Republic of Honduras
Since independence, Honduras has been plagued with nearly 300 internal rebellions, civil wars, and changes of government -- more than half occurring during this century. The country traditionally lacked both an economic infrastructure and social and political integration. Its agriculturally based economy came to be dominated in this century 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 assumed 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 non-governmental 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 collectively outpolled the National Party candidate, Rafael Leonardo Callejas, who received 42% of the vote. Jose Azcona Hoyo, the candidate receiving the most votes 27% among the Liberals, assumed the presidency in January 1986. With strong endorsement and support from the Honduran military, the Suazo Administration had 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 the Callejas Administration's economic reforms, growing public dissatisfaction with the rising cost of living and with seemingly 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. As a result, a notable start was made in institutionalizing the rule of law in Honduras.
A hallmark of the Reina Administration was his successful efforts to increase civilian control over the armed forces, making his time in office a period of fundamental change in civil-military relations in Honduras. Important achievements -- including the abolition of the military draft and passage of legislation transferring the national police from military to civilian authority -- have brought civil-military relations closer to the kind of balance normal in a constitutional democracy. Additionally, President Reina in 1996 named his own defense minister, breaking the precedent of accepting the nominee of the armed forces leadership.
Reina restored national fiscal health. After a rough start in 1994-95, the Reina administration substantially increased Central Bank net international reserves, reduced inflation to 12.8% a year, restored a healthy pace of economic growth (about 5% in 1997), and, perhaps most important, held down spending to achieve a 1.1% non-financial public sector deficit in 1997.
Carlos Roberto Flores Facusse took office on January 27, 1998, as Honduras' fifth democratically elected President since free elections were restored in 1981. Like three of his four predecessors, including his immediate predecessor, Flores is a member of the Liberal Party. He was elected with a 10% margin over his main opponent -- National Party nominee Nora de Melgar -- in free, fair, and peaceful elections on November 30, 1997. These elections, probably the cleanest in Honduran history, reflected the maturing of Honduras' democratic institutions. 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. International donors came forward to assist in rebuilding infrastructure, and the Honduran Government has been fairly transparent in the management of relief funds.
Principal Government Officials
Honduras maintains an embassy in the United States at 3007 Tilden Street NW, Washington, DC 20008 (tel. 202-966-7702).
The country signed an Enhanced Structural Adjustment Facility (ESAF) -- later converted to a Poverty Reduction and Growth Facility (PRGF) with the International Monetary Fund in March 1999. While Honduras continues to maintain stable macroeconomic policies, it has lagged in implementing structural reforms, such as privatization of the publicly-owned telephone and energy distribution companies. Honduras received significant debt relief in the aftermath of Hurricane Mitch, including the suspension bilateral debt service payments and bilateral debt reduction by the Paris Club -- including the U.S. -- worth over $400 million. In July 2000, Honduras reached its decision point under the Highly Indebted Poor Countries Initiative (HIPC), qualifying the country for interim multilateral debt relief.
President Flores consults frequently with the other Central American presidents on issues of mutual interest. He has continued his predecessor's strong emphasis on Central American cooperation and integration, which resulted in an agreement easing border controls and tariffs among Honduras, Guatemala, Nicaragua, and El Salvador. Honduras also joined its six Central American neighbors at the 1994 Summit of the Americas in signing the Alliance for Sustainable Development, known as the Conjunta Centroamerica-USA, or CONCAUSA, to promote sustainable economic development in the region. Honduras held the 6-month SICA presidency during the second half of 1998.
In 1969, El Salvador and Honduras fought the brief "Soccer War" over disputed border areas and friction resulting from the 300,000 Salvadorans who had emigrated to Honduras in search of land and employment. The catalyst was nationalistic feelings aroused by a series of soccer matches between the two countries. 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 that will implement the terms of the ICJ decree. The treaty awaits legal ratification in both countries. Honduras and El Salvador maintain normal diplomatic and trade relations.
Honduras and Nicaragua had tense relations throughout 2000 and early 2001 due to a boundary dispute off the Atlantic coast. Nicaragua imposed a 35% tariff against Honduras due to the dispute, and the matter is currently awaiting a decision from the ICJ.
At the 17th Central American Summit in 1995, hosted by Honduras in the northern city of San Pedro Sula, the region's six countries (excluding Belize) signed treaties creating confidence- and security-building measures and combating the smuggling of stolen automobiles in the isthmus. In subsequent summits (held every 6 months), Honduras has continued to work with the other Central American countries on issues of common concern.
In Costa Rica in May 1997, former President Reina met with former President Clinton, his Central American counterparts, and the President of the Dominican Republic to reaffirm support for strengthening democracy, good governance, and promoting prosperity through economic integration, free trade, and investment. The leaders also expressed their commitment to the continued development of just and equitable societies and responsible environmental policies as an integral element of sustainable development.
