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Background Note:
Honduras PROFILE
OFFICIAL NAME: Geography People Government Flag: Economy (2000 data) PEOPLE AND HISTORY Independence Since independence, Honduras has been plagued with nearly 300 internal rebellions, civil wars, and changes of government--more than half occuring during the 20th century. The country traditionally lacked both an economic infrastructure and social and political integration. Its agriculturally based economy came to be dominated in the 1900s by U.S. companies that established vast banana plantations along the north coast. Foreign capital, plantation life, and conservative politics held sway in Honduras from the late 19th until the mid-20th century. During the relatively stable years of the Great Depression, authoritarian Gen. Tiburcio Carias Andino controlled Honduras. His ties to dictators in neighboring countries and to U.S. banana companies helped him maintain power until 1948. By then, provincial military leaders had begun to gain control of the two major parties, the Nationalists and the Liberals.
From Military to Civilian Rule Gen. Lopez' successors continued armed forces modernization programs, building army and security forces, and concentrating on Honduran air force superiority over its neighbors. The regimes of Gen. Melgar Castro (1975-78) and Gen. Paz Garcia (1978-83) largely built the current physical infrastructure and telecommunications system of Honduras. The country also enjoyed its most rapid economic growth during this period, due to greater international demand for its products and the availability of foreign commercial lending.
Following the overthrow of Anastasio Somoza in Nicaragua in 1979 and general instability in El Salvador at the time, the Honduran military accelerated plans to return the country to civilian rule. A constituent assembly was popularly elected in April 1980 and general elections were held in November 1981. A new constitution was approved in 1982, and the Liberal Party government of President Roberto Suazo Cordoba took office following free and fair elections power.
Suazo relied on U.S. support to help with a severe economic recession and with the threat posed by the revolutionary Sandinista government in Nicaragua amid a brutal civil war in El Salvador. Close cooperation on political and military issues with the United States was complemented by ambitious social and economic development projects sponsored by the U.S. Agency for International Development (USAID). Honduras became host to the largest Peace Corps mission in the world, and nongovernmental and international voluntary agencies proliferated.
As the November 1985 election approached, the Liberal Party had difficulty settling on a candidate, and interpreted election law as permitting multiple presidential candidates from one party. The Liberal Party claimed victory when its presidential candidates, who received 42% of the vote, collectively outpolled the National Party candidate, Rafael Leonardo Callejas. Jose Azcona Hoyo, the candidate receiving the most votes among the Liberals, assumed the presidency in January 1986. With the endorsement of the Honduran military, the Azcona administration ushered in the first peaceful transfer of power between civilian presidents in more than 30 years. Four years later, Rafael Callejas won the presidential election, taking office in January 1990. Callejas concentrated on economic reform, reducing the deficit, and taking steps to deal with an overvalued exchange rate and major structural barriers to investment. He began the movement to place the military under civilian control and laid the groundwork for the creation of the public ministry (Attorney General's office).
Despite his administration's economic reforms, the nation's fiscal deficit ballooned during Callejas' last year in office. Growing public dissatisfaction with the rising cost of living and with widespread government corruption led voters in 1993 to elect Liberal Party candidate Carlos Roberto Reina over National Party contender Oswaldo Ramos Soto, with Reina winning 56% of the vote.
President Reina, elected on a platform calling for a "moral revolution," actively prosecuted corruption and pursued those responsible for human rights abuses in the 1980s. He created a modern attorney general's office and an investigative police force and was successful in increasing civilian control over the armed forces and transferring the police from military to civilian authority.
Reina also restored national fiscal health by substantially increasing Central Bank net international reserves, reducing inflation, restoring economic growth, and, perhaps most importantly, holding down spending.
Carlos Roberto Flores Facusse took office on January 27, 1998, as Honduras' fifth democratically elected president since democratic institutions were restored in 1981. Like three of his four predecessors, Flores was a member of the Liberal Party. He was elected by a 10% margin over his main opponent, National Party nominee Nora de Melgar. Upon taking office on January 27, 1998, Flores inaugurated programs of reform and modernization of the Honduran Government and economy, with emphasis on helping Honduras' poorest citizens while maintaining the country's fiscal health and improving international competitiveness.
In October 1998, Hurricane Mitch devastated Honduras, leaving more than 5,000 people dead and 1.5 million displaced. Damages totaled nearly $3 billion. The Honduran Government agreed to a new transparent process to manage relief funds, which included significant donor oversight. This open process greatly facilitated the relief and reconstruction effort. President Flores and his administration have successfully managed more than $600 million in international assistance. Civil society's role in the government-coordinated reconstruction process has been lauded internationally. President Flores also forwarded judicial and penal reforms. He established an anticorruption commission, supported passage of a new penal code based on the oral accusatorial system, and saw passage of a law that creates an independent Supreme Court. Flores cemented the transition from military to civilian rule by eliminating the commander in chief position, and by signing a law that establishes civilian control formally over the military.
