How much longer does Postmedia have?

I’m rooting for Postmedia. But the latest quarterly results released Thursday don’t offer much hope for the future of the corporation.

Since the company took over the assets of Canwest in 2010, it has gone from weakness to weakness. The problems aren’t unique to Postmedia, of course. Newspapers and other traditional media are being hammered by a loss of audience and advertising revenues.

Postmedia was slow to accept that reality. And its response has been inadequate.

Basically, the corporate strategy is to cut costs, increase digital revenue and try to get readers to pay more for content, whether it's delivered by print, online or through mobile devices.

But it’s not working.

In the latest report, revenues are down 9.1 per cent for the quarter. That follows declines of 9.6 per cent for the 2013 fiscal year and 7.4 per cent for 2012. 

Since Dec. 1, 2011, revenue has fallen by $181 million.

The company launched a three-year cost-cutting program in July 2012, and reports it has found $98 million in annualized savings. That’s not nearly enough given the revenue drop. But deeper cuts will reduce quality and service and lead to more revenue losses, a vicious cycle that usually ends badly.

The plan to boost digital revenue has flopped. Digital revenue was down in the quarter.

The effort to get people to pay more for content is likewise stalled. Circulation is down more than 11 per cent compared to a year earlier, and price increases have not been enough to increase revenue.

And people have proved reluctant to pay for online content, despite the introduction of paywalls. 

Postmedia claims 140,000 registered online users, but won’t say how many are paying customers and how many are print subscribers who registered for free access.

In any case, only 5,000 new people signed on in the last quarter, or about 500 per paper over the three-month period. That’s not enough.

Postmedia is hoping that a planned relaunch of the print products and new tablet and smartphone subscription options will turn things around, or at least give management some breathing room. 

If they don’t, the corporation’s future is grim. Based on the current trends, Postmedia is a year or two away from facing major problems in coming up with the cash flow to make the required interest and principal payments on its debt. Asset sales might buy a little more time, but they don't change the fundamentals.

Three numbers that will tell the tale for Postmedia

Postmedia will releases its latest quarterly results Thursday.

Here are three numbers that will tell if the company is making any progress toward a viable future.

Revenue: The amount of money the company takes in has been plunging since Paul Godfrey and hedge funds bought Canwest’s assets. Nothing can save the company unless the freefall is arrested. 

Revenue will still be lower than the previous year, but unless the rate of decline slows to five per cent or lower, there is little hope.

Digital revenue: Postmedia’s digital strategies have fizzled, and managers have come and gone. The company needs to show some sort of digital revenue growth - at least four per cent.

Digital subscribers: A key element of the corporation’s strategy is getting readers to pay more for the content. It hopes tablet editions will help, but the current indicator is digital subscribers. Last quarter, Postmedia said 135,000 people have registered for access to newspaper websites. But it refuses to say how many are paying customers, and how many are subscribers registering for free access.

If the strategy is working, that number should increase to at least 150,000.

The quarterly will present information on cost-cutting and restructuring. But revenue losses - 17 per cent in the last two fiscal years - have far outstripped expense reductions. 

Unless the company can find a way at least to slow the loss of revenue, its future is bleak.

BC Liberal's executive director refuse to answer questions in Ontario police investigation

No one has to co-operate with the police when they’re investigating a possible crime. You’re free to tell the officers that you have no interest in helping them and won't say a word.

But not if you’re a politician or political operative who hopes to be credible and trusted.

Laura Miller, the executive director of the BC Liberal Party, has refused to meet with police officers from Ontario’s anti-racket squad to answer questions. Police believe she could help with their investigation of breach of trust in an alleged high-level illegal coverup in the office of former premier Dalton McGuinty, where she was deputy chief of staff.

The investigation is focused on David Livingstone, Miller’s boss. Police believe Miller’s partner was enlisted to go through the computers of everyone in the premier’s office and illegally delete documents relating to the Liberal’s pre-election decision to kill two gas-powered power plants - one partially built - that might have cost it swing seats. The decision cost Ontario taxpayers more than $1 billion in sunk costs and compensation for the companies involved. (The story is complex - a good summary is here.) 

