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Honduras (05/03)For the most current version of this Note, see Background Notes A-Z. PROFILE OFFICIAL NAME: Geography People Government
Economy (2002) PEOPLE AND HISTORY Independence Since independence, Honduras has been plagued with nearly 300 internal rebellions, civil wars, and changes of government--more than half occurring during the 20th century. The country traditionally lacked both an economic infrastructure and social and political integration. Its agriculturally based economy came to be dominated in the 1900s by U.S. companies that established vast banana plantations along the north coast. Foreign capital, plantation life, and conservative politics held sway in Honduras from the late 19th until the mid-20th century. During the relatively stable years of the Great Depression, authoritarian Gen. Tiburcio Carias Andino controlled Honduras. His ties to dictators in neighboring countries and to U.S. banana companies helped him maintain power until 1948. By then, provincial military leaders had begun to gain control of the two major parties, the Nationalists and the Liberals. From Military to Civilian Rule Gen. Lopez' successors continued armed forces modernization programs, building army and security forces, and concentrating on Honduran Air Force superiority over its neighbors. The regimes of Gen. Melgar Castro (1975-78) and Gen. Paz Garcia (1978-83) largely built the current physical infrastructure and telecommunications system of Honduras. The country also enjoyed its most rapid economic growth during this period, due to greater international demand for its products and the availability of foreign commercial lending. Following the overthrow of Anastasio Somoza in Nicaragua in 1979 and general instability in El Salvador at the time, the Honduran military accelerated plans to return the country to civilian rule. A constituent assembly was popularly elected in April 1980, and general elections were held in November 1981. A new constitution was approved in 1982, and the Liberal Party government of President Roberto Suazo Cordoba took office following free and fair elections power. Suazo relied on U.S. support to help with a severe economic recession and with the threat posed by the revolutionary Sandinista government in Nicaragua amid a brutal civil war in El Salvador. Close cooperation on political and military issues with the United States was complemented by ambitious social and economic development projects sponsored by the U.S. Agency for International Development (USAID). Honduras became host to the largest Peace Corps mission in the world, and nongovernmental and international voluntary agencies proliferated. As the November 1985 election approached, the Liberal Party had difficulty settling on a candidate, and interpreted election law as permitting multiple presidential candidates from one party. The Liberal Party claimed victory when its presidential candidates, who received 42% of the vote, collectively outpolled the National Party candidate, Rafael Leonardo Callejas. Jose Azcona Hoyo, the candidate receiving the most votes among the Liberals, assumed the presidency in January 1986. With the endorsement of the Honduran military, the Azcona administration ushered in the first peaceful transfer of power between civilian presidents in more than 30 years. Four years later, Rafael Callejas won the presidential election, taking office in January 1990. Callejas concentrated on economic reform, reducing the deficit, and taking steps to deal with an overvalued exchange rate and major structural barriers to investment. He began the movement to place the military under civilian control and laid the groundwork for the creation of the public ministry (attorney general's office). Despite his administration's economic reforms, the nation's fiscal deficit ballooned during Callejas' last year in office. Growing public dissatisfaction with the rising cost of living and with widespread government corruption led voters in 1993 to elect Liberal Party candidate Carlos Roberto Reina over National Party contender Oswaldo Ramos Soto, with Reina winning 56% of the vote. President Reina, elected on a platform calling for a "moral revolution," actively prosecuted corruption and pursued those responsible for human rights abuses in the 1980s. He created a modern attorney general's office and an investigative police force and was successful in increasing civilian control over the armed forces and transferring the police from military to civilian authority. Reina also restored national fiscal health by substantially increasing Central Bank net international reserves, reducing inflation, restoring economic growth, and, perhaps most importantly, holding down spending. Carlos Roberto Flores Facusse took office on January 27, 1998, as Honduras' fifth democratically elected president since democratic institutions were restored in 1981. Like three of his four predecessors, Flores was a member of the Liberal Party. He was elected by a 10% margin over his main opponent, National Party nominee Nora de Melgar. Upon taking office on January 27, 1998, Flores inaugurated programs of reform and modernization of the