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With a gross national income of US$ 1,600 per capita, Honduras is one of the least developed countries in the Western hemisphere. Half the Honduran population lives below the poverty line and unemployment reaches 28%. The economy has historically been dependent on banana and coffee exports but in the past decades, it has slowly diversified into tourism, maquila (off-shore assembly for re-export) and new exports such as shrimp and melon. Although the economy has grown by more than 6% per year since 2007, the largest source of foreign currency is remittances sent by Hondurans working abroad, especially in the U.S. These remittances represent roughly a quarter of GDP.

Past and present

Honduras saw its development shaped by the U.S. companies that established vast banana plantations along the north coast in the early 20th century. The companies grew to control huge portions of land and wield considerable political influence, to the point that the term “banana republic” was actually coined in Honduras. Until the 1950’s, the economy basically was one of subsistence agriculture, with foreign companies controlling the export trade of bananas as well as minerals.

In the following decades, the Honduran economy grew steadily as exports diversified, then the country’s involvement in the U.S.-backed Contra war of Nicaragua in the 1980’s dragged it down again. Growth picked up again in the 1990’s, as Asian investors set up maquilas, the tax-free manufactures. But in 1998, Hurricane Mitch devastated the country, dealing a severe blow to production. The economy has slowly been growing again over the past decade, even reaching a rate of 6% in 2007.

The CAFTA-DR free trade agreement signed by several Central American countries and the U.S. in 2005 is expected to further bolster private investment. However, the economy has been burdened by heavy foreign debt, to the point that Honduras is even one of the few countries outside of Sub-Saharan Africa to have qualified for the IMF and World Bank’s Heavily Indebted Poor Countries debt relief program in 2006. The country is still dependent on the fluctuations of the U.S. economy and on the prices of its exports such as coffee and bananas, but revenue from tourism is increasing steadily, totaling US$567m in 2007.


20 Jan 2009

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