Good morning, everybody.
As was already mentioned, my name is Karen Spring and I'm a representative of the Honduras Solidarity Network, which is a network of over 20 organizations from across the United States. We've been working in Honduras since 2009, and our most recent project in Honduras was organizing a delegation of 170 electoral observers for the November 2013 elections. I've been working in Honduras since 2009, and I've spent the majority of the last five years living there as well.
Today, I'm going to speak a little bit about the human rights context in Honduras, and specifically, the human rights context in its relation to Canada's economic interests in the country and the sectors that may be most impacted by the free trade agreement.
Since 2009, the violence in Honduras has increased pretty dramatically, and coupled with a high impunity rate, this has been very troubling for the human rights situation in the country. Very few crimes are investigated, and even fewer are brought before a judge. The Honduran Supreme Court has estimated that the impunity rate is at about 98%, but depending on who you ask, I've heard the impunity rate can be between 80% and up to 98%.
So, given the high impunity rate, it's really difficult for human rights concerns to be mediated, and there are really serious repercussions for human rights abuses related to Canadian investments in the region as a result of the high impunity rate.
I'm going to speak a little bit about the three major Canadian interests in Honduras.
The first one is textiles. Textiles are a major import from Honduras. The textile industry largely employs Honduran women, and there are Canadian-owned factories in Honduras that are located primarily in export-processing zones. When I speak about the apparel and textile industry, I'm more likely referring to Gildan, which is a Canadian company operating in Honduras.
Many of their factories are located in export-processing zones, and they're actually exempt from paying any taxes to the Honduran government. Within the export-processing zones, sweatshop and textile companies are not required to pay the higher minimum wage. There are two minimum wages in Honduras. So, by law, they're required to pay a lower minimum wage. But often in the case of Gildan's factories in Honduras, wages to workers are not indexed to the minimum wage. Workers are paid by production. What this means is that in order for workers who work in Gildan's factories to make approximately minimum wage, they're required to work four days on, four days off as the work shift. And they're required to conduct 500 dozen of the same operation per day. That would be sewing sleeves on T-shirts 500 dozen times a day in order to make the high production quota that's set by the company. That's in order to make above the minimum wage, which is approximately $192 a month.
So, as I already mentioned, the wages are indexed to production quota, and that requires workers to make a lot of repetitive movements in one work shift. Many women—and I speak about women because I've done my thesis research in women's occupational health concerns in Gildan's factories—are suffering from musculoskeletal disorders as a result of the repetitive movements they're required to make in order to make the production quota.
Gildan has acknowledged this is a problem in their factories, and they have tried to address the problem with an ergonomic program. But even the Fair Labor Association, which went to inspect the factories given the complaints related to the health and safety issues in the factories, have acknowledged that they've failed to incorporate workers' participation in their program, which is often one of the most important aspects of any ergonomic program implemented in any factory setting.
There are currently 30 to 40 Honduran women waiting for medical diagnoses, who indicate that their musculoskeletal disorders are related to their work in the factories. Hundreds more have received medical diagnoses from the Honduran social insurance hospital, indicating that their musculoskeletal disorders were caused by their occupations.
Another major interest of Canada in Honduras is bananas. Obviously, there's a really long history of the banana industry in Honduras, and a long history of land conflicts related to the banana industry in the country.
The two largest banana companies have a lot of land in one of the two most fertile valleys in Honduras and they've contributed to the social conflict related to land problems in Honduras.
I'm going to speak about the most recent serious human rights case related to the banana industry.
The communications director of the federation of banana and agroindustrial unions of Honduras, whose name is José María Martínez, is also a labour journalist who has a national radio program that's called Trade Unionist on Air, which he's had for 19 years, 5 days a week. He's recently been working on a union organizing drive and he makes frequent mention of a Chiquita banana supplier. It's called the Fincas Las Tres Hermanas, which is a banana plantation. Last June he started receiving death threats related to his work. Every time he went on the air and spoke about the Chiquita supplier he received death threats on his phone, and cars were circulating around his house and the radio station after his programs. In January of this year he was still dealing with the intimidation related to his work and so he since had to go into hiding, and he remains in hiding due to fears for his safety and the safety of his family.