Ricardo Maduro Joest of the National Party was elected to the Honduran presidency on November 25, 2001, outpolling the Liberal candidate, Rafael Pineda Ponce, by 8%. He will be inaugurated on January 27, 2002. The elections, characterized by international observer teams as free, fair, and peaceful, reflected the maturing of Honduras' democratic institutions. During his campaign, President-elect Maduro promised to reduce crime, reinvigorate the economy, and fight corruption.
GOVERNMENT POLITICAL CONDITIONS Political Parties Principal Government Officials NATIONAL SECURITY ECONOMY Unemployment is estimated at around 4.0%, though underemployment is much higher. The Honduran economy grew 4.7% in 2000, recovering from the Mitch-induced recession (-1.9%) of 1999. The economy is expected to grow 3% in 2001, led by continuation of foreign-funded reconstruction projects. The Honduran maquiladora sector, the second-largest in the world, continued its strong performance in 2000, providing employment to more than 125,000 workers and generating over $528 million in foreign exchange for the country. The economic slowdown in the U.S. caused Honduras' maquila sector growth to stagnate in 2001 and employment in the sector to drop to about 115,000.
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.
The country signed an Enhanced Structural Adjustment Facility (ESAF)--later converted to a Poverty Reduction and Growth Facility (PRGF) with the International Monetary Fund (IMF) in March 1999. While Honduras continues to maintain stable macroeconomic policies, it has lagged in implementing structural reforms, such as privatization of the publicly owned telephone and energy distribution companies. Honduras received significant debt relief in the aftermath of Hurricane Mitch, including the suspension of bilateral debt-service payments and bilateral debt reduction by the Paris Club--including the U.S.--worth more than $400 million. In July 2000, Honduras reached its decision point under the Highly Indebted Poor Countries Initiative (HIPC), qualifying the country for interim multilateral debt relief. In 2001, the IMF approved Honduras' third year PRGF, and together with the World Bank, the Poverty Reduction Strategy Paper, which makes Honduras eligible for interim debt relief and qualify for $556 million in debt relief in present value terms at its completion point in December 2002.
FOREIGN RELATIONS Honduras is a strong proponent of Central American cooperation and integration, and has joined in an agreement easing border controls and tariffs among Honduras, Guatemala, Nicaragua, and El Salvador. Honduras held the 6-month SICA presidency during the second half of 2001, and worked hard to advance regional cooperation with the U.S. on issues related to sustainable development. President Flores also was instrumental in galvanizing regional support for counterterrorism measures following the September 11 attacks.
In 1969, El Salvador and Honduras fought the brief "Soccer War" over disputed border areas and the emigration of some 300,000 Salvadorans to Honduras in search of land and employment. The catalyst was nationalistic feelings aroused by a series of soccer matches between the two countries, but the roots of the conflict lay in local disputes over land ownership and usage. The two countries formally signed a peace treaty on October 30, 1980, which put the border dispute before the International Court of Justice (ICJ). In September 1992, the Court awarded most of the disputed territory to Honduras. In January 1998, Honduras and El Salvador signed a border demarcation treaty to implement the terms of the ICJ decree. The treaty awaits legal ratification in both countries. Honduras and El Salvador maintain normal diplomatic and trade relations, however, they continue to have strained relations over the status of their maritime borders in the Gulf of Fonseca.
Honduras and Nicaragua had tense relations throughout 2000 and early 2001 due to a maritime boundary dispute off the Atlantic coast. Nicaragua imposed a 35% tariff against Honduras due to the dispute, and the Central American Court of Justice ruled the tariff illegal in 2001.
Overview The U.S. favors stable, peaceful relations between Honduras and its Central American neighbors. During the 1980s, Honduras supported U.S. policy in Central America opposing a revolutionary Marxist government in Nicaragua and an active leftist insurgency in El Salvador. The Honduran Government also played a key role in negotiations that culminated in the 1990 Nicaraguan elections. Honduras contributed troops for the UN peacekeeping mission in Haiti and continues to participate in the UN observer mission in the Western Sahara.
The United States is Honduras' chief trading partner, supplying 46% of its imports and purchasing 40% of its exports. Leading Honduran exports to the United States include coffee, bananas, seafood (particularly shrimp), minerals (including zinc, lead, gold, and silver), and other fruits and vegetables. The United States encourages U.S. investment that contributes to Honduran development and bilateral trade. The United States' direct investment in Honduras is an estimated $840 million, about two-thirds of the total foreign direct investment in the country. The largest U.S. investments in Honduras are in the maquila (garment assembly) sector, fruit production--particularly bananas, melons, and pineapple--tourism, energy generation, shrimp culture, animal feed production, telecommunications, fuel distribution, cigar manufacturing, insurance, brewing, leasing, food processing, and furniture manufacturing. U.S. maquilas are responsible for the majority of the approximately 115,000 jobs in that sector. Many U.S. franchises, particularly in the restaurant sector, operate in Honduras. The Honduran Government supports the conclusion of the Free Trade Agreement of the Americas by 2005.
