Problem in Honduras Regarding Gasoline

Honduras is a very small country located in Central America. There are three countries bordering it. They are Nicaragua, Guatemala, and El Salvador. Honduras is a third world country that has been facing many economic problems for quite some time. It has an external debt of approximately 4. 4 billion dollars. Honduras is a country which depends mostly on its imports rather than on what it exports. Honduras is not very productive when it comes to exporting things. A big part of the country’s income is from the money that Honduran citizens who have traveled to the United States and are working illegally send to their families monthly.

One element that affects the Honduran economy is converting dollars to lempiras. One dollar is equal to nineteen lempiras. Since this country has a very poor economy, the minimum wage per month for most employees is L. 2, 500, or approximately 130 American dollars. The American minimum wage is about six dollars an hour. If we convert this, the employees in the United States earn the Honduran minimum wage in three days. This is how bad the Honduran economy is right now. A current problem the country has been facing these days is with the import of petroleum.

This has always been a problem since it is one of their major imports. Hondurans depend a lot on it since they don’t have any petroleum refineries there. At first, many years ago the government used to pay the gas taxes directly instead of charging it to the consumers. This is why the prices were so low at that time; however, the foreign debt was increasing. The government realized this, so they started charging the taxes to the consumers and this is why the prices increased. Other problems derived because of this and have caused this problem to become bigger.

Since the Honduran government used to subsidize the gas taxes many years ago, the price of gasoline was much lower. People those days were okay with that since the price was lower and they didn’t worry about the taxes. Event though the government knew that they were under a huge foreign debt, they continued paying for the taxes themselves instead of passing them along to the consumers. After a while, the government started to realize the debt was increasing quickly and that they were losing too much money.

Since they didn’t have any additional funds to be able to pay for all this, they decided to charge it to the consumers. This is where some of the problems started to get even bigger. The Honduran population was not happy after the change the government made. Due to the fact that they were not able to keep on paying, they now were making the population pay for the taxes. This was why the gas prices increased excessively. During all this conflict, many people in the government took advantage of it and started to act illegally.

These government officials started to bring in petroleum without paying taxes so they could sell it to some gas stations that were owned by certain influential people at a lower price and to other non-influential gas station owners at the regular price. The extra money from the gas stations that were charged the regular price was kept by the dirty government people in charge of this act. This whole illegal act was named “El Gasolinazo”. What the Honduran government has begun to do now is ask for pricing bids from petroleum companies from different countries in the world to see which one is the most cost effective.

Apparently, that is what the last government regime had started to do a few months before leaving power. They began to discuss a strategic alliance with an Australian company called Trafigura. This alliance with Trafigura could provide some much needed economic relief to the Honduran people while the country is going through many riots and other problems with the people. Even though this could be a very major turning point for Honduras, the General Manager of one of the most influential Honduran gas stations has said that this would not satisfy the consumers because it would only reduce gasoline prices by approximately one lempira.

He has said that he is only estimating, but he thinks that the country should turn down this bid. A way of solving this new huge problem in Honduras is to take advantage of this bidding opportunity with Trafigura and Australia. The government should take their time to make the correct decision. They should consider not only if it will benefit them, but also if it benefits the whole country. Another element that they should define is how to manage the import and distribution of the gas, and which company will be the one in charge of it after closing the bid.

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