Death threats by phone are a quite common scare tactic in Honduras and a lot of people who are speaking out against the banana industry or major economic interests in the country have very little faith in the institutions that are set up, the Honduran institutions that are required to investigate and to take complaints of this kind. Very few investigations are conducted and the fear that Martínez or people like Martínez face is very real, especially given that since 2009, 31 trade unionists have been murdered in Honduras and over 33 journalists as well.
I'm going to talk about the third major Canadian interest in Honduras: tourism.
The Garifuna people on the north coast of Honduras are an Afro-indigenous group and they live in 46 communities along the north coast of Honduras. There is a major Canadian investment in the tourist industry in the northern city called Trujillo. A Canadian man, Randy Jorgensen, has built a cruise ship dock and he's currently constructing gated communities in Trujillo. Where he's constructing his projects, the cruise ship dock as well as his gated communities, he's obtained the land by illegally purchasing the land through the municipality of Trujillo. All the land that he's purchased is inside the land title that's collectively owned by the Garifuna communities. The land title dates back to 1901. The Garifuna, in his purchasing of their land, obviously were never consulted, and this is mandated by Honduran law because Honduras is a signatory to the International Labour Organization's convention number 169, which requires free, prior, and informed consent before projects are started on indigenous territory. The two communities that are most impacted by this tourist investment put forward a legal complaint in 2011 regarding the illegal land purchases conducted by Jorgensen within their community land title, and to this day here has been no response from the Honduran state to mediate these conflicts.
As I mentioned before, land conflicts are quite a prevalent issue related to human rights issues in the country. Very close to Trujillo, where this cruise ship project is being built or is actually already constructed, there is a land conflict in the Aguán Valley where over 130 peasant farmers have been killed since 2009. Human Rights Watch recently put out a report regarding the Aguán Valley indicating that public prosecutors, police, and military officials have failed to carry out proper and thorough investigations of the human rights abuses related to the land conflict. In examining the issues in the Aguán Valley and the murders of the peasant farmers since 2009, many activists and Honduran human rights organizations have concluded that there is a significant political interest or political relation to a lot of killings and the assassinations, disappearances, and torturing of the peasant farmers and the leaders who have been killed since 2009.
In closing, I'd like to talk a little bit about the violence surrounding the elections and the context in which the November 2013 elections occurred.
The 2013 elections occurred in a really difficult human rights context, given the high impunity rate, given the high homicide rate. There was a report put out that looked at the political killings in Honduras a year and a half prior to the November 2013 elections, and it showed that there were 36 killings in total of candidates and pre-candidates who were set to participate in the November elections. There were 24 armed attacks against these candidates.
The list shows that the majority of these killings were against the political opposition party, the Libre party. This list was published by Rights Action, and later, a lot of the cases were actually published by the International Federation of Human Rights, and the federation also indicated it was worried about the targeted assassinations of the political opposition in the lead-up to the elections.
So in general there are a lot of human rights violations that are associated with Canadian economic interests in the region, and there's really no way of mediating these issues, given the high impunity rate.
I think I will end there and leave the rest of the time for questions.
On behalf of PEN Canada and the International Human Rights Program at the University of Toronto, Faculty of Law, I want to thank the committee for this opportunity to present on Bill . I will be sharing my time with Tasleem Thawar, the executive director of PEN Canada.
Since 2010, PEN and the International Human Rights Program have worked together to research and report on threats to freedom of expression around the world. This January, we released our latest joint report, which focuses on impunity and violence against journalists in Honduras. I am a researcher for this report and our research included a thorough review of previous work published on the problem of impunity in Honduras, and extensive in-country interviews with journalists, human rights defenders, lawyers, government officials, and other stakeholders.
When we first embarked on this study, we were drawn to Honduras because we were, quite frankly, alarmed at what we were seeing: deadly violence against journalists in a country that until quite recently was not particularly notorious for such threats. Although Honduras has been plagued by violence and high crime rates for several years, the evidence suggests that the sharp increase in violence against journalists cannot simply be ascribed to this trend.
