Honduras (01/06)

For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Republic of Honduras

Geography
Area: 112,090 sq. km. (43,278 sq. mi.); slightly larger than Virginia.
Cities: Capital--Tegucigalpa (1,150,000); San Pedro Sula (800,000-900,000).
Terrain: Mountainous.
Climate: Tropical to subtropical, depending on elevation.

People
Nationality: Noun and adjective--Honduran(s).
Population (2005 est.): 7 million.
Growth rate (2005 est.): 2.2%.
Ethnic groups: 90% mestizo (mixed Indian and European); others of European, Arab, African, or Asian ancestry; and indigenous Indians.
Religions: Roman Catholic, Protestant minority.
Language: Spanish.
Education (2003): Years compulsory--6. Attendance--88% overall, 31% at junior high level. Literacy--76.2%.
Health: Infant mortality rate--29.64/1,000. Life expectancy--66.2 yrs.
Work force: Services--42.2%; natural resources/agriculture--35.9%; manufacturing--16.3%; construction/housing--5.6%.

Government
Type: Democratic constitutional republic.
Independence: September 15, 1821.
Constitution: 1982; amended 1999.
Branches: Executive--president, directly elected to 4-year term. Legislative--unicameral National Congress, elected for 4-year term. Judicial--Supreme Court of Justice (appointed by Congress and confirmed by the president); several lower courts.
Political parties: National Party, Liberal Party, Innovation and National Unity Party, Christian Democratic Party, and the Democratic Unification Party.
Suffrage: Universal and compulsory at age 18.
Administrative subdivisions: 18 departments.

Economy (2005 est.)
GDP: $20.6 billion (PPP) or $8 billion (official exchange rate).
Growth rate: 4.5%.
Per capita GDP: $2,900 (PPP).
Per capita income: $1,035
Natural resources: Arable land, forests, minerals, and fisheries.
Agriculture (13% of GDP): Products--coffee, bananas, shrimp and lobster, sugar, fruits, basic grains, and livestock.
Manufacturing (31% of GDP): Types--textiles and apparel, cement, wood products, cigars, and foodstuffs.
Services (45% of GDP)
Trade: Exports--$1.73 billion: apparel, coffee, shrimp, bananas, palm oil, gold, zinc/lead concentrates, soap/detergents, melons, lobster, pineapple, lumber, sugar, and tobacco. Major market--U.S. (54.4%).
Imports--$4.16 billion: fabrics, yarn, machinery, chemicals, petroleum, vehicles, processed foods, metals, agricultural products, plastic articles, and paper articles. Major source--U.S. (37.5%).

PEOPLE
About 90% of the population is mestizo. There also are small minorities of European, African, Asian, Arab, and indigenous Indian descent. Most Hondurans are Roman Catholic, but Protestant churches are growing in number. While Spanish is the predominant language, some English is spoken along the northern coast and is prevalent on the Caribbean Bay Islands. Several indigenous Indian languages and Garífuna (a mixture of Afro-indigenous languages) are also spoken. The restored Mayan ruins near the Guatemalan border in Copan reflect the great Mayan culture that flourished there for hundreds of years until the early 9th century. Columbus landed at mainland Honduras (Trujillo) in 1502, and named the area "Honduras" (meaning "depths") for the deep water off the coast. Spaniard Hernan Cortes arrived in 1524.

HISTORY

Independence
Honduras and other Central American provinces gained independence from Spain in 1821. The country was then briefly annexed to the Mexican Empire. In 1823, Honduras joined the newly formed United Provinces of Central America federation, which collapsed in 1838. Gen. Francisco Morazan--a Honduran national hero--led unsuccessful efforts to maintain the federation. Honduras’ agriculture-based economy was 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 century until the mid-20th century.

Military Rule
Authoritarian Gen. Tiburcio Carias Andino controlled Honduras during the Great Depression, until 1948. In 1955--after two authoritarian administrations and a strike by banana workers--young military reformists staged a coup that installed a provisional junta and paved the way for constituent assembly elections in 1957. This assembly appointed Ramon Villeda Morales as President and transformed itself into a national legislature with a 6-year term. The Liberal Party ruled during 1957-63. In 1963, conservative military officers preempted constitutional elections and deposed Villeda in a bloody coup. These officers exiled Liberal Party members and took control of the national police. The armed forces, led by Gen. Lopez Arellano, governed until 1970. Popular discontent continued to rise after a 1969 border war with El Salvador, known as "the Soccer War." A civilian President--Ramon Cruz of the National Party--took power briefly in 1970 but proved unable to manage the government. In 1972, Gen. Lopez staged another coup. Lopez adopted more progressive policies, including land reform, but his regime was brought down in the mid-1970s by corruption scandals. 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.

