Once part of Spain's vast empire in the New World, Honduras became an independent nation in 1821. After two and a half decades of mostly military rule, a freely elected civilian government came to power in 1982. During the 1980s, Honduras proved a haven for anti-Sandinista contras fighting the Marxist Nicaraguan Government and an ally to Salvadoran Government forces fighting leftist guerrillas. The country was devastated by Hurricane Mitch in 1998, which killed about 5,600 people and caused approximately $2 billion in damage. Since then, the economy has slowly rebounded.
Central America, bordering the Caribbean Sea, between Guatemala and Nicaragua and bordering the Gulf of Fonseca (North Pacific Ocean), between El Salvador and Nicaragua
timber, gold, silver, copper, lead, zinc, iron ore, antimony, coal, fish, hydropower
Population - distribution
most residents live in the mountainous western half of the country; unlike other Central American nations, Honduras is the only one with an urban population that is distributed between two large centers - the capital of Tegucigalpa and the city of San Pedro Sula; the Rio Ulua valley in the north is the only densely populated lowland area
Spanish (official), Amerindian dialects
TEGUCIGALPA (capital) 1.123 million; San Pedro Sula 852,000 (2015)
- Conventional long form
- Republic of Honduras
- Conventional short form
- Local long form
- Republica de Honduras
- Local short form
- Geographic coordinates
- 14 06 N, 87 13 W
- Time difference
- UTC-6 (1 hour behind Washington, DC during Standard Time)
accepts compulsory ICJ jurisdiction with reservations; accepts ICCt jurisdiction
Honduras, the second poorest country in Central America, suffers from extraordinarily unequal distribution of income, as well as high underemployment. While historically dependent on the export of bananas and coffee, Honduras has diversified its export base to include apparel and automobile wire harnessing.
- External debt stocks
- US$ 7,584,337,000
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -1,291,425,227
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 12,485,911,445
- Exports of goods and services
- US$ 9,192,133,576
- Total Merchandise Trade
- FDI, net inflows
- US$ 1,316,679,827
- Commercial Service Exports
- US$ 2,634,028,441
bananas, coffee, citrus, corn, African palm; beef; timber; shrimp, tilapia, lobster, sugar, oriental vegetables
sugar processing, coffee, woven and knit apparel, wood products, cigars
- coffee, apparel, coffee, shrimp, automobile wire harnesses, cigars, bananas, gold, palm oil, fruit, lobster, lumber
- US 36%, Germany 8.7%, El Salvador 8.5%, Guatemala 6%, Nicaragua 5.6%, Netherlands 4.1% (2015)
- communications equipment, machinery and transport, industrial raw materials, chemical products, fuels, foodstuffs
- US 35.2%, China 13.6%, Guatemala 9.2%, Mexico 6.6%, El Salvador 5.1% (2015)
- Country Risk Rating
- A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high.
- Business Climate Rating
- The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.
- Privileged relations with the United States
- Agricultural, mining, and tourist resources
- Agreement with the IMF
- Dependency on the American economic conditions (exports, foreign direct investment)
- Dependency on imports of fuel and cereals (maize is the basic foodstuff)
- High degree of criminality
In 2016, growth Honduras was mainly on the back of the recovery in private consumption, boosted by low energy prices and the robustness of remittances by expatriate workers. In 2017, activity is expected to continue to be sustained by investment and higher household consumption. Apart from remittances of funds, the jobs market recovery (specifically in the manufacturing industry) is likely to contribute to rising internal demand for food products, fuel, pharmaceutical products and, in particular, electricity and water supply. Public investment in construction and the improvement of the road network are expected to continue, as is private investment mainly in residential construction. Primary exports (coffee, iron, and shrimps) and manufacturing exports (especially textiles) are expected to benefit from the gradual depreciation of the local currency, the lempira, against the dollar. Finally, inflation is likely to rise in 2017 driven by higher domestic demand, but will remain below the central bank target (5-7%).
The government is expected to continue its fiscal consolidation policy in order to guarantee the extension of the IMF's credit facility. Thanks to the consensus within the political class, Honduras has succeeded in obtaining approval for the reform of VAT (rising from 12% to 15%), cut in civil service wages and the optimisation of tax collection thanks to the widening of the tax base and a reduction in tax evasion. Moreover, the budget responsibility law, approved in 2016, sets a ceiling on the non-financial public sector deficit of 1% of GDP by 2019. The local authorities have also implemented institutional improvements, such as setting up a committee to examine all ministerial requests so as to better control spending growth and achieve the medium-term objectives. These efforts are specifically aimed at reducing the public debt, the amount of which has risen constantly in recent years. Despite this, the public debt as a share of GDP is unlikely to stabilise before 2018 given, to some extent, the increase in public spending on infrastructure, health, education and social programmes. Although such spending contributed to an increase in the public deficit in 2016, it paves the way for more inclusive growth in a country where the poverty rate amounts to almost 40% of the population.
In 2016, the current account deficit improved due to robust exports of goods to the United States, which receives almost 60% of Honduran exports, to the increase in funds remitted by migrants and weak imported energy prices. This trend is expected to continue in 2017, despite the expected increase in oil imports driven by rising internal activity. The country is a leading producer of textiles and is expected to continue to benefit from preferential agreements wit the United States during the year. The balance of services deficit will remain low given the relatively weak prices for the transport of goods, but the high crime rates will continue to impact tourism income. Continued reinvestment by foreign companies of their local profits will help to stabilise the income deficit and remittances by migrants, living for the most part in the United States, are expected to remain robust.
In power since January 2014, President Juan Orlando Hernandez of the centre-right National Party (PN) could well stand for a second term in the forthcoming November 2017 elections. The success of his policy, focused on fiscal restructuring, supported by involvement in the three-year agreement with the IMF (December 2014), has been recognised by international creditors and the rating agencies. In contrast, the government's inability to tackle the issue of corruption, which affects the whole of the public sphere (politics, justice, and the police), is a major handicap for the country's credibility and that government's potential re-election. After the drug money laundering scandal at Banco Continental (Rosenthal family) in 2015, allegations of drug trafficking against those close to the president (his brother and his defence minister) are affecting his government's popularity. Socially, Honduras is still one of the poorest countries in Latin America and remains among the most violent in the world. Violence, corruption, drugs trafficking and insecurity are, moreover, the main obstacles to the country's economic development.