Our report finds that journalists are targeted for their work, and that they are especially vulnerable members of the population. As detailed in our report, freedom of expression in Honduras has suffered serious restrictions since the ouster of President Zelaya in June 2009. These past five years have seen a dramatic erosion in protections for expressive life in Honduras. Journalists are threatened, they're harassed, attacked, and murdered with near impunity, and sometimes in circumstances that strongly suggest the involvement of state agents. This has had a devastating impact on the general state of human rights and the rule of law in the country, since violence against journalists often silences coverage of topics such as corruption, organized crime, drug trafficking, and political reportage. Fearing for their personal safety, many journalists either self-censor or flee the country altogether.
Among the journalists and human rights defenders we spoke with, there is a pervasive sense that they are under threat, and that the state is, at best, unable or unwilling to defend them, or at worst, complicit in the abuses. This general feeling is borne out by the numbers. As our report sets out, only two convictions have been secured in the 38 journalist killings between 2003 and 2013—an impunity rate of 95%.
Investigations by the national police are conducted poorly, if at all. Indeed, the national police is widely acknowledged to be highly corrupt, notwithstanding decades of so called “purification”. When we were in Honduras, the deputy minister of justice and human rights told us that the police officers and police forces suffer from serious institutional problems, including infiltration by organized crime. A representative from an intergovernmental organization told us that his office operates under the assumption that narco-trafficking groups have established links with politicians, the army, and the police.
The taint of corruption and the culture of impunity have undermined trust among state agencies and public confidence in key institutions. Public distrust of the police is so great that only about 20% of crime is reported, and of that, less than 4% gets investigated. According to Honduras's own statistics, less than 1% of all crime in Honduras is subject to a police investigation.
Serious problems are evident throughout the criminal justice system. Police will say an investigation is under way when there is none. The office of the special prosecutor for human rights does not have the jurisdiction to try those responsible for the murders of journalists, and lacks resources to conduct even the most basic of investigations into human rights abuses.
We met with two of the special prosecutors for human rights defenders during our time in Tegucigalpa. One of them, Rosa Seaman, told us that she was personally responsible for 200 cases. However, her office received only enough funding for her salary and a vehicle. She had virtually no investigative resources, no team beyond herself and the other special prosecutor for human rights defenders, no investigative analysts, and no technical capacity to even trace the source of threats sent by email or telephone.
She estimated that realistically, she could only investigate and prosecute about one case per month. That means 12 cases out of the 200 that she is responsible for. Meanwhile, she and the other prosecutor we spoke with also reported being subject to threats for their work in protecting human rights. Therefore, while a special prosecutor for human rights exists on paper and as an institution, its ability to carry out its mandate is seriously compromised by severe underfunding and threats to the safety of the prosecutors themselves.
To be clear: under international law, when the state is unable or unwilling to prosecute crimes, this is state complicity in human rights violations. Honduras is facing a serious human rights crisis. This is not just a matter of working with Honduras to move beyond a troubled past. Violence against journalists, complete collapse of expressive life, and impunity for violent crimes and human rights abuses remain the norm there.
Ms. Thawar will set out why this is important for Canada and our interests in the region.
I thank you for the opportunity to address the committee, and I look forward to your questions.
My name is Tasleem Thawar, and I'm the executive director of PEN Canada. Before I begin, I'll tell you a bit about PEN Canada. We're the Canadian centre of PEN International, the oldest human rights organization in the world, working in more that 100 countries. Though we are active in the international freedom of expression arena—in fact we're just back from Washington, D.C., testifying on Honduras at the Organization of American States Inter-American Commission on Human Rights—we don't often testify on Canadian foreign policy issues. However, as you've heard from Ms. Cheung, the state of freedom of expression in Honduras is deeply concerning. So here we are.
