Honduras Foreign Trade

Honduras Foreign Trade and Policy

Estimated GDP (US $): 24.9 billion (2019)

Per capita income (purchasing power parity): 2204 USD (2019)

Rank of human Development (HDI): 132 of 189 (2019)

Proportion of poverty: 64% (2018)

Distribution of income (Gini coefficient): 50 (2016)

Economic Transformation Index (BTI): 5.21 (Rank 77 of 136, 2020)

The most important foreign policy partner is the USA, followed by the Central American states and Mexico. During Zelaya’s term of office, the relationship with his “big brother” was disrupted by a rather provocative policy. Joining the Petrocaribe Agreement (to obtain oil on preferential terms from Venezuela) and joining the ALBA (Alternativa Bolivariana para los Pueblos de Nuestra América) displeased not only the Honduran oligarchy but also the USA. The current relationship is largely dominated by the migration caravans. Trump has put the payments of the funds in the context of development cooperation on hold for the time being. NACLA gives an analysis why this is not a good sign as it is yet another attack on migrants.

Honduras has concluded an asylum cooperation agreement with the USA, which makes Honduras safe third countries alongside Guatemala and El Salvador, i.e. the countries from which the majority of people are fleeing because of the unsafe situation.

After the coup, Honduras was isolated in terms of foreign policy. The international community unanimously condemned the coup against Zelaya and called for his reinstatement as president. Numerous states, including all EU countries, withdrew their ambassadors from Honduras. The Organization of American States (OAS) suspended Honduras’ membership. The international community did not recognize the PN politician Carlos López Contreras, appointed foreign minister by Micheletti, as a representative of Honduras.

Shortly after the 2009 elections, the country’s international relations normalized. For Honduras important (donor) countries such as the USA or Spain have recognized the new government. The Cartagena Agreement of May 22, 2011 paved the way for Honduras from isolation to the OAS.

According to mathgeneral, Honduras was present at the founding summit of CELAC and was thus able to normalize relations with most of the Latin American countries.

Honduras is a member of the Inter-American Development Bank and belongs to the institutions of the Central American Integration System – SICA.

Data and statistics on the economy

The World Bank has basic economic data in the country profile. CEPAL – the Economic Commission for Latin America of the United Nations publishes regular reports on the economic situation of the individual countries.

On the website of the Central Bank of Honduras (BCH) you can find a lot of statistics, but they are not entirely up to date.

The Inter-American Development Bank (IDB) has statistics that also cover topics such as public debt and tax revenue.

An analysis of the current economic situation can be found at the Central American Bank for Economic Integration (BCIE).

The Federal Foreign Office deals with relations with Germany. On the German Trade & Invest website you can find economic data that is always updated in May and November.

Trade and trade agreements

The USA is the main economic reference point for Honduras. According to the CIA’s World Factbook, more than 54% of exports and 48% of imports go to the United States.

In a free trade agreement, all five Central American countries have signed the CAFTA-DR (Central America-Dominican Republic-United States Free Trade Agreement) with the USA together with the Dominican Republic. The agreement has been in force since April 1, 2006. So far, the impact of the free trade agreement on employment growth and poverty reduction has been cautiously assessed as positive. In general, the free trade agreements in Honduras tend to have negative effects.

The six Central American countries Honduras, Guatemala, El Salvador, Nicaragua, Costa Rica and Panama, represented by the Organization of Central American States (SICA), signed the Association Agreement with the EU in June 2012. The agreement is a free trade agreement that presents a number of risks, opportunities and challenges for the region. The agreement consists of three pillars: political dialogue, cooperation and trade. The Association Agreement was ratified by the European Parliament in December 2012. There were protests by civil society against the association agreement. The criticism of the agreement results from the fact that the north-south divide in trade is underpinned and that no sanctions are provided for in the event of human rights violations.

Honduras signed a free trade agreement with Canada, a trading partner that has grown enormously in importance over the past five years, in 2013, which has been in force since October 2014. In addition to the important trading partners with whom Honduras has concluded free trade agreements, a number of other free trade agreements have been signed, such as with Mexico, Colombia, Taiwan and Panama. An agreement with South Korea is under discussion.

The current government of Honduras is also looking for new trading partners such as Russia or Brazil and would like to join the Pacific Alliance, where the country currently has observer status. Israel opened a trade cooperation office in Honduras in August 2020.

The largest source of foreign currency in the country for years has been the money transfers from Hondurans who have emigrated to the USA (or less frequently to Canada or Europe) to their families who have stayed in Honduras. Remittances represent almost 20% of GDP and have been increasing since 2013 continuously. In 2019, remittances reached a record $ 5.5 billion. However, this inflow of funds only supports the economic or social development of the country to a very limited extent, as it is mainly spent on living costs and health. The remittances are therefore a double-edged sword, as they also contribute to maintaining the situation in Honduras by financing what are actually public services.

Honduras Foreign Trade