Seven Consecutive Democratic Elections
Following the overthrow of Anastasio Somoza in Nicaragua in 1979 and general instability in El Salvador at the time, Hondurans elected a constituent assembly in 1980 and voted in general elections in 1981. A new constitution was approved in 1982, and the Liberal Party government of President Roberto Suazo Cordoba took office. Suazo relied on U.S. support during a severe economic recession, including 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 1985 election approached, the Liberal Party 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 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, Nationalist Rafael Callejas won the presidential election, taking office in 1990. 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 with 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, increased civilian control over the armed forces, transferred the police from military to civilian authority, and restored national fiscal health.

After winning the 1997 election by a 10% margin, Liberal Carlos Roberto Flores Facusse took office in 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. President Flores and his administration successfully managed more than $600 million in international assistance. President Flores also moved judicial and penal reforms forward, establishing an anticorruption commission, and supporting passage of a new penal code based on the oral accusatorial system and a law that created an independent Supreme Court. Flores also established a civilian Minister of Defense.

Ricardo Maduro Joest of the National Party won the 2001 presidential elections by 8 percent, and was inaugurated in 2002. During his campaign, President Maduro promised to reduce crime, reinvigorate the economy, and fight corruption. Maduro’s first act as President was to deploy a joint police-military force to the streets to permit wider neighborhood patrols in the ongoing fight against the country’s massive crime and gang problem. Maduro was a strong supporter of the global war on terrorism and joined the U.S.-led coalition in Iraq with an 11-month contribution of 370 troops. Under President Maduro’s guidance, Honduras also negotiated and ratified the U.S.-Central America Free Trade Agreement (CAFTA), received debt relief, became the first Latin American country to sign a Millennium Challenge Account compact with the U.S., and actively promoted greater Central American integration.

Jose Manuel "Mel" Zelaya Rosales of the Liberal Party won the November 27, 2005 presidential elections by under 4 percent—the smallest margin ever. Zelaya’s campaign theme was "citizen power," and he has vowed to increase transparency and combat narcotrafficking, while maintaining macroeconomic stability. The Liberal Party won 62 of the 128 congressional seats, just short of an absolute majority. Zelaya was inaugurated on January 27, 2006.

GOVERNMENT
The 1982 constitution provides for a strong executive, a unicameral National Congress, and a judiciary appointed by the National Congress. The president is directly elected to a 4-year term by popular vote. The Congress also serves a 4-year term; congressional seats are assigned the parties' candidates in proportion to the number of votes each party receives in the various departments. The judiciary includes a Supreme Court of Justice, courts of appeal, and several courts of original jurisdiction--such as labor, tax, and criminal courts. For administrative purposes, Honduras is divided into 18 departments, with municipal officials selected for 4-year terms.

POLITICAL CONDITIONS
Reinforced by the media and several political watchdog organizations, human rights and civil liberties are reasonably well protected. Organized labor now represents approximately 8% of the work force and its economic and political influence has declined. Honduras held its seventh consecutive democratic elections in 2005 to elect a new president, unicameral Congress, and mayors. For the first time, voters were able to vote for individual members of Congress rather than party lists.

Political Parties
The two major parties are the slightly left-of-center Liberal Party and the slightly-right-of-center National Party. The three much smaller registered parties--the Christian Democratic Party, the Innovation and National Unity Party, and the Democratic Unification Party—hold a few seats each in the Congress, but have never come close to winning the presidency.

Principal Government Officials

Honduras maintains an embassy in the United States at 3007 Tilden Street NW, Washington, DC 20008 (tel. 202-966-7702).

ECONOMY
Honduras is one of the poorest and least developed countries in Latin America, with nearly two-thirds of Hondurans living in poverty. Although historically dependent on exports of coffee and bananas, the economy has diversified over the past 20 years with the development of non-traditional exports such as cultivated shrimp, melons, and tourism, and the establishment of a growing maquila industry (primarily assembly for re-export of textiles and apparel). The maquila industry employs approximately 130,000 Hondurans. Honduras also has extensive forest, marine, and mineral resources, although widespread slash-and-burn agricultural methods and illegal logging continue to destroy Honduran forests. Family remittances from Hondurans living abroad (mostly in the United States) rose to an estimated $1.4 billion in 2005, or 15% of the country’s foreign exchange.