It's also important to point out that PEN Canada has no view on whether Canada should or should not enter into a preferential trade agreement with Honduras. That said, we do feel that bilateral negotiations with Honduras must be informed by the dire situation there and should be used as an opportunity to improve the conditions for freedom of expression. We believe this ought to be a priority for Canada as a major donor to the country and potential future preferential trading partner. A free and independent press is essential to a free and democratic society, rule of law, and combatting corruption. We believe Honduras' dismal record on freedom of expression poses great risk to Canadian companies and to Canada generally.
I have some brief points that I want to emphasize.
First, Honduras is far worse than any of Canada's current trading partners in the region. To give you an idea of the situation in relation to others, in the global press freedom rankings of 191 countries compiled by Freedom House, Canada ranked 29; Chile ranked 64; Peru ranked 89; and even Colombia, also plagued by narco-trafficking, ranked 112. Where did Honduras rank? They ranked 140, tied with Egypt, which has imprisoned two Canadian media workers in the past eight months. Since the coup in 2009, 32 journalists have been murdered in Honduras.
So this agreement should not be business as usual for Canada. When it comes to freedom of expression, this is a country that has performed far worse than its neighbours and Canada's other preferential trading partners.
Second, not only have Honduran institutions failed at protecting basic human rights for its citizens; there is a history of government involvement in these human rights abuses. Our research shows that the state not only failed to investigate crimes against journalists; in many cases state actors were themselves complicit in these crimes. This is a government that is plagued by corruption, and it has a record of failure in bringing perpetrators to justice.
Third, many of the issues that put journalists in danger are related to trade, investment, and business. There is evidence that journalists writing about sensitive subjects such as the environment, natural resources, and land conflicts are far more likely to be targeted than others. It follows that Canada and Canadian companies may very well be affected by the freedom of expression situation in Honduras. Even if Canadian companies in Honduras act according to Canadian values, we are dealing with a country where journalists are being killed for covering issues that may affect them nonetheless, either directly or indirectly. We need only look back at what happened in Nigeria with Shell and the killing of Ken Saro-Wiwa to see what kind of devastating impact this could have on the reputation of Canadian companies. Indeed, Canada's reputation generally could be at risk. Guilt by association is not uncommon in the international arena when it comes to human rights.
So what can we do to improve the situation in Honduras and mitigate these risks? If passed as it currently stands, Bill would implement a treaty that is silent in relation to an unfolding human rights disaster in Honduras. This is a missed opportunity. Bilateral trade negotiations and the resulting deepening of Canada's relationship with Honduras put Canada in a unique position to press Honduras to do more to address this crisis. It is not too late for us to take advantage of this opportunity.
Today we are asking the standing committee to recommend that Canada commission human rights assessments and reporting, and second, that we ensure that fundamental human rights are enforceable through the trade agreement.
I'll give you a bit of detail about the two tools.
One, human rights assessments are not new. They are done by many countries as part of trade agreements, including Canada with the Canada-Colombia free trade agreement. There are two parts to this recommendation. First, in order to establish a baseline, Canada should commission an independent, impartial, and comprehensive assessment of the state of fundamental human rights in Honduras, including a specific focus on freedom of expression, and make the findings of this assessment public. Second, in order to ensure that progress is being made in meeting their human rights obligations, Canada should negotiate an agreement with Honduras whereby both parties would be required to submit an annual public, independent, impartial, and comprehensive human rights assessment report, with each subsequent report providing an update on how the issues noted in previous reports are being effectively addressed.
Finally, because there are serious doubts about whether Honduras is willing or able to fulfill its existing human rights obligations, we would like to see that fundamental human rights are enforceable through this trade agreement. This would mean incorporating language that references both of our countries' existing human rights obligations and making these enforceable within the treaty.
Thank you for your time. We look forward to your questions.
Thank you, Mr. Chair, and thank you very much, all of you, for appearing and for your work.
It is interesting hearing from you in the first hearing following Ms. Oliva, because both the department—the administrative officials behind trade, the non-politicians—and Ms. Oliva stated the profound problems in Honduras, and you have reiterated a lot of those today, particularly crime and narco-trafficking and the terrible impact those have on the country.