Honduran Government and economy, with emphasis on helping Honduras' poorest citizens while maintaining the country's fiscal health and improving international competitiveness. In October 1998, Hurricane Mitch devastated Honduras, leaving more than 5,000 people dead and 1.5 million displaced. Damages totaled nearly $3 billion. The Honduran Government agreed to a new transparent process to manage relief funds, which included significant donor oversight. This open process greatly facilitated the relief and reconstruction effort. President Flores and his administration have successfully managed more than $600 million in international assistance. Civil society's role in the government-coordinated reconstruction process has been lauded internationally. President Flores also forwarded judicial and penal reforms. He established an anticorruption commission, supported passage of a new penal code based on the oral accusatorial system, and saw passage of a law that creates an independent Supreme Court. Flores cemented the transition from military to civilian rule by eliminating the commander in chief position, and by signing a law that establishes civilian control formally over the military. Ricardo Maduro Joest of the National Party was elected to the Honduran presidency on November 25, 2001, outpolling the Liberal candidate, Rafael Pineda Ponce, by 8%. He was inaugurated on January 27, 2002. The elections, characterized by international observer teams as free, fair, and peaceful, reflected the maturing of Honduras' democratic institutions. During his campaign, President-elect Maduro promised to reduce crime, reinvigorate the economy, and fight corruption. Working to fulfill this promise, Maduro’s first act as President was to deploy more than 5,000 soldiers to the streets to support the police in the ongoing fight against the country’s massive crime problem. While the initial reaction to this policy was overwhelmingly positive, the soldiers’ presence appears to have had only a minimally positive effect on the country’s crime rate. The recent suspension of Nicaragua’s 35% tariff on Honduran goods is a positive step for Central American economic integration and is seen as a victory for the Maduro administration. GOVERNMENT POLITICAL CONDITIONS Political Parties Principal Government Officials Honduras maintains an embassy in the United States at 3007 Tilden Street NW, Washington, DC 20008 (tel. 202-966-7702). NATIONAL SECURITY ECONOMY Unemployment is estimated at around 4.2% in 2001, though underemployment is much higher. The Honduran economy grew 2.0% in 2002, which was lower than economic growth rates of 2.7% in 2001 and 4.7% in 2000. The Honduran maquiladora (garment assembly) sector, the third-largest in the world, continued its strong performance in the first month of 2003 with the announcement of 8,000 new jobs. The industry provides employment to more than 110,000 workers and generated more than $600 million in foreign exchange for Honduras in 2001. The economic slowdown in the United States caused Honduras' maquila sector growth to stagnate in 2001 and employment in the sector to declined from 125,000 in 2000 to 110,000 in 2001. Inflation, as measured by the consumer price index, was 8.1% in 2002, down slightly from the 8.8% recorded in 2001. The country's international reserve position continued to be strong in 2002, at slightly over $1.5 billion. Honduras received significant debt relief in the aftermath of Hurricane Mitch in late 1998, including the suspension of bilateral debt-service payments and bilateral debt reduction by the Paris Club--including the United States--worth more than $400 million. In July 2000, Honduras reached its decision point under the Heavily Indebted Poor Countries initiative (HIPC), qualifying the country for interim multilateral debt relief. In 2001, the International Monetary Fund (IMF) and World Bank approved Honduras’ Poverty Reduction Strategy Paper (PRSP), making Honduras eligible for $900 million in debt relief in present value terms, upon its completion point. Since that time, fiscal problems have derailed the government’s IMF program and put the HIPC debt relief on hold. Honduras is currently negotiating with the IMF on the terms of a new 3-year Poverty Reduction and Growth Facility program. FOREIGN RELATIONS Honduras is a strong proponent of Central American cooperation and integration, and has joined in an agreement easing border controls and tariffs among Honduras, Guatemala, Nicaragua, and El Salvador. Honduras held the 6-month SICA presidency during the second half of 2001, and worked hard to advance regional cooperation with the United States on issues related to sustainable development. President Flores also was instrumental in galvanizing regional support for counterterrorism measures following the September 11 attacks. In 1969, El Salvador and Honduras fought the brief "Soccer War" over disputed border areas and the emigration of some 300,000 Salvadorans to Honduras in search of land and employment. The catalyst was nationalistic feelings aroused by a series of soccer matches between the two countries, but the roots of the conflict lay in local disputes over land ownership and usage. The two