Doing Business in Honduras
The Country Commercial Guide provides a useful starting point for U.S. businesses pursuing export and investment opportunities in Honduras.
Market Overview
The U.S. is the chief trading partner for Honduras, supplying 46.2 percent of Honduran imports and purchasing 33.4 percent of Honduran exports in 2011 (excluding maquila trade). Bilateral trade between the two nations totaled $10.6 billion in 2011. U.S. exports to Honduras continued to perform well in 2011 reaching $6.1 billion, an increase of 33 percent over 2010.
On August 5, 2004, the United States signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) with five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican Republic. CAFTA-DR eliminates most tariffs and other barriers 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. 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 by 2016.
The Government of Honduras views foreign investment as crucial for economic growth and development. In 2010, it began to draft new laws to improve the legal framework and incentives for investment in Honduras. A Public-Private Partnership law was passed in August 2010 and an Hourly Employment Law was approved in November 2010. In May 2011, the Honduran National Congress approved a new Investment and Protection and Promotion Law, aimed at improving conditions for investing in Honduras. The Government of Honduras is also in the process of creating a “Single Window” for foreign direct investment.
More than 150 American companies are currently operating in Honduras. According to the U.S. Department of Commerce/Bureau of Economic Analysis, the stock of U.S. investment in Honduras was $1,027 billion (on a historical cost basis) at the end of 2010. Foreign Direct Investment (FDI) in Honduras totaled USD $687 million in 2010, an increase of 37.3 percent from 2009.
In 2011, the Honduran economy continued its modest recovery from the effects of the global economic crisis and the 2009 coup d’état, both of which created an atmosphere of uncertainty leading to a virtual halt in international and domestic investment. GDP growth for 2010 was 2.8 percent, following a 2.1 percent contraction of GDP in 2009. Preliminary estimates indicate that the GDP grew at approximately 3 to 3.5 percent in 2011.
Honduras, with an estimated per capita GDP of USD 2,105 in 2011, is one of the poorest countries in the Western Hemisphere, with about 65 percent of the population living in poverty. Roughly 1 million Hondurans have migrated to the United States. Remittance inflows from Hondurans living abroad, mostly in the United States, are the largest source of foreign income and a major contributor to domestic demand. Remittances totaled USD 2.8 billion in 2011, up 10.7 percent from 2010 levels; this is equivalent to almost one-fifth of Honduras’ GDP.
The CAFTA-DR region overall enjoys relative stability. Other factors that make the CAFTA-DR markets attractive for U.S. exporters include proximity to the U.S., and adequate port infrastructure. Despite the economic downturn in 2009, the region as a whole achieved 0.6 percent GDP growth. Further regional integration could spur investment, growth, trade and continued market opportunities for U.S. firms in coming years.
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