The important thing I took from Ms. Oliva was that even with her frustration, when she was asked whether Canada should engage or isolate, even one of the most passionate champions didn't want isolation. I think we all agree. In fact I love the quote from John Ralston Saul on how power loves silence. So isolation, I'd suggest, is not the way to go.
Beyond our commercial relations that the free trade agreement would strengthen, Honduras has been a country of focus. Depending on the year, Canada has been either the third- or fifth-largest bilateral donor. There has been our work through the OAS. Some of you have referenced Truth and Reconciliation, the Inter-American Commission on Human Rights. Some of our money has been targeted at justice reform in particular.
Ms. Spring, I think you mentioned the word “impunity” probably 10 times in your remarks. Do you think our continued focus on justice reform and what I'd call institution building, both on the investigative side and on the prosecution side, should remain a focus because of the profound challenges in that area?
Just to jump right in, I wanted to just ponder for a moment: what's the attraction of a bilateral agreement for a Canadian mining company considering investment or further investment in Honduras? Generally, this is to reduce risk for a company by locking in the current operating environment, giving them a sense of stability concerning the regulatory and taxation terms that are in effect when they invest. It also is to give them access to possibly the most powerful binding arbitration tool in the world today that allows corporations to launch costly lawsuits against governments when they, their people, or even their courts, make decisions that companies don't like. Even if a corporation loses, the initial stages in such a process can cost both parties millions of dollars that would be much better spent.
I want to talk first about this. What is the operating environment today in Honduras? In other words, what would this agreement lock in?
While the last few years, and especially the last few months of the outgoing government of former President Lobo have been marked by the ramming through of literally hundreds of legislative reforms, l'm going to focus on just one piece of legislation that is highly relevant to the mining sector: the new Canadian-backed mining law that was passed in January 2013. This law was developed and passed with strong diplomatic support from the Canadian embassy, and with contributions from the Department of Foreign Affairs and the former Canadian International Development Agency.
The Canadian government and mining industry, along with the industrial mining association in Honduras, pushed for this law principally in order to lift a moratorium that had been in place in Honduras on new mining concessions and projects since 2006. This moratorium was put in place by ousted President Mel Zelaya, under pressure from the Honduran civil society, who had been fighting for legislative reforms for years as a result of the weaknesses in the legal framework to respond to the impacts on their water and health that communities in the Siria Valley, around Goldcorp's San Martin mine, started experiencing very shortly after this mine went into operation.
We can also safely assume, I believe, that the Canadian government and industry undertook the process to try to get this new law in the context of the highly repressive and violent post-coup environment from 2010 to 2013, in order to ensure that the mining law wouldn't end up looking like the proposed mining bill that had been waiting in the wings and that was ready for debate prior to the military-backed coup of June 2009. The 2009 bill, which was supposed to be debated in August 2009, included key civil society proposals, including a ban on open-pit mining, a ban on the use of cyanide and mercury in mineral processing, and a requirement for community approval prior to the granting of mining concessions.
So what's in the new law? There are just a few points. It leaves the door open to open-pit mining. Water sources, except for those that have been declared and registered, which are in a minority, are not protected. Mining is not prohibited in populated areas, meaning that forced expropriation and displacement of entire communities can continue to take place. Community consultation is to take place, but only after exploration has occurred and there's a contract established with mining companies. This is a very late stage in the mining process to undertake consultation, and it means that while a community could presumably state its position on mining at this stage, were there local opposition and the state of Honduras took this seriously, the government would face a high probability of being sued under such a free trade agreement as that which we’re discussing today. This law also divvies up a new 6% royalty on mineral sales from metal mining projects into several pots, in particular a 2% tax for security forces.
Even without looking at what's going on on the ground right now, we can foresee that the conditions are very ripe for conflict, first, with communities who are strongly opposed to open-pit mining. In 2011, a public opinion survey carried out by the research centre for democracy found that some 90% of Hondurans are opposed to open-pit mining.