countries formally signed a peace treaty on October 30, 1980, which put the border dispute before the International Court of Justice (ICJ). In September 1992, the Court awarded most of the disputed territory to Honduras. In January 1998, Honduras and El Salvador signed a border demarcation treaty to implement the terms of the ICJ decree although delays continue due to technical difficulties. Honduras and El Salvador maintain normal diplomatic and trade relations, however, they continue to have strained relations over the status of their maritime borders in the Gulf of Fonseca. Honduras and Nicaragua had tense relations throughout 2000 and early 2001 due to a maritime boundary dispute off the Atlantic Coast. Nicaragua imposed a 35% tariff against Honduras due to the dispute, and the Central American Court of Justice ruled the tariff illegal in 2001. Despite this ruling, Nicaragua continued to impose the tariff until March 2003, when it was suspended under threat of a Honduran retaliatory tariff on Nicaraguan goods. Overview The United States favors stable, peaceful relations between Honduras and its Central American neighbors. During the 1980s, Honduras supported U.S. policy in Central America opposing a revolutionary Marxist government in Nicaragua and an active leftist insurgency in El Salvador. The Honduran Government also played a key role in negotiations that culminated in the 1990 Nicaraguan elections. Honduras contributed troops for the UN peacekeeping mission in Haiti and continues to participate in the UN observer mission in the Western Sahara. The United States is Honduras' chief trading partner, supplying 46% of its imports and purchasing 49% of its exports in 2001. Leading Honduran exports to the United States include coffee, bananas, seafood (particularly shrimp), minerals (including zinc, lead, gold, and silver), and other fruits and vegetables. The United States encourages U.S. investment that contributes to Honduran development and bilateral trade. U.S. direct investment in Honduras is an estimated $840 million, about two-thirds of the total foreign direct investment (FDI) in the country of $1.3 billion. FDI flow into Honduras in 2001 totaled $186 million with the United States leading the way with investments totaling $84 million or 45% of the total FDI. The largest U.S. investments in Honduras are in the maquila (garment assembly) sector, in which apparel and textile export revenues totaled $2.34 billion in 2001. There also are significant U.S. investments in fruit production--particularly bananas, melons, and pineapple--tourism, energy generation, shrimp culture, animal feed production, telecommunications, fuel distribution, cigar manufacturing, insurance, brewing, leasing, food processing, and furniture manufacturing. U.S. maquilas are responsible for the majority of the approximately 110,000 jobs in that sector. Many U.S. franchises, particularly in the restaurant sector, operate in Honduras. On January 8, 2003, the United States launched negotiations for a free trade agreement with Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. The negotiations are scheduled to be completed by December 2003. The U.S.-Central America Free Trade Agreement (U.S.-CAFTA) will eliminate tariffs and other barriers to trade in goods, services, agricultural products, and investments. Additionally, U.S.-CAFTA is seen as a mechanism to solidify democracy, encourage greater regional integration, and provide safeguards for environmental protection and labor rights. The main interest for Honduras in a free trade agreement is increased access to the U.S. market for textiles and apparel goods. U.S.-CAFTA also will serve as a stepping stone to the scheduled conclusion of the Free Trade Agreement of the Americas in 2005. The United States maintains a small presence at a Honduran military base; the two countries conduct joint counternarcotics, humanitarian, disaster relief, and civic action exercises. U.S. troops conduct and provide logistics support for a variety of exercises--medical, engineering, peacekeeping, counternarcotics, and disaster relief--for the benefit of the Honduran people and their Central American neighbors. U.S. forces--regular, reserve, and National Guard--benefit greatly from the training and exercises. U.S. troops, in collaboration with counterparts from Brazil and Colombia, have since 1994 assisted Honduran soldiers in clearing land mines from the country's border with Nicaragua. As of early 2001, the U.S.-trained Honduran demining unit had cleared nine major minefields measuring about 333,000 square meters, and more than 2,200 mines had been destroyed. U.S. Policy Toward Honduras U.S.