Serious stuff. If the truth had been known before the 2011 election, the outcome might have been different. 

McGuinty resigned, Miller moved on to help with Christy Clark’s election campaign and was then hired to run the BC Liberal Party.

And now, according to Gary Dimmock’s excellent coverage in the Ottawa Citizen, Miller is refusing to be interviewed by police.

That’s a citizen’s right. But politicians and political parties make a big deal about believing in the justice system, supporting and police and helping them keep communities safer by co-operating in crime investigations.

When the most senior party staffer refuses to sit down answer questions, that all is revealed to be hypocritical rubbish. We want you ordinary people to co-operate wth police, Clark and company are saying. We’ll act in our own self-interest.

And it raises serious questions. Why, exactly, is Miller refusing to answer questions about what she knows? What does Christy Clark think about the party executive director’s refusal to co-operate with an extremely serious police investigation?

And what does that say about Miller’s attitude toward accountability and the law in her B.C. job?

Norman Spector has been asking why Miller’s refusal hasn’t been covered in B.C. media. It’s a good question.

So long, Copan Ruinas, and thanks

We’ve been counting down the lasts for a while now. 

The last four-hour bus trip home from San Pedro Sula a week ago. Last trip to the pool with the kids from Angelitos, the care home/orphanage we’ve been helping out, on Sunday. Last concept note for Cuso International. Last trip up the hill for a $1.25 haircut yesterday. Last boiling up of three pounds of chicken menudo for the dogs. (The slogan should be ‘now with more chicken feet.’)

It’s not much fun. Partly, it’s just stressful trying to pack up life in Copan Ruinas after more than two years, cram our stuff into two backpacks and big suitcase and head off to who-knows-what in Canada. (Lugging along an accordion and a dog.)

And partly there is a sense of unfinished business. 

My partner Jody and I have been Cuso International volunteers here, placed with local development agencies and tasked with ‘building capacity’ in communications. I’ve spent a lot of time on interesting projects for the Cuso Honduran office as well.

It is a great experience. We’re living in Honduras, experiencing life in an entirely different culture, discovering the challenges of life in a poor, unequal and largely dysfunctional country. It’s year-round summer, and life is lived - loudly - on the street. Or it might as well be, as every house in our neighbourhood is built right to the street and windows are always open. I can pretty much sing along with one neighbours music choices by now. 

And it’s not like visiting. 

We know the neighbours and the people in the market stalls. We’ve been through the afternoon rains, and the April heat, and had a chance to see how people live in a poor country. We ride the buses and cope with the power failures and, as we’re paid stipends equivalent to Hondurans doing similar work, pay attention to what things cost. I’ve been touched by how genuinely sad some people are to learn we are leaving.

Which, I suppose, is one reason I have a sense of unfinished business. It takes time to become more than a visitor, and to be an effective contributor in the important work Cuso International and its partners are doing. After two years, I’m much more useful and understand much more. And as a result I wonder how much more could be done with more time.

And any time of leaving is, for me, a time of regrets. I was walking White Dog, who is going to Canada, and Crazy Pup, who is not, today and noticed a path heading up into the hills east of town that I hadn’t seen before. There are a lot of paths not walked.

I’ll be glad to tick off some of the lasts. Sometime before Monday morning at 7 a.m. we will have the last power failure, and the last resulting loss of Internet service. And at some point, I will utter a last frustrated complaint about the creeping pace of web access when it does work.

And I’ll read the last story in a Honduran newspaper that leaves me baffled at how things could be so messed up. (The current contender is a La Prensa piece yesterday on a public school in La Moskitia that offers its 610 students one diploma program, in technology and computer skills. The area has no reliable electricity and almost no opportunities in computer work. And in any case, the school hasn’t had any actual working computers for students since it opened seven years ago. Miraculously, hopeful students keep showing up.)

Leavings always seem to come in a rush of farewells and hurried preparations, with too little time to think much about all that’s left behind. I’m writing this perched one of two plastic chairs that are our remaining furniture, with clothes spilling out of the half-packed bags on the floor. We’ve got a couple of steaks to fry up for dinner, two plates and two knives and forks. 