The U.S. 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 observers mission in the Western Sahara.
The U.S. works with Honduras for sustained economic, political, and social development and to combat drug trafficking in the region. Because of economic needs and security concerns, U.S. material assistance and political support are important to Honduras. The U.S. Agency for International Development (USAID) is active in Honduras, although official U.S. assistance to the country was reduced -- from $51 million in 1993 to $29 million in 1997 -- due to worldwide reductions in U.S. bilateral assistance. The U.S. increased its assistance to Honduras to over $300 million for 1999 through 2001 and is working with international lenders such as the World Bank and the private sector to promote economic recovery from Hurricane Mitch.
The United States is Honduras' chief trading partner, supplying 46% of its imports and purchasing 40% of its exports. Leading Honduran exports to the United States have included 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 United States' direct investment in Honduras is an estimated $840 million, about two thirds of the total foreign direct investment in the country. The largest U.S. investments in Honduras are in the maquila (garment assembly) 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. U.S. maquilas are responsible for the majority of the approximately 120,000 jobs in that sector. Many U.S. franchises, particularly in the restaurant sector, operate in Honduras.
The U.S. maintains a small presence at a Honduran military base; the two countries conduct joint counternarcotics, humanitarian, 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 -- since 1994 have 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 approximately 333,000 square meters and more than 2,200 mines had been destroyed.
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, USIS--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/
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 is fair and effective. 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 U.S. also works with Honduras to meet transnational challenges, including the fight against narcotics trafficking, 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.
A top priority is to assist Honduras and its Central American neighbors in recovering from Hurricane Mitch, which brought unprecedented destruction to the region in October 1998. In Honduras alone, an estimated $3 billion in damage to infrastructure and productive capacity was sustained. To the extent U.S. policy is successful in helping democracy and economic opportunity to flourish in Honduras, we contribute to a better quality of life for Hondurans and reduce the pressures that compel many Hondurans to attempt to migrate illegally to the U.S.
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. In recent years, more than 100 American companies have been operating in Honduras.
U.S. Economic and Development Assistance
However, Hurricane Mitch -- the worst natural disaster ever to strike the Western Hemisphere -- brought massive rains to Honduras that killed thousands of people, left hundreds of thousands homeless, devastated the road network and other public infrastructure, and crippled certain key sectors of the economy. Estimates are 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. Throughout the country, damage-affected highways, bridges, ports and airports; the electrical power system, the telephone, water, and sewage systems; hospitals and health centers; more than 3,000 schools; almost 83,000 houses; private agricultural infrastructure; and the non-agricultural private sector. Estimates of lost future productive capacity vary.
In response to this disaster, the U.S. provided more than $300 million in humanitarian aid spread over the years 1999-2001. This supplemental assistance is designed to help repair water and sanitation systems; housing, schools, and roads; provide agricultural inputs; local government crisis management training; debt relief for Honduras and Nicaragua; and environmental management expertise. Additional resources have been proposed to maintain anti-crime and drug assistance programs.
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 pre-feasibility 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 at one time the program there was the largest in the world. During that time some 5,000 American women and men, ranging in age from 22 to 65, have helped the people of Honduras. In 2001, there were 200 Peace Corps Volunteers working in the poorest parts of Honduras.
The government of President Flores is committed to the full implementation of a civilian police force and the Congress has taken essential constitutional steps to effect that. The U.S. Government strongly supports this action. The American embassy in Tegucigalpa provides specialized training to police officers through the International Criminal Training Assistance Program (ICITAP).
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 (JTF) 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 U.S. to respond to Hurricane Mitch, Hurricane Keith, and the earthquakes in El Salvador by saving lives, repairing roads and critical infrastructure, and 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
U.S. investors account for nearly two-thirds of the estimated $1.3 billion in foreign direct investment in Honduras, and more than 150 American companies operate there. The largest U.S. investment in Honduras is in the agribusiness sector. Other important sectors include petroleum products, marketing, maquiladoras (in bond assembly plants), electric power generation, banking, insurance, and tobacco. U.S. franchises have taken off in recent years, mostly in the fast food sector.
Opportunities for U.S. businesses include textile machinery, construction equipment, 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 caution, especially in coastal areas or on the Bay Islands, because of frequently conflicting legislation and problems with land titles. Such 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).
OTHER CONTACT INFORMATION
Caribbean/Latin American Action
1818 N Street, N.W.
Washington, D.C. 20036
U.S. Department of Commerce
International Trade Administration
Office of Latin America and the Caribbean
14th and Constitution Avenue, N.W.
Washington, D.C. 20230
U.S. Agency for International Development
1300 Pennsylvania Avenue, N.W.
Washington, D.C. 20523-0001
Hurricane Relief Website: http://hurricane.info.usaid.gov