Second, we have the communities that are fighting to protect key water sources or to stay on their land. This law enables and favours companies that might monopolize local water supplies for industrial mining operations. It could lead to the displacement of entire communities that might be in the way of new projects, putting at grave risk the survival and economic sustenance of peasant farmer communities.
This is a continuation of weaknesses under the earlier mining law regime that put communities such as those in the Siria Valley, around Goldcorp's San Martin mine, at a tremendous disadvantage. It has led to the loss of local water supplies, the displacement of an entire community, and long-term risk from the environment and public health risks of acid mine drainage, which was observed by a leading expert from Newcastle University, in 2008.
Third, I fear that the new security tax on mining production provides a direct incentive to corrupt security forces to protect mining installations instead of people's safety, which should be their first and foremost concern. I think the earlier speakers have already gone into the terrible track record of the Honduran state forces.
What have we been hearing about mining in Honduras since the new mining law was passed? I’m going to give a couple of examples.
First, in northern Honduras, in the mountains just inland from the Caribbean coast, in the agricultural community of Nueva Esperanza in the municipality of Tela, there's been an ongoing fight over a new iron ore mining project that’s owned by the son-in-law of one of the country's richest men. The community has complained that they were not consulted, and in mid-2013, they were already reporting heavy sedimentation contaminating a local river.
In June of last year, the Honduras accompaniment project reported that armed men entered the community under police escort to provide security for the mine. Both police and armed men in this case have been reportedly been involved in threatening and intimidating acts against the community. In particular, armed men have targeted community members who refuse to sell their land. Community members have reported death threats, and nightly curfews during the summer months. In July 25, 2013, armed men also held captive two human rights accompaniers from France and Switzerland, from the Honduras accompaniment project, under threat for several hours. A number of local residents were forced to flee in August 2013.
There are further examples that we could go into, but just to note, in the Siria Valley, where Goldcorp has their San Martin project, well-known environmental activist, community reporter, and teacher, Carlos Amador, has publicly denounced being watched and followed by unknown individuals using vehicles with tinted windows and without licence plates over the last few months; his life is believed to be under serious threat. And local communities in this area are concerned about the approval of new mining concessions that they have insufficient information about.
Right now we can say that there's a state of fear and violence for campesinos and activists fighting to protect their water, their lands, and their right to speak out about the damages of mining, without protection from the state or their own justice system.
If we could imagine that it wasn’t this way, what if the tide shifted and the Honduran government actually made significant efforts to respect the will of communities and to better protect their water supplies, their living environment, and their right to decide what development is good for them? What would happen? The situation in El Salvador provides a poignant example.
Right now, Vancouver-based Pacific Rim Mining, currently owned by OceanaGold, an Australian-Canadian firm, is suing El Salvador for more than $301 million after failing to obtain the social and environmental licence needed to develop a gold mine in the department of Cabañas, and after encountering nation-wide opposition to metal mining in the country.
Notably, Pacific Rim did not meet regulatory regulation requirements necessary to obtain a mining permit in El Salvador; it relied instead on political lobbying. Nor did Pacific Rim undertake adequate studies to understand, much less mitigate, potential adverse effects from the El Dorado project, especially on water supplies. Whether or not the company ultimately wins or loses the arbitration case, which is ongoing, El Salvador has already spent $5 million fighting the suit, which is enough to provide one year of adult literacy classes for 140,000 people. Meanwhile, several environmental activists have been killed, others repeatedly threatened, and the policy development area in the mining sector has stagnated.
So, were a future government in Honduras to come along that would stand up for what Honduran communities have been calling for in terms of respect for their right to decide and to adequately protect water supplies and the environment, they would likely be slapped with another suit of this sort under the current free trade agreement such as the one being debated today.
Just to sum up, what would a free trade agreement between Canada and Honduras do in the mining sector? It would lock in an unjust arrangement for communities that did not provide guarantee of protection for adequate consultation, protection of land and water supplies, or sufficient recourse when things go wrong. It is also taking place in an environment where they are facing targeted threats on a regular basis. At the same time it shores up very powerful protections for companies that will be able to resort to an arbitration mechanism that goes above and beyond the Honduran justice system into which communities have no reach.
