 

The OECD looked at inequality around the world, and concluded it�s a serious threat. The �social contract� that ensures people accept the state�s laws and responsibilities is at risk of unravelling, the OECD report said, as economic growth enriched a tiny sector of the population. The claims that the benefits would trickle down to others had proved false, the report found.

The Conference Board report cited a study by the Canadian Centre for Policy Alternatives tracking the incomes of the richest one per cent of Canadians using tax return data. 

That group - 246,000 people with an average income was $405,000 - claimed almost one-third of all income growth during the growth years from 1998 to 2007. One per cent of the population took 33 per cent of income gains.

Government policy played a significant role in ensuring that those people would take the greatest benefit from economic growth in Canada.

Most policies could at least be examined on the basis of whether they increased or reduced inequality.

Earlier this year, the Canadian Institute of Health Information released an analysis of the effect of public health care on inequality. 

Publicly funded health care reduces income equality by 16 per cent, CIHI found.  

People in the highest income group cost the system an average $206,000 over a lifetime. People in the lowest income group, $237,500. (Poverty is the single greatest predictor of poor health.)

And people in the lowest income group paid about $740 (or six per cent of income) in taxes that went to health care/ People in the highest income group paid $7,200 (or eight per cent  of income).

End or the public health care system, and the rich get richer and the poor get poorer (and sicker). 

So when people argue for reduced public health care, they should at least have to defend the increased inequality that would result.

There is an implicit deal that keeps people participating as responsible citizens.

They pay taxes and obey the rules and rely on the political process. They expect in return that government reflects their interests and values. They know there are no guarantees of success, but they expect the game is rigged so those at the top are always the big winners.

When governments don�t even acknowledge inequality, they threaten the social contract that makes the country work.

Government 'easing' us into letting U.S. agents work in Canada

Yahoo reports the Harper government is moving forward with plans to give U.S. FBI and DEA agents the right to operate in Canada.

The news service cites an article in Embassy Magazine (behind a paywall), that quotes a senior RCMP officer involved saying the government is moving in �baby steps� to prevent Canadians from being alarmed.

"We recognized early that this approach would raise concerns about sovereignty, of privacy, and civil liberties of Canadians," Chief Superintendent Joe Oliver told the Senate Committee on National Security and Defence on May 14. Oliver is the RCMP director general for border integrity,

"We said 'Let's take baby steps, let's start with two agencies to test the concept, let's demonstrate to Canadians and Americans that such an approach might work.�"

So the DEA and the FBI were the pilots, and the �baby steps� include the Shiprider program that lets U.S. agents act as police in Canadian waters.

Broader U.S. action in Canada, including aerial surveillance, is being considered, the article says. (No word whether the access will be reciprocal - if Canadian police will be allowed to operate in the U.S.)

Which brought to mind this column from 2002. 

U.S. DEA agents had conducted an illegal operation in Canada, a B.C. Supreme Court ruling found. �The illegal conduct is extremely offensive because of the violation of Canadian sovereignty without explanation or apology," the justice wrote. 

Which establishes that the agents are already operating in Canada. And suggests that they won�t be much bothered to operate under Canadian law when as they are given a broader and broader role.

There are already a full range of agreements that let U.S. police forces operate in Canada in co-operation with Canadian authorities. There is no need to expand their role and, as the judgment shows, good reason to be wary. Even of �baby steps.�

The column, versions of which ran in the Vancouver Sun and papers around the province, is below. The lack of reaction or concern in the wake of the court�s finding was discouraging.

Aug. 26, 2002

Ottawa eerily silent on U.S. illegal operation in B.C. 

By Paul Willcocks 

VICTORIA - Maybe they just don't care up in Ottawa that U.S. agents feel free to enter Canada illegally, break our laws and then conceal the evidence from the courts here. 

For a week I've been trying to get someone - anyone - in the federal government to describe Canada's response to a B.C. court ruling that U.S. Drug Enforcement Agency operatives knowingly broke our laws. 

B.C Supreme Court Justice Janice Dillon found the Americans knowingly snuck into Canada, ran an illegal operation and then tried to conceal their activities from the court - a shocking abuse of Canadian law, she called it. "The illegal conduct is extremely offensive because of the violation of Canadian sovereignty without explanation or apology," she wrote. 

Talking to the federal government from B.C. is generally like shouting down a long, hollow tube to a deaf man. 

But Ottawa should have a response when a foreign government walks all over its police and laws, especially when that foreign government is seeking to have more and more of its agents operating in Canada. 

Dillon was ruling on a U.S. bid to extradite Brent 'Dave' Licht to California to face cocaine charges, the end of a saga that wanders a long, winding path from the DEA office in Los Angeles to a White Rock pier. 

The DEA plan originally targeted would-be Canadian cocaine importers. Two paid informants were told to pretend to be Colombian drug dealers in Los Angeles with lots of cocaine to sell. They found some interested buyers, and set off on a trail that led to Vancouver. They wanted to follow that trail across the border. 

The rules governing a DEA operation in Canada are clear. A U.S.-Canada agreement requires the DEA to get RCMP consent. They also needed a special permit from the immigration minister because the undercover agent had a criminal record. 

And they needed approval from the RCMP's top narcotics officer to pretend they had drugs for sale. The tactic is illegal in Canada except under tight controls, because of the risk of injustice. When police approach potential buyers, they may be creating a crime that would never have happened without their instigation 

The Mounties said yes and the phoney dealer and his DEA handler came up. But his efforts bombed; no big drug dealers were discovered. 

The DEA wanted to try again, but the RCMP said no. They had higher priorities. 

The DEA seemed to accept the decision. But a month later one of the undercover agents entered Canada illegally, and ignoring our law and agreements signed by his country, tried to make a drug deal. 

Eventually a pretend deal in California was arranged, with Licht. He wasn't there for the buy, so the U.S. set out to extradite him on conspiracy charges. 

That's what led to Dillon's ruling. The Americans knowingly broke Canadian law and violated international agreements, she found. They conducted an illegal reverse sting operation. They tried to conceal the information from the court. And they never offered any explanation for the illegal acts. (This wasn't some fluke. Documents showed that the RCMP felt pressured to approve the first operation quickly, because they feared that the DEA would just go ahead illegally.) 

I expected a run-around from American officials. But surely the Canadian government would have a response to the damaging findings. 

But it took two days for a spokesman for Justice Minister Martin Cauchon to say he had no comment, although he was considering an appeal - on behalf of the Americans. After more than a week of calls, Solicitor General Lawrence MacAulay's staff still haven't explained whether the case is an aberration, whether it will affect future DEA activities in Canada, how many legal DEA operations are conducted in B.C. - or even whether they've asked the Americans for an accounting for the illegal acts. 

Our law should matter more than that.