The 2005 exchange rate was 18.92 Honduran Lempira to the dollar, a slight devaluation from the 2004 rate of 18.21. Inflation, as measured by the consumer price index, was estimated at 9.2% in 2005. International reserves, which were $1.16 billion at end of 2003, rebounded to an estimated $2.23 billion in 2005. Unemployment was estimated at around 28% in 2005.

In 2005, Honduras reached completion point under the Heavily Indebted Poor Countries (HIPC) initiative, qualifying the country for multilateral debt relief. Honduras has also done well in maintaining its commitments under its 3-year International Monetary Fund (IMF) Poverty Reduction and Growth Facility program, begun in 2004.

NATIONAL SECURITY
With the cessation of the 1980s civil wars in El Salvador and Nicaragua, the Honduran armed forces refocused their orientation toward combating transnational threats such as narcoterrorism and organized crime. Honduras supports efforts at regional integration and deployed troops to Iraq in support of Operation Iraqi Freedom. In 1999, the constitution was amended to abolish the position of military commander in chief of the armed forces, thus codifying civilian authority over the military. Former President Flores also named the first civilian Minister of Defense in the country's history.

FOREIGN RELATIONS
Honduras is a member of the United Nations, the World Trade Organization (WTO), the Organization of American States (OAS), the Central American Parliament (PARLACEN), the Central American Integration System (SICA), the Conference of Central American Armed Forces (CFAC), and the Central American Security Commission (CASC). During 1995-96, Honduras—a founding member of the United Nations--served as a nonpermanent member of the UN Security Council for the first time. Honduras is currently a member of the UN Human Rights Commission. Honduras is a party to all UN and OAS counterterrorism conventions and protocols.

Honduras is a strong proponent of Central American cooperation and integration, and continues to work towards the implementation of a regional customs union and Central American passport, which would ease border controls and tariffs among Honduras, Guatemala, Nicaragua, and El Salvador.

In 1969, El Salvador and Honduras fought the brief "Soccer War" over disputed border areas. The two countries formally signed a peace treaty in 1980, which put the border dispute before the International Court of Justice (ICJ). In 1992, the Court awarded most of the disputed territory to Honduras, and in 1998, Honduras and El Salvador signed a border demarcation treaty to implement the terms of the ICJ decree. Demarcation has not yet been completed, but Honduras and El Salvador maintain normal diplomatic and trade relations. Honduras also has unresolved maritime border disputes with El Salvador, Nicaragua, Jamaica, and Cuba.

U.S.-HONDURAN RELATIONS

Overview
The United States and Honduras have close and friendly relations. Honduras is supportive of U.S. policy in the United Nations and other fora, as well of the war on terrorism. Honduras was among the first countries to sign an International Criminal Court (ICC) Article 98 Agreement with the U.S., and the Honduran port of Puerto Cortes is part of the U.S.’ Container Security Initiative (CSI).

The United States favors stable, peaceful relations between Honduras and its Central American neighbors. During the 1980s, Honduras supported U.S. policy 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 continues to participate in the UN observer mission in the Western Sahara, contributed 370 troops for the reconstruction of Iraq, and remains interested in participating in other UN peacekeeping missions.

The United States is Honduras' chief trading partner, with two-way trade in goods increasing to $7 billion in 2005. U.S.-Honduran trade is dominated by the Honduran maquila industry, which imports yarn and textiles from the United States and exports finished articles of clothing. Other 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.

The stock of U.S. direct investment in Honduras in 2004 was $339 million, up from $262 million in 2003. FDI flow into Honduras in 2004 surpassed $200 million, with the United States leading the way. The largest U.S. investments in Honduras are in the maquila sector, 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. Many U.S. franchises, particularly in the restaurant sector, operate in Honduras.

In 2004, the United States signed a free trade agreement with Honduras, El Salvador, Nicaragua, Guatemala, Costa Rica, and the Dominican Republic. The legislatures of all signatories but Costa Rica ratified the U.S.-Central America Free Trade Agreement (CAFTA) in 2005, and the agreement is expected to enter into force in the first half of 2006. CAFTA will eliminate tariffs and other barriers to trade in goods, services, agricultural products, and investments. Additionally, CAFTA is seen as a mechanism to solidify democracy, encourage greater regional integration, and provide safeguards for environmental protection and labor rights.

