In Central America the relentless
upward trend in oil prices is provoking crisis in the parts of the
region's electrical energy system dependent on oil. Panama, Nicaragua
and Honduras are the countries in the region most dependent on oil
imports. Overall Central America sources over 70% of its energy
requirements from oil, imported mostly from Mexico and Venezuela. Only
Costa Rica has made determined efforts to avoid energy dependence on
oil. Its State power company generates over 80% of its electricity from
hydro-electric sources
The neo-liberal privatization craze of the 1990s resulted predictably
in little long-term investment in renewable energy from geo-thermal or
wind generation. Opportunist foreign companies invested in quick and
dirty oil powered generating plants to get a cut of the region's wide
open energy market. The same short term approach to the region's
transport needs has emphasised road infrastructure to the virtual
exclusion of all other options. A typically short-sighted decision of
Nicaragua's Chamorro government in the 1990s was to rip up rail track
linking the country's capital with the the Pacific coast and with Lake
Nicaragua at Granada.
With oil prices trending consistently higher, the failure of the "free
market" to meet the majority of people's fundamental energy and
transport needs becomes plainer almost week by week. But longer term
implications of this crucial fundamental economic reality have yet to
sink in to governments hopelessly trying to follow faith-based "free
market" ideology. Belatedly they may have started to flirt with
renewable energy initiatives like wind-power for electricity generation
or sugar cane derived ethanol for transport fuel, but the budget
arithmetic of oil imports has already overtaken most of the region with
a vengeance.
The strike in Honduras
On September 6th, public transport in the Honduran capital Tegucigalpa
shut down for two days when taxi drivers and bus owners went on strike
in protest at a government imposed 19.7% increase in fuel prices The
government alleged the incease was provoked by Katrina-related damage
to oil and port infrastructure along the US Gulf coast. Most people in
Honduras believed it was shameless profiteering by oil companies
leaning on high-level friendly officials in the Honduran government.
The national daily El Heraldo reported that around 70% of offices and
businesses closed down during the strike.
By Wednesday night the National Assembly was debating measures to
reverse the price hike, voting to do so at the end of the all night
session. So life abruptly returned to normal on the Thursday morning.
But the lightning strike was a sharp reminder to governments throughout
the region that over fifteen years of neo-liberal economic policies
have left ordinary people with no margin to absorb increased costs in
their basic expenditure. The strike was reminiscent of violent protests
earlier in the year in the Nicaraguan capital Managua over a modest
increase in bus fares.
The reason Honduran taxi drivers and bus owners went on strike is
becuase they know their customers cannot afford higher transport costs.
The arithmetic is straightforward. An average family of two working
adults with two school age children commonly have a total income of
US$200 or so a month. That family would typically have to pay ten bus
fares every day to get to and from school and work. For them an
increase of just US$0.05 cents in bus fare means an extra US$0.50 cents
a day in transport costs, or around US$12 extra on transport per month.
So the margins people live on are extrenely fine.
Wider implications
Given that reality, continuing upward trends in the international oil
price imply sharp rises in ordinary people's direct living costs via
transport and electricity increases. The trends also mean indirect
price increases across the board as businesses of all kinds try to
maintain profit margins. Governments in the region are currently all
run by opportunists committed to obeying the wishes of the United
States government. An obvious medium term response to the crisis would
be to work out preferential arrangements with US bug-a-boo Venezuela
similar to the recent Petrocaribe agreement between Venezuela and its
Caribbean neighbours.
Deteriorating relations between the US and Venezuela make such a
rapprochement awkward for US allies in the region. (Although in this
context it is worth noting that Cuba has hundreds of doctors working in
Honduras covering rural areas Honduran doctors are unwilling to serve.)
It is undeniable that the United States can offer its Central American
allies little help with their energy costs. Venezuela can. Regional
governments may well begin to exploit that contradiction as the radical
failure of counter-productive "free market" policies leave large
majorities of their people ever more ready to rebel in defence of basic
living standards.
Another little noted impact of upward trending oil prices is that they
will show up even more the disadvantages and irrelevance of the Central
American Free Trade Agreement (CAFTA) and the grand designs of regional
infrastructure schemes like Plan Puebla Panama for the majority of
people in the region. CAFTA and Plan Puebla Panama are premissed on
increased urbanization and low energy costs. Rational public policy
responses to higher energy costs will resist greater concentrations of
people in large urban centres and tend to promote sustainable small and
medium sized energy-consuming economic activitiy in small towns and
rural areas.
Strikes and power cuts in Nicaragua
No one has really worked out the political consequences resulting from
conflict between discredited, bogus "free market" ideology and the
obvious economic and environmental reality. Regional left wing
opposition movements often seem unable to recognise the depth of the
changes already well in the making. Nonetheless, they are likely to
benefit politically from their historical solidarity with urban and
rural workers and their families. Self-evidently, their traditional
class identification gives them elements of a workable social and
political settlement for the region's poor majority unavailable to
local oligarchies.
Currently, Nicaragua offers a clear example of that. On September 20th
and 21st, the capital Managua was again shut down by striking transport
workers as it was earlier this year. But the latest strike took place
in the context of power cuts caused by Spanish multinational Union
Fenosa's failure to pay the generating companies, its suppliers. Union
Fenosa blames the government, arguing it needs to increase prices to
stay in business in Nicaragua. The government blames the National
Assembly for refusing to ratify presidential decrees authorizing a
price hike. The Sandinista opposition has sought to balance defence of
ordinary people's living standards with workable measures to keep
lights and refrigeration on and the buses running.
The energy crisis in Nicaragua has merged with the country's continuing
political crisis. Paradoxically, the resulting confusion has sharpened
the clarity of wider conflicts facing the region. For whose benefit is
government - for the poor majority or for foreign corporations and the
wealthy few? Who runs public policy - the United States embassy and the
international financial institutions or sovereign governments
representing the interests of their peoples? The energy crisis will put
pressure on the region's political structures unprecedented since the
end of open armed conflict in the early 1990s.
Those structures are unlikely to survive the stress of the developing
energy crisis unaltered, although this year's election in Honduras will
no doubt follow the usual time-honoured, meaningless Punch-and-Judy
format. By contrast, next year's election in Nicaragua should have a
more decisive regional significance. US diplomats and politicians are
already engaging in relentless interventionist blackmail to undermine
support for the Sandinistas. The election in Nicaragua will give a
clear signal whether or not the poor majority are ready to go on
indefinitely suffering deepening poverty out of fear of US government
reprisals.