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The Country Commercial Guide provides a useful starting point for U.S. business persuing export and investment opportunities in Honduras.
Market Overview
U.S. exporters enjoy an enviable position in the Honduran market, and saw this position improve after the 2006 implementation of the Central American Free Trade Agreement (CAFTA-DR), which was signed by the U.S., Honduras, El Salvador, Nicaragua, Costa Rica, Guatemala, and the Dominican Republic in August 2004. Honduras was the second country to ratify CAFTA-DR, which entered into force for Honduras on April 1, 2006, one month following El Salvador and the United States. CAFTA-DR eliminates most tariffs and other barrier for U.S. goods destined for the Central American market, provides protection for U.S. investments and intellectual property and creates more transparent rules and procedures for conducting business. CAFTA-DR also aims to eliminate intra-Central American tariffs, and facilitate increased regional trade, benefiting U.S. companies manufacturing in Honduras.
Over the past decade, U.S. exports to Honduras have increased both in terms of absolute dollar value and in terms of market share. Strong prospects for exports of goods and services are extensive and include: franchising; food processing and packaging equipment; hotel and restaurant equipment; processed foods, auto parts and transportation machinery; travel and tourism services; printing and graphic arts equipment; safety and security equipment; electrical machinery; and electrical power generation/renewable energy equipment. Honduran imports of textiles and apparel input materials, oils and lubricants, industrial chemicals, plastic materials, electrical machinery and sound equipment, automotive vehicles, food industry products, and general consumer goods all showed increases in 2007-2008.
The U.S. is the chief trading partner for Honduras, supplying 52 percent of Honduran imports and purchasing approximately two-thirds of Honduran exports. U.S. exports to Honduras in 2008 were $4.8 billion, up approximately 9 percent from the previous year. Honduran tariffs on most goods from outside the Central American Common Market (CACM) are currently within the zero to 15 percent range. With CAFTA-DR implemented, about 80 percent of U.S. goods now enter the region duty-free, with tariffs on the remaining 20 percent to be phased out within 10 years. Nearly all textile and apparel goods that meet the Agreement’s rules of origin became duty-free and quota-free immediately, thus promoting new opportunities for U.S. fiber, yarn, fabric, and apparel manufacturers. Honduras is the seventh largest exporter of apparel and textile products by volume to the U.S. market behind countries such as Mexico and China, and first among Central American and Caribbean countries.
The total value of U.S. investments in Honduras on an historical
cost basis at the end of 2007 was $968 million, according to the
U.S. Department of Commerce. The United States continued to
be the largest investor in Honduras in 2007, accounting for
$578.5 million, or 53.3 percent, of the total inflow. The
United Kingdom comes next at 13.8 percent, followed by Mexico at
13.5 percent.
According to the Central Bank of Honduras (BCH), the flow of foreign direct investment (FDI) into Honduras in 2007 was $929.3 million, up 37.8 percent from $674.1 million in 2006. During 2007, Honduras was the third largest recipient of FDI flows in Central America, after Costa Rica and El Salvador. The BCH expects FDI inflow to top $1 billion in 2008. Of the total FDI inflow, 23.6 percent ($219.6 million) is directed toward the export processing (maquila) sector. Canada is the largest foreign investor in the maquila sector, with 51.3 percent of the total inflow in 2007, followed by the United States at 37.2 percent and South Korea at 5 percent. Sectors receiving the highest amounts of FDI in 2008 were financial and insurance, manufacturing, and telecommunications.
The Honduran government is generally open to foreign investment,
with limited restrictions and performance requirements, although
some U.S. investors have experienced extensive waiting periods
for environmental permits and other regulatory and legislative
approvals.
Honduras marked 26 years of unbroken civilian, constitutional
rule in 2008 with the holding of primary elections in November
that were considered free and fair. The winners will
compete in the general election in November 2009 to succeed
President José Manuel “Mel” Zelaya of the Liberal Party, who was
elected to a four-year term in November 2005. There are no
possibilities for re-election in Honduras.
Economic growth in 2006 and 2007 averaged more than 6 percent,
led by the construction, agricultural and financial
sectors. Remittances from Hondurans living in the United
States, equal to about one-fifth of Honduran GDP, contributed
significantly to domestic demand in recent years. However,
the growth rate of remittances has slowed in the past two years
and could become negative in 2009. Meanwhile, GDP growth
slowed to around 4 percent in 2008 and economic activity could
deteriorate significantly in 2009 given adverse international
economic conditions.
Overall, Central America and Honduras enjoy relative stability, growing economies, proximity to the U.S., and adequate port infrastructure, all of which make these markets attractive for U.S. exports. Regional integration should spur investment, growth, trade and continued market opportunities for U.S. firms in coming years.