IV.

Economy

Honduras is one of the poorest and least developed countries in the Western Hemisphere. Agriculture is the mainstay of the economy. The country’s extreme dependence on the export of agricultural products with constantly fluctuating world prices has made the economy highly unstable. The government sought to diversify the economy during the 1990s by developing tourism, new agricultural exports, and manufacturing industries based on assembly of clothing and textiles for export. Despite some success in these areas, unemployment has remained high. Devastation caused by Hurricane Mitch in 1998 delivered a major setback to the country’s development.

The gross domestic product (GDP), which measures the total value of goods and services produced, was $9.2 billion in 2006. Per capita GDP was $1,325.20 in 2006. The national budget in 2006 included $1,804 million in revenue and $1,939 million in expenditure.

A.

Agriculture

Some 12.8 percent of the total land area of Honduras is cultivated or used for plantation agriculture, most of it on the coastal plains. Because of the country’s rugged terrain, much of the land is unsuitable for agriculture. Poor transportation and the lack of modern production methods have left farms in the highlands physically isolated and economically backward. Along the Caribbean coast, United States companies developed vast plantations on which to grow bananas for export. The banana companies introduced modern methods and transport systems to serve their plantations.

The U.S. fruit companies were granted vast concessions of land along the fertile coastal plain around 1900. The region’s easy access to the southern ports of the United States helped it to become the world’s second largest banana exporting area, following Ecuador. Until the middle of the 20th century, the U.S. banana companies completely dominated the Honduran economy. The government and large landowners who shared the wealth from the banana trade made few efforts to promote other crops.

Coffee first became an important commercial crop in the 1950s. It is grown throughout the mountainous area of the interior. Honduran coffee farms tend to be small. Cotton, which is grown on the Pacific coastal plain, became important in the late 1950s.

Today, the leading cash crops grown in Honduras (with annual production for 2006 in metric tons) are fruits such as bananas and plantains (1,696,409) and coffee (190,640). Other important crops include sugarcane (5 million), cantaloupes and other melons, oranges, and oil palm fruit. The principal food crops are corn (470,000), beans (75,000), and rice (19,200). Production of these food staples is carried out principally by small subsistence farmers on the infertile soils of the mountainous interior.

Cattle have been raised on large ranches in the highlands and the Caribbean lowlands since colonial times. Beef production rose significantly after 1960 with the opening of the country’s first modern meat-packing plants. Exports of beef declined in the 1980s as local consumption grew. The livestock population in 2006 numbered 2.50 million cattle and 490,000 pigs. Chickens are raised for local consumption.

B.

Forestry and Fishing

Honduras once had abundant forests. As in much of Central America, the forests have been disappearing at an alarming rate. Poor, landless farmers cleared land to raise crops, cattle ranchers cleared vast tracts for grazing land, and loggers cut down trees for lumber. Most of the wood exported by Honduras is pine and other softwoods. A reforestation program has been hampered by rudimentary lumbering methods and poor transportation facilities. In 2006 roundwood production was 9.54 million cubic meters (337 million cubic feet).

Exports of shellfish, primarily shrimp and lobsters, grew in importance during the 1990s and early 2000s, with shrimp farming joining the country’s industries. The fish catch in 2005 of 48,580 metric tons was primarily shellfish.

C.

Mining

Deposits of zinc, silver, and lead are mined in Honduras. Other resources reported, but largely unworked, include iron ore, coal, and tin. In 2004, 41,000 metric tons of zinc concentrate and 48 metric tons of silver were mined.

D.

Manufacturing

Honduran industry has grown significantly since the mid-1950s. Traditional industries were based largely on the production of agricultural and forestry products, including cotton, sugar, beverages, and furniture and other wood products. Cement was another important product. Textiles grew in importance during the 1980s, and in the 1990s the assembly of goods for export became significant as a result of the Caribbean Basin Initiative. This United States initiative allows for the duty-free importation of clothing assembled from U.S. cloth. Factories also opened to assemble electronics, furniture, and metal goods. Most of the assembly industries were based near the coastal ports of San Pedro Sula and Puerto Cortés. The capital, Tegucigalpa, is also a center of industry.

E.

Tourism

Tourism has grown in importance and provides the country with much-needed income. Most of the visitors to the country come from elsewhere in Central America or from the United States. The well-preserved ruins of the ancient Maya civilization at Copan are a leading tourist attraction. Palm-fringed beaches along the Caribbean coast draw vacationers who wish to relax. Others choose to visit mangrove swamps, cloud forests high in the mountains, or some of the country’s many national parks where they can observe wild life, especially the country’s colorful birds. The Bay Islands off the Caribbean coast of Honduras are ringed by coral reefs, which makes them popular for snorkeling.

F.

Currency and Banking

The unit of currency in Honduras is the lempira, divided into 100 centavos (18.90 lempiras equal U.S.$1; 2006 average). The bank of issue is the Banco Central de Honduras. The government-controlled Municipal Bank and National Agricultural Development Bank provide credit for developmental projects.

G.

Commerce and Trade

Bananas and coffee have traditionally been the leading Honduran exports by value, although in the early 2000s they were surpassed by export revenues from industries that assemble parts for electronic devices, furniture, and other goods. Other food exports, especially shellfish, contributed significantly. The United States is the principal trading partner of Honduras. El Salvador is another leading purchaser of Honduran exports. Guatemala, El Salvador, and Mexico are other sources for imports.

The total yearly value of exports in 2003 was $992 million. Since the mid-1970s imports have risen rapidly, reaching a value of $3.32 billion in 2003. Income from tourism helped balance the country’s trade deficit, as has money sent back to the country by Hondurans living abroad, especially in the United States.

H.

Transportation

In 1870 the government planned to build a railroad, but because of bad planning and mismanagement, only 142 km (88 mi) were finished. The banana companies later built some 600 km (370 mi) of railroads for their own use along the northern coast. The rest of Honduras was served only by mule trails until road building began in the late 1940s. The Inter-American Highway (160 km/100 mi in Honduras) runs along the Pacific coast and links Honduras with Nicaragua, Guatemala, and El Salvador. A good road connects this highway with Tegucigalpa. Today, the total length of roads in Honduras is 13,600 km (8,451 mi).

The mountainous character of Honduras has made aviation an important means of transportation. Today, about 30 local airports, several international airports, and more than 100 small fields are in use. Puerto Cortés, on the Caribbean coast, is the country’s principal port. Other ports on the Caribbean include Tela, La Ceiba, and Puerto Castilla. Amapala and San Lorenzo are the main ports on the Pacific coast.

I.

Communications

Journalists in Honduras generally practice self-censorship to avoid offending government authorities or powerful media owners. Honduras has 7 daily newspapers. The country also has 410 radio receivers and 101 televisions for every 1,000 residents; there are 4 main television stations. Honduras had 69 telephone mainlines for every 1,000 people in 2005.

J.

Labor

The total labor force of Honduras numbers 3.02 million, of which 39 percent are engaged in agriculture.