Thank you very much.
Good afternoon. Thank you for inviting me and for the opportunity to speak with you today regarding Bill .
My area of research at the North-South Institute is on international trade and investment. I will be providing my testimony from that point of view. I have been working and doing research on trade between Canada and Latin America for the last six years here. I have been researching also the investment relations of Canada with different countries in Latin America, particularly those that have signed FTAs, or free trade agreements, with Canada.
My presentation is going to focus then on the possible benefits that these FTAs might bring to Canada and also to Honduras. I will cover first a little bit of theoretical but also empirical research that has been done in Canada and abroad that tells us under what conditions those agreements can bring economic growth and economic development to both countries. I will later talk about the Honduras economic and governance conditions from an economic point of view. Finally, I will suggest some policies or instruments Canada can use in order to build a more successful relationship with Honduras.
Let's begin with the free trade agreements. There are currently about 400 free trade agreements functioning in the world. Most countries have signed at least one. It is actually a practice that is more common among developing countries than among industrialized countries. There are quite a lot of studies already on under what conditions those agreements are actually successful for the purpose that they are intended. Most FTAs are actually signed among developing countries and only a very small percentage are signed between developing countries and developed countries and there are good reasons for that. In that regard, most developing countries sign FTAs with other developing countries because they are trying to emulate the historical experience of the European Union and to some extent the experience of NAFTA as well, trying to bring it to their own situation and their own geography.
The literature tells us there is a very highly variable degree of success. Developing country businesses in general tend to be too small and not technologically advanced to make use of the opportunities in enhanced market access that these FTAs give. For the most part, exporters from developed countries find the enhanced access to the market of developing countries, particularly when those countries are small, quite underwhelming.
What I would say is that the practice of north-south FTAs is actually more difficult than the one between developing countries. One of the main problems in general tends to be the average levels of governance and effective rule of law in the developing country party. Even when those conditions are met, the developing country gains are not going to be significant, they usually are around 0.1% to maybe 0.2% of GDP per year for the first 10 years after signing and then they decrease.
Other indicators such as improving the legal system, improving governance, public education, and public health, bring anything between 10 to 20 times more gains per year than executing an FTA. In other words, the policy measures that affect trade for an economist, particularly those related to development, are of secondary importance when we are trying to support the economic growth of a developing country. What is of primary importance is governance and access to public education and public health.
Now I'm going to direct my attention to the specific FTA that Canada and Honduras have signed. I read the text and what I can say in summary is that these agreements are very similar to the ones that Canada has already signed with other nations in Latin America such as Panama, Colombia, and Peru. The substantial preferential access that is given to Honduras in textiles and clothing, fresh fruits and vegetables, and some processed foods, these advantages that are given to Honduras align fairly well with the comparative advantage that Honduras has already demonstrated in the last decade.
However, UNCTAD, which is the United Nations commission for trade and investment, has an ongoing ranking for countries on what market access they have to their main partners; and Honduras is one of the countries that is highest ranked in the world. In other words, Honduras does not need enhanced market access in order to increase its exports to the rest of the world, in comparison with most other developing countries.
On the other side, Canada gains from the FTA increased access to agricultural goods, cereals, and also meats, and some technology-based manufacturing. More relevant for Canada is the enhanced general investment protection that Jennifer has already mentioned, and in particular, I would say, this is an argument that comes more from economists, because Honduras is a country that is ranked by the World Bank as having one of the worst levels of governance and that affects all kinds of investment, not only domestic but also international. That is a big handicap for Honduras to receive any further investment.
However, it is very concerning to me that in this agreement, the Honduran side has already carved out some very strong exceptions to the application of this agreement, such as, for example, investment in construction, oil refining, fuel distribution, casinos, and the possibility also of excluding any Canadian firms from any future privatizations that the Honduran government would do. I can later explain in the question and answer period why the Honduran government would go for that.
