Honduras Crisis Deepens as Cops Rebel and OAS Questions Results

(Bloomberg) -- Honduras is slipping deeper into crisis nine days after its presidential election as international monitors question the vote count and sections of the police force rebel.

President Juan Orlando Hernandez clung to a small lead with 99.98 percent of ballots counted Tuesday, but hasn't yet been declared the winner. A team of electoral observers from the Organization of American States said Monday that “irregularities, errors and systemic problems” mean they can't be certain about the results, while the head of the European Union's mission said the process is far from over.

“Day by day there is less confidence in the institutions and the process in Honduras,” said Ricard Barreno, political coordinator at the Guatemala City-based Central American Institute of Political Studies. “The electoral council will have to put out an official pronouncement this week or they risk the demonstrations getting worse.”

Hernandez, a pro-U.S. leader who presided over one of the world's largest bond rallies, holds an advantage of almost 53,000 votes over Salvador Nasralla, according to the latest count. Nasralla, a sports journalist and television personality-turned politician, is demanding that international monitors undertake a complete recount, and has called on his supporters to maintain street protests across the nation of 9 million. For now, all the electoral authorities have offered is a partial recount.

Burning Tires

Nasralla, 64, took an early lead after the Nov. 26 vote, before the electoral authority went silent and stopped publishing updates. When they began to update the vote, Hernandez gradually inched ahead, fueling allegations of irregularities.

Pro-Nasralla marchers with their faces covered blocked highways and burnt tires in recent days, while the government declared 10 days of curfews from 6 p.m. to 6 a.m., in a bid to prevent further disturbances and looting. Some police units have refused to obey orders, according to International Crisis Group and the Washington Office on Latin America.

Hernandez has remained mostly silent, calling for “peace” and “national unity” on his Twitter account Monday. On Tuesday, he tweeted about melon exports to Mexico, a day after congratulating school children on their graduation.

Much will now depend on what international election observers say, said Eurasia Group analyst Risa Grais-Targow. If they end up sanctioning the results, Hernandez will retain power, albeit amid opposition protests, whereas if they have serious misgivings about the electoral process, Hernandez will be in a weaker position, she said.

Honduran bonds fell the most in emerging markets after the first results were announced -- a drop that was only partially reversed as he moved back into the lead. Yields on notes due in 2024 rose 1 basis point to 5.27 percent as of 11 a.m. New York time.

The 49-year-old conservative former congressman has been popular with foreign investors after slashing the fiscal deficit under an International Monetary Fund program. Even after this month's drop, the nation's bonds have returned 77 percent since Hernandez took the lead in the run up to winning his first term in 2013, the most in the world over that period.

Honduras is a main transit point for South American drugs en route to the U.S., and a big source of illegal migration. Both problems may worsen if there's a serious breakdown in order.

--With assistance from Aline Oyamada

To contact the reporter on this story: Ezra Fieser in Santo Domingo, Dominican Republic at efieser@bloomberg.net.

To contact the editors responsible for this story: Matthew Bristow at mbristow5@bloomberg.net, Philip Sanders

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