Maybe the rush is a good thing. There will be time to figure out what all this lasts mean when we’re settled, for a while, in Canada.

Five questions about the Leslie moving expense furor

Former Canadian Forces lieutenant-general Andrew Leslie - and federal Liberal advisor and prospective star candidate - is being attacked by the Harper Conservatives for claiming $72,000 in retirement moving expenses under a policy that applies to RCMP officers and the military.

The Intended Place of Residence policy covers retiring Mounties and military personnel for one last move after they retire. The idea is that if you end your career in Newfoundland, but want to move back to be closer to your grandkids in Saskatoon, the government will pick up the cost. It’s a reward for accepting a series of transfers over the course of a career.

But the Leslie case raises some questions.

1) Was the information about Leslie’s expenses a political smear engineered by the Conservatives? CTV News broke the story, saying it had “obtained” documents on the moving expenses. But the TV network did not say how it got the documents, or from whom. That should be part of the story.

2) Is the Conservative government suggesting its policy should be changed, and the costs of a last move should not be covered by taxpayers? If so, why has the change not been made over the eight years the Conservatives have governed?

3) What was Leslie thinking? Just because the benefit is in place doesn’t mean you need to claim it. Leslie was highly paid, over $250,000 a year, and retiring on a pension that most Canadians could only dream about. He decided he wanted a different house in Ottawa. Why did he choose to have taxpayers pick up the costs - moving fees, real estate commissions, property transfer taxes - for what was a personal choice?

4) How much is the policy costing taxpayers? About 3,500 Mounties and Canadian Forces employees are retiring each year.

5) And given that volume, why hasn’t the federal government negotiated a better deal? The largest chunk of Leslie’s expenses were real estate fees. Surely the government, with thousands of moves a year, could get a better deal on real estate commissions.

Honduras seizes 'crime zoo,' animals go hungry

Back in September the Honduran government started seizing the assets of Los Cachiros, an alleged drug and crime organization. The $500 million in seizures included a zoo and resort business the organization had established between San Pedro Sula and Tegucigalpa. We had meant to go; the TripAdvisor reviews were pretty good.

Uh-oh, I thought, when news of the seizure broke. Those animals were a lot better off in a zoo owned by narcos than one run by the Honduran government, which has demonstrated a consistent lack of competence in almost everything it touches.

Sadly, that seems to be true. La Tribuna reports today that the government agency responsible for seizures has fumbled around with the zoo, with no one consistently responsible. (A Google translate version of the story is here.)

The only money available to feed the animals and maintain the zoo comes from park revenues, which have fallen because there is no advertising or promotion, many people think it was closed after the seizure and it is not being maintained.

The current revenue isn’t enough to cover food and vet care for the animals - tigers, giraffes, zebras and a collection of animals native to Central America.

The government could have put in a trustee to manage the zoo, with a budget to run the business and look after the animals. Or it could have hired a competent management company on contract. Instead there has been a succession of people within government responsible. 

That’s not just bad for the animals. The zoo and resort provided jobs and economic activity in the region. As the government bungles its management, those will be lost.

The seizures from Los Cachiros were co-ordinated with the U.S. government, which had targeted the family-based group under the “Kingpin Act” aimed at foreign crime groups.

The zoo’s struggles raise questions about government management of other assets on the U.S. hit list and apparently seized, like African palm plantations, cattle ranches, hotels and mining and roadbuilding companies.

Grimmer news for League Investors - some $355 million of their money gone

The news keep getting worse for investors in Victoria-based League Assets. And the financial disaster is still not getting adequate media coverage.

Back in November, I predicted massive losses for the investors League, which promised investors security and great returns through real estate investments.

Based on the latest filings from PWC, the news is even worse than I expected.

League Assets, the creation of Adam Gant and Emanuel Arruda, is broke and filed for protection under the Companies’ Creditors Arrangement Act. PWC is being paid to manage the mess.

The best estimate, in November, was that League’s properties could be sold off and net $227 million.

But there are $186 million in mortgages, PWC reported in its latest filing, and $6.3 million owed on outstanding property taxes and liens. They get paid first.

