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.