My simple calculation is that bilateral trade between Canada and Honduras, if this agreement were ratified, would increase; however, the increases would be minimal for Canada and they would even be fairly small for Honduras, and that would only be in the case that Honduras would perform as well as the other Latin American partners that already have an FTA with Canada. I'm talking about Chile, Colombia, Peru, Panama, and Costa Rica. I have to say, even very early on, that Honduras is a totally different country from those five. The exception and one of the best gains, I think, for increased trade is that there would be more access for clothing and for textiles. Most other Honduran goods already arrive in the Canadian market with very minimal taxes, very minimal or zero tariffs.
On the other side, the Canadian exports would gain market access, but again, those gains would be fairly small because the average applied tariffs of Honduras are already very low. They are among the lowest in the world and the lowest in the region. They are around 5% to 6%. It's already very much a free-trading nation. Besides, it's an economy that is very small. To compare it to Canada, the economy of Honduras is smaller than the Ottawa-Gatineau metropolitan area. And that is only at the aggregate level. Once you input the fact that Honduras is the most unequal country, by distribution of income, in the most unequal region in the world, Latin America, then that market is really much smaller than Ottawa-Gatineau.
So if we are expecting to have big increases in Canadian exports to that market, we should know that that market is structurally handicapped from providing those gains, because there is nobody to buy those goods. Canada is not a country that is specializing in luxury goods to sell to a very wealthy elite. Canada sells grains, auto parts, and goods that tend to be consumed by businesses or individuals from the middle class, or from the poorer working class.
Again, comparing Honduras with other Latin American countries that have signed these FTAs with Canada, Honduras is anything between 2 and 20 times smaller as a market, and that is without considering income distribution. The population of Honduras is 8 million, and two-thirds live in poverty and one-third in extreme poverty. That is according to the Honduran government. The UN says quite worse things.
So I also have to say that towards the future—
Okay. I will try to summarize.
Looking towards the future, the Honduran economy has been underperforming in the Latin American economy for the last decade and in all likelihood it will continue to underperform. There is no economic forecast from anywhere—I've checked Bloomberg, Reuters, and everywhere else—that says that Honduras will grow fast. It will not. It just will not. It's not an emerging country.
According to the World Bank, Honduras is also one of the most expensive countries in which to run a business given its convoluted and politically rigged regulatory systems, a non-functioning court system, and massive corruption. It is ranked 141 out of 183 nations by the World Bank. Only Haiti is ranked lower in the western hemisphere.
Another problem—I would like to mention it later on, perhaps, in the question and answer period—is that Honduras, as you know, has an enormous security problem. There were 7,200 murders in 2012. That is 20 murders per day, as compared with two murders per day in Canada, which has four times more population. The levels of violence are actually increasing in Honduras, unlike in the other Central American countries.
That is a striking disincentive for any entrepreneur to start a business in Honduras in terms of export or the local market. Capital accumulation is close to impossible, as we know for any economies that work on issues related to security, given the extortion that Maras and other gangs demanded from approximately 90% of all firms there in 2012, with kidnapping—
I happen to agree with you. I think drawing a causal line between trade and the kinds of benefits that the Conservative government often claims—that it'll create jobs, improve the welfare of people, that a free trade agreement will boost GDP and create wealth—I personally think that those causal relationships are not made. But they're made all the time by this government.
We do have data from the U.S. agreement that certainly suggests that, from my reading of all the data, the conditions in Honduras have gotten much worse. Some of the social spending over the last number of years has gone down. Economic inequality, which decreased for four consecutive years starting in 2006, began trending upward in 2010. Poverty and extreme poverty rates decreased by 7.7% and 20.9% during the Zelaya administration, which was overthrown in the coup in 2009, and the poverty rate has increased by 13% and 26% since. Unemployment has gone up. Minimum wage and wages have gone down. So, all of the metrics look poor.
Ms. Moore, I'd like to ask you a question.
My reading of the environmental side agreements that Canada generally signs is that they generally follow the format that the parties agree that they will not reduce their present environmental standards in order to attract investment. That, of course, is predicated on the fact that the environmental standards that are in place now are firm. Can you describe for us, briefly, what the state of environmental protection is in Honduras currently?