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 hydroelectric sources.
The neoliberal 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 emphasized road infrastructure to the virtual exclusion of all other options. A typically shortsighted decision of Nicaragua's Chamorro government in the 1990s was to rip up rail track linking the country's capital with 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 increase 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 neoliberal 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 because 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 extremely fine.
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 bugaboo Venezuela similar to the recent Petrocaribe agreement between Venezuela and its Caribbean neighbors.
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 defense 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 premised on increased urbanization and low energy costs. Rational public policy responses to higher energy costs will resist greater concentrations of people in large urban centers and tend to promote sustainable small and medium sized energy-consuming economic activity 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 recognize 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 20 and 21, 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 defense 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-honored, 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 is ready to go on indefinitely suffering deepening poverty out of fear of US government reprisals.
toni solo is an activist based in Central America. He can be reach via: www.tonisolo.net.
Other Articles by toni
Other Articles by toni solo