CASE STUDY

Stone Container in Honduras50

In the late 1980s and early 1990s, the Chicago-based Stone Container Corporation was a leading producer of containerboard, newsprint, and market pulp-all of which are produced from lumber. Concerned with increased restrictions on U.S. forestland, and fresh from a similar, successful initiative in nearby Costa Rica, the company opted to explore options in lumber-rich Honduras.

A series of clandestine negotiations with the president of Honduras yielded an agreement for Stone to harvest 320,000 hectares of pine forests in exchange for $20 million. However, right up until the public release of the agreement, the president kept the precise terms and conditions of the agreement a closely guarded secret. When the deal was announced, criticism was swift. Honduran critics were quick to point fingers at a U.S. multinational engaging in secret negotiations for more than 790,000 acres of Honduran forest. Eventually, accusations of neo-imperialism and corruption doomed the project, and negotiations were halted in 1992.

In some ways, this outcome could have been anticipated. Hondurans, accustomed to dictatorships and highly wary of profiteering U.S. corporations, were suspicious of secretly negotiated agreements. Even more off-putting was the fact that the agreement between Stone and the government was written entirely in English, not Spanish. Despite Stone's commitments to replenish the forest with fast-growing trees and create 3,000 jobs for indigenous people of the region, the optics of the deal rendered the agreement unfeasible.

Stone's failure represents not just a failure of communication, but a failure of negotiation as well. Stone's deal reflected a one-dimensional approach to negotiation: settling on a sale price at the table. Even with concessions for local job creation and forest replenishment, the deal was conventional, allowing Stone to extract profit from a Honduran natural resource. The at-the-table tactics may have yielded a favorable arrangement for Stone, but the ensuing deal was ultimately unsustainable.

Let's imagine how a 3-D approach might have given Stone a better playing field. What kinds of away-from-the-table tactics could they have used to improve the negotiation process? Would Stone have been successful if they had used a PPP?

First, Stone's approach should have begun long before expressing their interest in a lumber deal. Meeting with the Honduran government, in other words, ought to have been the last step in a deal negotiation, not the first.

Stone's preparations for negotiation would have involved a rigorous stakeholder analysis. That analysis would have turned up key stakeholders in Honduras beyond just the government and the indigenous people who stood to gain employment from the project, including indigenous communities at large, environmental groups, and corruption watchdog organizations.

Stone could have benefitted from improved sequencing as well. Stone could have first travelled to the region from which they were considering harvesting lumber, met with indigenous communities, and asked what kinds of assistance they might need. By building clinics, schools, or electrical systems, Stone could have cultivated goodwill within the community and began their negotiation from a much stronger position. They could have engaged with environmental groups on how to responsibly harvest the lumber and re-seed the forests.

And perhaps most easily, they could have avoided an unnecessarily poor public appearance by drafting agreements in both Spanish and English.

The case of Stone Container does not involve a PPP. But it does provide an illuminating example of the pitfalls of engaging in negotiations without due consideration of country context. Stone opened itself up to criticism unnecessarily by foregoing a 3-D negotiation strategy.