In June 2005, Honduras became the first country in the hemisphere to sign a Millennium Challenge Account (MCA) compact with the USG. Under the compact, the U.S. Millennium Challenge Corporation will invest $215 million over five years to help Honduras improve its road infrastructure, diversify its agriculture, and get its products to market.

The United States maintains a small presence at a Honduran military base; the two countries conduct joint peacekeeping, counternarcotics, humanitarian, disaster relief, and civic action exercises. U.S. troops conduct and provide logistics support for a variety of bilateral and multilateral 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. Policy Toward Honduras
U.S. policy toward Honduras is aimed at consolidating stable democracy with a justice system that protects human rights and promotes the rule of law. U.S. Government programs are aimed at promoting a healthy and more open economy capable of sustainable growth, improving the climate for business and investment while protecting U.S. citizen and corporate rights, and promoting the well-being of the Honduran people. The United States also works with Honduras to meet transnational challenges--including the fight against terrorism, narcotics trafficking, money laundering, illegal migration, and trafficking in persons--and encourages and supports Honduran efforts to protect the environment. The goals of strengthening democracy and promoting viable economic growth are especially important given the geographical proximity of Honduras to the United States. Approximately 800,000 to 1 million Hondurans reside in the United States; consequently, immigration issues are an important item on our bilateral agenda.

U.S.-Honduran ties are further strengthened by numerous private sector contacts, with an average of between 80,000 and 110,000 U.S. citizens visiting Honduras annually and about 15,000 Americans residing there. More than 150 American companies operate in Honduras.

Economic and Development Assistance
To help strengthen Honduras' democratic institutions and improve living conditions, the United States has provided substantial economic assistance. The United States has historically been the largest bilateral donor to Honduras. The USAID budget for Honduras is $45 million for fiscal year 2006. Over the years, U.S. foreign assistance has helped advance such objectives as fostering democratic institutions, increasing private sector employment and income, helping Honduras fund its arrears with international financial institutions, providing humanitarian aid, increasing agricultural production, and providing loans to microbusinesses.

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.

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 States provided $265,000 in disaster assistance after Tropical Storm Michelle inundated the north coast with floods. Most recently, the United States provided assistance for Honduras’ recovery from 2005’s devastating storms, including Hurricane Beta and Tropical Storm Gamma.

The Peace Corps has been active in Honduras since 1962, and currently the program is one of the largest in the world. In 2005, there were 220 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.

Security Assistance
The role of the Honduran armed forces has changed significantly in recent years as many institutions formerly controlled by the military are now under civilian authority. The defense and police budgets have hovered at around $35 million during the past few years. Honduras receives modest U.S. security assistance funds and training.

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 natural disasters in Central America 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
Bilateral trade between the two nations totaled $7 billion in 2005. Exports of goods and services from the U.S. totaled $2.56 billion 2002, and Honduran exports to the U.S. totaled $3.26 billion. U.S. investors account for nearly two-thirds of the estimated stock of $1.3 billion in foreign direct investment in Honduras. More than 150 American companies operate in Honduras; U.S. franchises are present in increasing numbers.

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
Ambassador--Charles A. Ford
Deputy Chief of Mission—Jim Williard
Political Counselor—Derrick Olsen
Economic Counselor—Patrick Dunn
Consul General--Ian Brownlee
Management Counselor--Jesse Coronado
USAID Director--Paul Tuebner
Public Affairs Officer--Melissa Cooper
Defense Attache--COL Derek Dickey
Military Group Commander--COL Jeffrey Moragne
Peace Corps Director--Ruben Hernandez

The U.S. Embassy in Honduras is located on Avenida La Paz, Tegucigalpa (tel.: 011-504-236-9320; faxes: general--011-504-236-9037, USAID--011-504-236-7776, Consulate--011-504-237-1792). Internet: http://honduras.usembassy.gov/english/index_e1.htm

Contact Information
American Chamber of Commerce
Hotel Honduras Maya
Apartado Postal 1838
Tegucigalpa, Honduras
Tel: (504) 232-7043/232-6035
Fax: (504) 232-9959
Branch office in San Pedro Sula
Tel: (504) 557-6402/559-6412
Fax: (504) 557-6402

U.S. Agency for International Development
1300 Pennsylvania Avenue, NW
Washington, DC 20523-0001
Tel: 202-712-4810
Fax: 202-216-3524
Internet: www.usaid.gov