Honduras

Inequality has decreased in Latin America. But not so in Honduras. Klasen, Otter and Villalobos examine this in the new paper (February 2012): The dynamics of inequality change in a highly dualistic economy: Honduras, 1991-2007.

Using annual household surveys, we document first rising inequality between 1991-2005, which is followed by falling inequality thereafter.

According to the authors, the driving force behind this was the overvaluation of the currency that affected agricultural exports from rural areas where 80% of the extremely poor live [coffee during the 1990s and bananas during the 2000s]. The other factor was the "poor commodity process for Honduras’ agricultural exports." On the other hand, inequality  decreased in Honduras from 2005 to 2007 due mainly to a commodity boom and remittances [government social transfers played a small role].  
Cornia (January 2012) argues that inequality has decreased in LA because of: 

. . . [a] drop in the skill premium following a rapid expansion of secondary education, and the adoption of a new development model by a growing number of left-of-centre governments which emphasizes fiscally-prudent but more equitable macroeconomic, tax, social expenditure and labour policies.

Cornia claims:

For the region as a whole, improvements in terms of trade, migrant remittances, FDI and world growth played a less important role than expected although their impact was perceptible in countries where such transactions were sizable.

 HT: Catalina Granda Carvajal.

In Honduras, a Catastrophe Long Foretold

Mark Ungar claims in a  NYT article referring to the recent fire in a prison in Honduras:

With more than 80 homicides per 100,000 people (compared to about 5 in the United States), Honduras has the world’s highest official homicide rate, according to the United Nations. The country is saturated by gang violence. Drug traffickers control many of the state agencies responsible for fighting the gangs, as well as the territory of the country’s six northern states.

The fire in the prison that killed more than 300 inmates is sad and lamentable. Ungar concludes:

 . . . [C]riminal investigation must be improved so that more cases are brought to court. The abysmally low percentage of violent crimes that actually lead to trials — fewer than 5 percent, by some estimates — can be increased through crime mapping; improving the quality of police reports; and support for citizen initiatives to provide crime statistics.

I would like to see improvements in these areas. However they seem unlikely because as the author argues "Drug traffickers control many of the state agencies . . ." 

It is interesting that the author does not mention in the article that drug trafficking is driven by the drugs demand in the US. 

The economic incentives for drug trafficking are so high that probably the only long term solution is drug legalization in the region. Of course this is a complex issue, especially when one thinks about how to legalize it, what to legalize, etc. 

It was a step in the right direction when the president of Guatemala said he wanted to make drugs legal in the region. The topic of drug legalization used to be a taboo in Guatemala, for example. Nowadays however more and more people are looking at it as one of the few ways out, if not the only one [I was against legalization in the past but the death toll is just too high]. When one looks at the literature on drug prohibition and violence the conclusion is very clear. In previous post on the link between drugs and violence I have looked at some research and commentaries. For example:

[i]ncreasing drug law enforcement is unlikely to reduce drug market violence.

The war on drugs increases drug-trade related violence. 

The fundamental problem is that drugs are illegal.