Some 460 trade creditors are owed $19.5 million. They get paid next.

Which leaves about $15 million for League’s investors, who entrusted the fund with $370 million of their money - retirement savings, money set aside for children’s education and the like.

There are 4,280 investment accounts, which means an average investment of about $86,000. Blogger Rachel Berube has 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. 

Based on the PWC reports, those investors will be lucky to get back four cents on the dollar. A typical $86,000 investment entrusted to League will be reduced to about $3,400.

It’s extraordinary. Investors put $370 million into League based on promises, and now $15 million is left. 

Money doesn’t disappear, and many creditors are asking where the missing $355 million has ended up.

Honduras: The new president gets a lavish swearing-in

There’s a certain over-the-top, bread and circuses aspect to tomorrow’s ceremonies for the swearing in of the new president of Honduras.

Especially for a country that is, effectively, broke, with desperate unmet needs.

The government has given all employees a half day off, in case they want to attend the ceremony or watch it on TV. A fleet of 450 buses has also been lined up to bring people from around the country.

The national stadium in Tegicugalpa, the venue for the big event, is being repainted, and beginning Sunday night the roads in a wide area around the stadium will be closed to traffic.

And 8,000 police - 4,000 of the new military police and 4,000 regular officers - were pulled from duty beginning Saturday to prepare security for Monday’s event. They will set up a series of security cordons and guard the hotels where representatives from some 60 countries will be staying (including Canada).

It’s a far cry from the Canadian process where the new prime minister and his cabinet are sworn in, there are some photo-ops and a cocktail party for party supporters, and everyone gets back to work.

You could argue, I suppose, that all the spending and pomp and pageantry are a legitimate celebration of democracy in a country still scarred by the 2009 coup. The November elections, while flawed, where the second since the widely criticized post-coup elections.

Or alternately you could argue that the giant public event is in effect a victory celebration for the National party, which succeeded in capturing the presidency and a plurality of congressional seats, designed in part to reinforce the power of President Juan Orlando Hernandez.

Mostly though, you have to wonder about the lavish spending on a spectacle at a time when hospitals go without medicine and the government has claimed an urgent need to cut spending.

The strange obsession with school uniforms in Honduras

I’ve come up with a clever, no-cost way to reduce poverty and increase school attendance in Honduras.

Get rid of school uniforms.

The uniforms - white dress shirts, navy blue pants or skirt, black shoes and white socks - are mandatory in public schools. Teachers are quite crabby about it, to the point of telling kids to stay home if they aren’t dressed in the right kit.

No desks, but kids better have uniforms

For many parents, the costs are huge. Some children don’t go to school because they don’t have the right clothes.

It’s getting worse. The government’s latest tax increases took the sales tax from 12 per cent to 15 per cent. It also applied the tax to items that had been exempt - including school uniforms.

La Prensa reported on the issue this week, and quoted typical prices for school uniforms - $6.50 for pants, $7 for shirts, $12 for leather shoes. (Which, based on the experience outfitting the Angelitos kids, will last about as long as you would expect a pair of $12 shoes to last.)

So, figuring two sets of clothes (one to wash) and three school-age kids, estimate $120 for the uniforms. That’s before backpacks, notebooks and all the other things on the mandatory supply list that teachers send home.

That’s a lot of money in a country where 74 per cent of the population lives in poverty and 47 per cent in extreme poverty. 

We’re acquainted with a woman with two school-age children, and little steady employment. She worked for 12 hours cleaning and plucking chickens one day this week, and was paid $5. 

That’s not atypical. For her, school uniforms and supplies and the fees levied through the year are a huge challenge.

Get rid of the uniforms, and poor families have more money to spend on things they need and one less reason to keep children home from school.

I can’t think of any good argument for the uniforms. It’s not as if poor children will be singled out for having bad clothes. Almost everyone is poor. (And people with any money send their children to private schools.)

And blurring individual differences isn’t necessarily such a great idea. 

In fact, Honduran schools would do well to put a lot more emphasis on individuality and creativity and a lot less on rote learning. 

