At the time of the 2009 US-backed coup, Honduras had $2.48 billion in external debt. Now it has $9.25 billion. New leftist President Xiomara Castro says this odious debt is unpayable. It already eats up 50% of the government budget.
This graph does not include Honduras’ massive internal debt.
“After 12 years of dictatorship the amount of internal debt increased from 20 billion lempiras (USD $810 million) to 179 billion lempiras (USD $7.3 billion),” Castro said in her inauguration speech.
“With these figures it is clear that the state does not have the capacity to sustain the outrageous and shameful debt that we are inheriting,” the new Honduran president added. “It is practically impossible to meet the debt requirements.”
Castro said the only way to manage the debt is to renegotiate it with the creditors.
“My government will not continue the vortex of plunder that has condemned generations of youth to pay the debt they took on behind their backs,” she declared.
“The country should know what they did with the money and where are the $20 billion that they took out in loans.”
The new Honduran president warned that this “plunder” caused poverty to increase by 74%, “turning us into the poorest country in Latin America.”
“This statistic itself explains the [migrant] caravan of thousands of people looking for opportunities,” she said.
Debt traps ensnare Argentina, Puerto Rico, Greece
Other countries in Latin America have been caught in these same kinds of debt traps.
In 2018, Argentina’s right-wing President Mauricio Macri took the largest loan in the history of the International Monetary Fund (IMF): $57.1 billion.
This enormous debt incurred by Macri pushed the subsequent center-left government of President Alberto Fernández into a debt spiral that has made it very difficult to spend on social programs.
The IMF, which is dominated by the United States, and is used as an economic weapon to advance Washington’s foreign-policy agenda, has often trapped Global South nations in unpayable debt.
The IMF uses this debt as leverage to force countries to sell off their natural resources, privatize state-owned enterprises, slash social spending, and cut labor protections that challenge the interests of foreign corporations.
Puerto Rico, a US colony, also suffers from painful odious debt. The US government used this debt burden to impose an unelected Financial Oversight and Management Board that controls Puerto Rico’s spending, and has imposed devastating austerity measures on the Puerto Rican people.
Even Greece, a member of the European Union, has similarly been crushed under the weight of odious debt. While Greeks work the most hours in Europe, economics experts have said the country’s debt is impossible to pay off.
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