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Honduras Economy
 
 
 
 
 

General

The economy is based mostly on agriculture, which accounted for 22% of its gross domestic product (GDP) in 1999. Leading export coffee ($340 million) accounted for 22% of total Honduran export revenues. Bananas, formerly the country's second-largest export until being virtually wiped out by 1998's Hurricane Mitch, recovered in 2000 to 57% of pre-Hurricane Mitch levels. Cultivated shrimp are another important export sector.

Honduras has extensive forest, marine, and mineral resources, although widespread slash and burn agricultural methods continue to destroy Honduran forests. Unemployment is estimated at around 28%. The Honduran economy grew 4.8% in 2000, recovering from the Mitch-induced recession (-1.9%) of 1999. The Honduran maquiladora sector, the third-largest in the world, continued its strong performance in 2000, providing employment to over 120,000 and generating more than $528 million in foreign exchange for the country. Inflation, as measured by the consumer price index, was 10.1% in 2000, down slightly from the 10.9% recorded in 1999. The country's international reserve position continued to be strong in 2000, at slightly over $1 billion. Remittances from Hondurans living abroad (mostly in the US) rose 28% to $410 million in 2000. The lempira (currency) was devaluing for many years but stabilised at L19 to the US dollar in 2005. The minimum wage is $150 a month.

Both the electricity services (ENEE) and land-line telephone services (HONDUTEL) have been operated by government agencies, with ENEE receiving heavy subsidies because of chronic financial problems. HONDUTEL, however, is no longer a monopoly, the telecommunication sector having been opened to private-sector companies after December 25, 2005; this was one of the requirements before approving the beginning of CAFTA. There are price controls on petrol, and other temporary price controls for basic commodities are often passed for short periods by the Congress.

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 privatisation 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 US, worth over $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.

Overview

Economy - overview
Honduras, the second poorest country in Central America and one of the poorest countries in the Western Hemisphere, with an extraordinarily unequal distribution of income and massive unemployment, is banking on expanded trade under the US-Central America Free Trade Agreement (CAFTA) and on debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. Despite improvements in tax collections, the government's fiscal deficit is growing due to increases in current expenditures and financial losses from the state energy and telephone companies. Honduras is the fastest growing remittance destination in the region with inflows representing over a quarter of GDP, equivalent to nearly three-quarters of exports. The economy relies heavily on a narrow range of exports, notably bananas and coffee, making it vulnerable to natural disasters and shifts in commodity prices, however, investments in the maquila and non-traditional export sectors are slowly diversifying the economy. Growth remains dependent on the economy of the US, its largest trading partner, and on reduction of the high crime rate, as a means of attracting and maintaining investment.

GDP (purchasing power parity)
$32.26 billion (2007 est.)

GDP (official exchange rate)
$12.28 billion (2007 est.)

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