Schools are generally dismal. An international test of math and science knowledge in 45 countries found Honduran students ranked at the bottom, with South Africa and Botswana.

Children here aren’t less intelligent. But they don’t learn much, for a variety of reasons. In the U.S., 68 per cent of students performed at the intermediate level in the math tests; in Chile, 23 per cent. In Honduras, four per cent. When one in 25 students is doing OK in math, a country has a bleak future.

I admit to a strong anti-uniform bias. I went to public schools, but did my final year in a Quebec public high school where grey flannels, white shirt, tie and blazer were required. The pants itched. The costume had nothing to do with our education. It seemed mostly like a chance for those with power to demonstrate it by telling other people what they must wear. 

Letting Honduran kids come to school in whatever they have to wear simply makes sense. Any barrier to education hurts kids, families and the country. And uniforms are a barrier.

The other interesting aspect is that Honduran parents put up with all this. They don’t, generally, show up at the school and insist that their children be allowed to attend in flip flops instead of leather shoes. They don’t demand better from the schools. The failure rate is extremely high, but parents don’t demand to know why their children didn’t learn enough to advance to the next grade. 

My hope is that Paul’s Law will abolish school uniforms in Honduras. My best guess is that parents would save more than $40 million a year, with most of the benefits going to poor families. More children would be in school.

And a small blow would be struck to the culture of conformismo.

Another bad quarter for Postmedia, and a plan that's not working

The latest grim quarterly report from Postmedia sharpens questions about the company’s future.

Continuing declines in revenue and circulation are too great to be solved by the company’s current approach.

The corporate strategy is straightforward. Cut costs, find ways to get readers to pay more, in part through innovations like tablet editions, and convince advertisers that they should pay more for more effective ads.

It might work, if revenue was not continuing to vanish at such an amazing rate. 

Revenue fell 8.4 per cent compared to the same quarter a year earlier, or $17.7 million. Print revenue - the largest category - was down 12.2 per cent.

Revenues have been eroding for two years - down 7.4 per cent in the 2012 fiscal year and 9.6 per cent in the 2013 year. Print revenues were down 10.3 per cent and 13.4 per cent in the same two years.

Based on the first quarter results of this fiscal year, which ended last Nov. 30, the decline isn’t slowing in any significant way.

That highlights the problems with Postmedia’s strategy.

Cost-cutting can only work if revenues, at some point, stabilize. Otherwise, it’s an endless process of cuts that weaken the quality of the products and services and lead to more revenue losses and more cuts.

In the quarter, Postmedia revenue dropped $17.7 million, but its operating expenses, despite the major cost-cutting initiative and falling circulation, were only reduced by $13.7 million.

The corporation launched its cost-cutting ”Transformation Program” in July 2012, with a target of $102 million to $135 million in annualized savings within three years.

But since Dec. 1, 2011, revenue has fallen by $165 million. The expense-reduction program goals are far short of what’s needed. And the gap looks to keep growing.

New revenue generation initiatives haven’t worked either. Postmedia was enthusiastic about increasing digital revenues for a while, but they actually fell 5.1 per cent in the quarter.

And the plans to increase the number of people reading and paying for digital products have been slow to show results. Postmedia said 135,000 people have registered to access the newspaper websites, now paywall protected. But it won’t say how many are paying customers and how many receive free access as subscribers. Digital circulation revenue is up only $300,000 over a year earlier, a suggestion that few new paying customers are signing up.

And at the same time, print circulation was down 13.4 per cent over the previous year. Price increases offset the loss in customers, but prices can’t keep rising indefinitely.

It’s another grim quarter. Postmedia needed to show that the revenue declines were at least slowing significantly. That would have given hope.

As it is, unless the corporation comes up with a more effective, bolder strategy, and a much faster rollout, the future looks bleak.

(For earlier posts on Postmedia, see here and here.)

Tax increases in Honduras, and linking aid to fair, effective tax policies

Taxes are big news in Honduras, as the outgoing Congress pushes through a bunch of last-minute increases.

The Congress is controlled by the National party, which won the November election. The increases are a way to get the unpopular deeds done before the new president takes over in two weeks.

