CONSULTATIVE GROUP M E E T I N G F O R Tegucigalpa M.D.C., June 10th and llth, 2004 NATIONAL RECONSTRUCTION REPORT 1998-2001 INTRODUCTION Since the end of 1998, Honduras has concentrated enormous efforts on completing the national reconstruction phase and on advancing in the reform processes of key sectors, within the framework of the commitments made at the Consultative Group meeting in Stockholm, Sweden in May 1999. As a follow-up of the above, the present administration is responsible for finishing the tasks that are still being executed, either due to their magnitude or to their recent initiation; and also for providing the international cooperating community with the information needed to evaluate the achievements obtained during the reconstruction process, October 1998 - December 2001; being informed of the transparency with which resources have been used; and documenting lessons learned throughout the process. As Hondurans we have given important indications of a profound and firm will, not only regarding the objectives of the national reconstruction, but also of the transformation process that we already have started, but that need to deepen further. In the perspective of strengthening the commitment with this transforming process, the Government Plan 2002-2006 has been prepared, in agreement with the achievement of the goals of the Poverty Reduction Strategy and the document My Commitment With you. Likewise, the present Administration has decided to dedicate its greatest efforts, together with the organizations of the civil society, to structuring a country vision, that has the development of the human person as its central axis and that will permit future generations to inherit a country that is advancing in a sustainable manner along the pathway of development and social equity. We are fully aware that the achievements visible in the country, which we expect to improve during the next few years, are the result of the firm determination of the Honduran society and its government, as well as the complementary role played by the international cooperation. We hope that these same elements will be consolidated and strengthened during the process of national transformation in order to successfully face their great challenges for the benefit of the Honduran people. Government of the Republic of Honduras CONTENTS EXECUTIVE SUMMARY............................................................................................................................... i-iii I. BACKGROUND...................................................................................................................................... 1 A. BRIEF SUMMARY OF THE MITCH PHENOMENON AND ITS EFFECTS............................................................ 1 B. THE MPNRT AND THE STOCKHOLM DECLARATION................................................................................ 2 C. GENERAL ASPECTS OF THE PROCESS………………………………………………………………………. 4 II. COUNTRY SOCIAL VULNERABILITY REDUCTION........................................................................... 5 A. FIGHT AGAINST POVERTY AND HUMAN DEVELOPMENT........................................................................... 5 1. Social Security Networks l …………………………………………………………………………... 5 2. Education.................................................................................................................................. 6 3. Health........................................................................................................................................ 8 4. Culture...................................................................................................................................... 10 5. Poverty Reduction Strategy (PRS)........................................................................................... 10 B. MACRO ECONOMY AND ECONOMIC REACTIVATION................................................................................. 11 1. Macroeconomic Aspects and Structural Reform...................................................................... 11 2. External Debt............................................................................................................................ 12 3. Productive Sectors.................................................................................................................... 13 C. RECONSTRUCTION AND INFRASTRUCTURE MODERNIZATION.................................................................... 16 1. Housing..................................................................................................................................... 16 2. Water and Sanitation................................................................................................................ 17 3. Roads and Bridges................................................................................................................... 20 4. Energy....................................................................................................................................... 19 5. Telecommunications................................................................................................................. 20 6. Ports.......................................................................................................................................... 20 D. NATURAL RESOURCES AND RISK MANAGEMENT…………….................................................................. 21 1. Natural Resources and Environment........................................................................................ 21 2. Risk Management..................................................................................................................... 26 III. STRENGTHENING DEMOCRACY AND GOVERNANCE..................................................................... 31 A. DECENTRALIZATION AND DEMOCRATIC PARTICIPATION........................................................................... 31 1. Decentralization........................................................................................................................ 31 2. Participation of Civil Society...................................................................................................... 32 B. GENDER EQUITY, CHILDREN AND ETHNIC GROUPS................................................................................ 33 1. Gender Equity........................................................................................................................... 33 2. Children and Adolescent Rights............................................................................................... 33 3. Ethnic Groups........................................................................................................................... 34 4. Other Minorities........................................................................................................................ 34 C. TRANSPARENCY, JUSTICE AND CITIZEN SECURITY................................................................................. 34 1. Transparency............................................................................................................................ 35 2. Justice System.......................................................................................................................... 36 3. Citizen Security......................................................................................................................... 37 IV. COORDINATING WITH INTERNATIONAL COOPERATION............................................................... 39 V. FINANCING THE RECONSTRUCTION PROCESS.............................................................................. 41 A. Non-Reimbursable Cooperation...................................................................................................... 41 B. Reimbursable Cooperation.............................................................................................................. 43 C. Natural Resources ........................................................................................................................ 44 VI. LESSONS FROM HURRICANE MITCH AND FROM THE RECONSTRUCTION PROCESS............. 45 VII. NATIONAL TRANSFORMATION CHALLENGES................................................................................ 51 ANNEXES...................................................................................................................................................... 59 EXECUTIVE SUMMARY 1. In the last years, Honduras has had to carry forward an arduous process of reconstruction, as a result of the devastation caused by hurricane Mitch, a phenomenon qualified as the greatest natural disaster in the last two hundred years, at the same time is has had to deal with a series of problems stemming from its condition as a highly indebted poor country and has had to undertake important steps towards setting the foundation for national transformation and poverty reduction. 2. The implementation of the Master Plan for National Reconstruction and Transformation (MPNRT) has required a great amount of public investment resources as well as the involvement of the different sectors of society. The achievements obtained, have had the firm support of the international cooperant community, not only with their contribution of financial resources but also with their supporting presence in coordination actions and events, follow-up and accompaniment in key aspects for the country. 3. In order to follow-up and monitor the introduction