-Honduran ties are further strengthened by numerous private sector contacts, with an average of 110,000 U.S. citizens visiting Honduras annually and about 10,500 Americans residing there. More than 150 American companies operate in Honduras. Economic and Development Assistance October 1998's Hurricane Mitch--the worst natural disaster ever to strike the Western Hemisphere--left hundreds of thousands homeless, devastated the road network and other public infrastructure, and crippled certain key sectors of the economy. Estimates show that Hurricane Mitch caused $8.5 billion in damages to homes, hospitals, schools, roads, farms, and businesses throughout Central America, including more than $3 billion in Honduras alone. In response, the United States provided more than $461 million in immediate disaster relief and humanitarian aid spread over the years 1998-2001. This supplemental assistance was designed to help repair water and sanitation systems; replace housing, schools, and roads; provide agricultural inputs; provide local government crisis management training; grant debt relief; and encourage environmental management expertise. Additional resources were utilized to maintain anti-crime and drug assistance programs. The vast majority of the U.S. reconstruction projects are scheduled to finish by December 31, 2001, with the exception of some water and sanitation and transparency projects that have been extended for another 14 months. In 2001, the United States also provided food aid in response to a short drought and the depressed state of the agriculture sector. Subsequently, the United Statesd provided $265,000 in disaster assistance after Tropical Storm Michelle inundated the north coast with floods. New and existing U.S. economic programs--some with proposed enhancements that have taken on even greater importance since the hurricane--include the Caribbean Basin Economic Recovery Act, Overseas Private Investment Corporation financing for private investment and insurance against risks of war and expropriation, U.S. Trade Development Agency grant loans for prefeasibility studies of projects with U.S. product and services export potential, and U.S. Export-Import Bank short- and medium-term financing for U.S. exports to Honduran importers. All of these provide greater economic opportunity for U.S. and Honduran businessmen and women. The Peace Corps has been active in Honduras since 1962, and, currently, the program is one of the largest in the world. In 2001, there were 200 Peace Corps Volunteers working in the poorest parts of Honduras. The U.S. Government strongly supports the professionalization of the civilian police force as an important element in strengthening the rule of law in Honduras. The American embassy in Tegucigalpa provides specialized training to police officers through the International Criminal Training Assistance Program. Security Assistance In the absence of a large security assistance program, defense cooperation has taken the form of increased participation by the Honduran Armed Forces in military-to-military contact programs and bilateral and multilateral combined exercises oriented toward peacekeeping, disaster relief, humanitarian/civic assistance, and counternarcotics. The U.S. Joint Task Force Bravo (JTF-B) stationed at the Honduran Soto Cano Air Base plays a vital role in supporting combined exercises in Honduras and in neighboring Central American countries. While JTF-Bravo has been involved in several multilateral exercises and numerous smaller humanitarian deployments, it played an absolutely critical role in helping the United States to respond to Hurricanes Mitch and Keith, and the earthquakes in El Salvador by saving lives, repairing critical infrastructure, and in meeting high priority health and sanitation needs. U.S. forces also delivered millions of dollars worth of privately donated goods to those in need. U.S. Business Opportunities Opportunities for U.S. business sales include textile machinery, construction equipment, automotive parts and accessories, telecommunications equipment, pollution control/water resources equipment, agricultural machinery, hotel and restaurant equipment, computers and software, franchising, and household consumer goods. Best prospects for agricultural products are corn, milled rice, wheat, soybean meal, and consumer-ready products. U.S. citizens contemplating investment in real estate in Honduras should proceed with extreme caution, especially in the Bay Islands or coastal areas, because of frequently conflicting legislation, problems with land titles, and a weak judicial system. Investors or their attorneys should check property titles not only with the property registry office having jurisdiction in the area in which the property is located (being especially observant of marginal annotations on the deed and that the property is located within the area covered by the original title), but also with the National Agrarian Institute (INA) and the National Forestry Administration (COHDEFOR). Investors in land should be aware that even clear title is not a guarantee that a future dispute over land would be resolved equitably. Principal U.S. Embassy Officials The U.S. Embassy in Honduras is located on Avenida La Paz, Tegucigalpa (tel.: 011-504-2369320; faxes: general--011-504-236-9037, USAID-011-504-236-7776, PAS--0l1-504-236-9309, Military Group--011-504-233-6171, Commercial Section--011-504-238-2888, Consulate-011-504-237-1792). Internet: http://www.usmission.hn/ Contact Information Caribbean/Latin American Action U.S. Department of Commerce U.S. Agency for International Development For the most current version of this Note, see Background Notes A-Z. |
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