It doesn’t look much like good governance, mostly because there are apparently no studies of the impact of the increases, or whether they are the best way to raise more revenue.

Taxed into poverty?

I was going to write about the increases anyway, but a Guardian blog post this week added an interesting element by arguing that donor countries should cut aid to at least some countries with lousy tax policies. (I’ve become a bit of a development geek, after two years as a Cuso International volunteer. The issues are complex, interesting and important.)

The blog post, by Kieran Holmes, is based on a British Commons committee report that recommended chopping aid to Pakistan unless the government started collecting more in taxes from its own people. 

Why should British taxpayers subsidize the government if Pakistan’s citizens - especially the rich - won’t pay up?

It’s an easier argument to make in the case of Pakistan, which is a middle-income country able to find money for a giant military budget, but seeks foreign aid for education and basic services. In poorer countries - like Honduras - an end to aid would mean disaster.

But the principle is interesting.

Honduras collects about 16 per cent of GDP in tax revenue, more than Pakistan but not enough to cover expenses. Government debt is up to 42 per cent of GDP, at high interest rates because there’s a lack of confidence in future repayments. The accepted ceiling seems to be about 35 per cent.

Holmes argues in his blog post that big donors - organizations and governments - should also consider how the tax revenues are raised and whether the system is equitable and supports poverty reduction and development.

The latest round of Honduran increases would not likely meet that test.

The government is already much more dependent on consumption taxes - sales taxes - then taxes on income. Sales taxes were expected to bring in about $1.1 billion last year. Income taxes about $865 million.

That’s out of whack with many countries. In Canada, the government takes in $3.50 in income taxes for every $1 in sales taxes.

And most economists would agree that the dependence on sales taxes serves the interests of the rich. Income taxes are generally progressive - the more an individual or business earns, the more paid in taxes.

Consumption taxes - sales taxes - are at best flat, and often regressive. Low-income people see a higher proportion of their income taken in taxes than the much more affluent. (The Honduran sales tax regime includes exemptions for some necessities - the “canasta basica,” or basket of necessary goods. That theoretically reduces burden on the poor.)

The latest round of tax increases in Honduras increases the burden on the poor and middle class. The basic sales tax rate jumps from 12 per cent to 15 per cent. That’s pushed up the cost of almost all goods and services by about 2.6 per cent. The list of tax exemptions designed to protect low-income consumers was dramatically - and apparently incompetently - trimmed.

The inflation rate was about five per cent before the tax increase. Price increases - including for the buses that people need every day - will make life harder for the poor. (That is to say, for Hondurans. About 74 per cent of the population live in poverty, and 47 per cent in extreme poverty.) 

The leading social watchdog group predicts the tax increases will push another 100,000 people into poverty over the next four years. A spokesman for the government says it’s impossible to predict what will happen as a result of the increases, which serves to show the lack of research on the impact on the economy and families.

It’s all made more confusing because the tax system is a total mess. Tax evasion of all kinds is the norm, with estimates of 20 to 40 per cent of taxes owed going uncollected. There are a huge number of exemptions - fast food restaurants pay no taxes under a tourist-promotion tax break. The tax collection agency doesn’t work, according to the incoming director.

Holmes says funders have a right to push governments toward fair, effective tax systems in return for aid, and the ability to help them achieve those goals.

Based on the tax chaos and unfairness in Honduras, he might have a point.

Gildan, maquillas, model cities and simplistic responses to complex problems

It’s amazing how simple the problems of Honduras seem to some people a few thousand kilometres away.

A handful of slogans, some recycled rhetoric and unsupported claims, and presto, a theory.

A fine example has been the blind libertarian enthusiasm for a plan to create “model cities” in Honduras, effectively independent fiefdoms, run, at least initially, by the investors.

Another was offered in a recent Internet opinion piece on Canadian textile company Gildan’s manufacturing centres in Honduras.

The 20,000 employees, the piece said, “are basically slaves, and their status will likely remain unchanged, or get worse.”

“With a growing number of U.S. military bases of occupation, and the murderous dictatorship of Juan Orlando Hernandez solidified, profits are basically guaranteed for transnational sweatshops in what is essentially a state-sanctioned Slaver's paradise,” the writer maintains.

It’s a good example of a failure to look seriously and critically at a challenging issue.

There are legitimate concerns about working conditions and the barriers to effective union representation at Gildan and other employers in Hondura’s maquilla sector, where tax-free status and other incentives have lured foreign workers.

There is also recognition that the 130,000 jobs are desperately needed and that labour standards and pay both good by Hondurans standards.

The minimum wage for maquilla workers is about $270 a month. That’s not rich, but by comparison, agriculture workers are paid $120 to $180 a month, and work six days a week.

And Gildan employees actually get the minimum wage. Between 70 and 85 per cent of Honduran workers don’t receive the legislated minimum wages. Many, including public sector workers, frequently don’t get paid at all. It’s common for employers to say sorry, not enough money this week.

The article paints a grim and unsupported picture of working conditions, too.

“By age 25, chronic work injuries, coupled with poor medical treatment, often prevent workers from performing their fast-paced tasks,” it reports. “Worse still, once a worker leaves Gildan, she is likely to have irreversible health problems which preclude her from finding alternate employment. Some women need crutches to walk; others can't hold their babies or do housework.”

It would be helpful to let readers know what “often” means in the first sentence, and what the source is for the information. (Hopefully not 'someone from Honduras told me.') 

And is there evidence to show that workers who leave Gildan are all “likely” to be permanently disabled, as the Internet piece claims? 

Workplace improvements are needed. Last year, CODEMUH, a leading women’s rights groups, filed a complaint with the Inter-American Commission on Human Rights because the Honduran government had failed to respond to health and safety issues, citing the cases of 47 women who had received disabling injuries. But there is zero evidence that all workers are “likely” to end up disabled.

I haven’t toured the Gildan plants. Those who have suggest that some improvements could be made and piecework incentives can lead to a focus on production over workplace safety. 

But that, on balance, they are not bad workplaces.

The article also states categorically “Unions are not allowed, collective bargaining is not allowed and human rights are not a concern.”

That’s false. The Gildan operations are unionized and there is bargaining. There are serious problems, including documented examples of intimidation and efforts to thwart union activities by managers. Throughout Honduras, exercising labour rights is an enormous challenge, sometimes met with violence. Those points all needed to be made.

But there have also been tripartite negotiations between the three largest national labour confederations, government and industry on wages and other issues for the entire maquilla sector and there are unions.

Maquillas aren’t an unmixed blessing.

The companies were lured by big tax breaks, including a 10-year total tax holiday. It’s hard to run a government without tax revenues. (Though tax exemptions here are out-of-control. American fast food franchises, owned by rich Hondurans, got a 10-year tax break because they supposedly encourage tourism. Teachers have, inexplicably, a permanent exemption from paying income taxes.)

And there is always the risk that some other country will come up with a better deal and the industry will collapse.

But the issues are complex and deserve serious discussion, not hyperbole.

Calling the workers’ “slaves” is inaccurate and insulting. Hondurans make choices about their futures. From a more limited range of options than many - but not all - North Americans enjoy, perhaps, but they are not slaves. 

Calling Juan Orlando a “murderous dictator” is inaccurate. Last month’s elections were flawed, but the consensus of international observers was that the results - at least at the presidential level - were representative. (Nicaraguan President Daniel Ortega was one of the first to congratulate Orlando.)

And the “murderous” allegation is silly. There is violence and impunity in Honduras. In a six-month period before the elections, 18 candidates or organizers from Libre, the left-wing opposition party, were murdered. But in the same period, 11 candidates or organizers from Orlando’s party were murdered. But there is no basis to call the incoming president murderous.

Honduras is a mess. The government is virtually broke, inequality is staggering and 74 per cent of the population live in poverty, with 47 per cent in extreme poverty. The murder rate is the highest in the world and almost all institutions - schools, courts, police, government - don’t really function. 

But Hondurans, ultimately, are going to have to create their own solutions, with international help.

Superficial prescriptions from North America and Europe, of all political stripes, are contributing nothing to the discussion and look much like another form of imperialism.

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.