The U.S. maintains a small presence at a Honduran military base; the two countries conduct joint counternarcotics, humanitarian, and civic action exercises. U.S. troops conduct and provide logistics support for a variety of exercises--medical, engineering, peacekeeping, counternarcotics, and disaster relief--for the benefit of the Honduran people and their Central American neighbors. U.S. forces--regular, reserve, and National Guard--benefit greatly from the training and exercises.
U.S. troops, in collaboration with counterparts from Brazil and Colombia, since 1994 have assisted Honduran soldiers in clearing land mines from the country's border with Nicaragua. As of early 2001, the U.S.-trained Honduran demining unit had cleared nine major minefields measuring about 333,000 square meters, and more than 2,200 mines had been destroyed.
U.S. Policy Toward Honduras U.S.-Honduran ties are further strengthened by numerous private sector contacts, with an average of 110,000 U.S. citizens visiting Honduras annually and about 10,500 Americans residing there. More than 150 American companies operate in Honduras.
Economic and Development Assistance October 1998's Hurricane Mitch--the worst natural disaster ever to strike the Western Hemisphere--left hundreds of thousands homeless, devastated the road network and other public infrastructure, and crippled certain key sectors of the economy. Estimates are that Hurricane Mitch caused $8.5 billion in damages to homes, hospitals, schools, roads, farms, and businesses throughout Central America, including more than $3 billion in Honduras alone.
In response, the U.S. provided more than $461 million in immediate disaster relief and humanitarian aid spread over the years 1998-2001. This supplemental assistance was designed to help repair water and sanitation systems; replace housing, schools, and roads; provide agricultural inputs; provide local government crisis management training; grant debt relief; and encourage environmental management expertise. Additional resources were utilized to maintain anti-crime and drug assistance programs. The vast majority of the U.S. reconstruction projects are scheduled to finish by December 31, 2001, with the exception of some water and sanitation and transparency projects that have been extended for another 14 months. In 2001, the U.S. also provided food aid in response to a short drought and the depressed state of the agriculture sector. Subsequently, the U.S. provided $265,000 in disaster assistance after Tropical Storm Michelle inundated the North Coast with floods.
New and existing U.S. economic programs--some with proposed enhancements that have taken on even greater importance since the hurricane--include the Caribbean Basin Economic Recovery Act, Overseas Private Investment Corporation financing for private investment and insurance against risks of war and expropriation, U.S. Trade Development Agency grant loans for prefeasibility studies of projects with U.S. product and services export potential, and U.S. Export-Import Bank short- and medium-term financing for U.S. exports to Honduran importers. All of these provide greater economic opportunity for U.S. and Honduran businessmen and women.
The Peace Corps has been active in Honduras since 1962, and, currently, the program is one of there was the largest in the world. In 2001, there were 200 Peace Corps Volunteers working in the poorest parts of Honduras.
The U.S. Government strongly supports the professionalization of the civilian police force as an important element in strengthening the rule of law in Honduras. The American embassy in Tegucigalpa provides specialized training to police officers through the International Criminal Training Assistance Program.
Security Assistance In the absence of a large security assistance program, defense cooperation has taken the form of increased participation by the Honduran armed forces in military-to-military contact programs and bilateral and multilateral combined exercises oriented toward peacekeeping, disaster relief, humanitarian/civic assistance, and counternarcotics. The U.S. Joint Task Force (JTF) stationed at the Honduran Soto Cano Air Base plays a vital role in supporting combined exercises in Honduras and in neighboring Central American countries. While JTF-Bravo has been involved in several multilateral exercises and numerous smaller humanitarian deployments, it played an absolutely critical role in helping the U.S. to respond to Hurricanes Mitch and Keith, and the earthquakes in El Salvador by saving lives, repairing roads and critical infrastructure, and meeting high priority health and sanitation needs. U.S. forces also delivered millions of dollars worth of privately donated goods to those in need.
U.S. Business Opportunities Opportunities for U.S. business sales include textile machinery, construction equipment, automotive parts and accessories, telecommunications equipment, pollution control/water resources equipment, agricultural machinery, hotel and restaurant equipment, computers and software, franchising, and household consumer goods. Best prospects for agricultural products are corn, milled rice, wheat, soybean meal, and consumer-ready products.
U.S. citizens contemplating investment in real estate in Honduras should proceed with caution, especially in coastal areas or on the Bay Islands, because of frequently conflicting legislation and problems with land titles. Such investors, or their attorneys, should check property titles not only with the property registry office having jurisdiction in the area in which the property is located (being especially observant of marginal annotations on the deed and that the property is located within the area covered by the original title), but also with the National Agrarian Institute (INA) and the National Forestry Administration (COHDEFOR).
Principal U.S. Embassy Officials The U.S. embassy in Honduras is located on Avenida La Paz, Tegucigalpa (tel.: 011-504-2369320; faxes: general--011-504-236-9037, USAID-011-504-236-7776, USIS--0l1-504-236-9309, Military Group--011-504-233-6171, Commercial Section--011-504-238-2888, Consulate-011-504-237-1792). Internet: http://www.usmission.hn/
Contact Information Caribbean/Latin American Action U.S. Department of Commerce U.S. Agency for International Development
TRAVEL AND BUSINESS INFORMATION Emergency information concerning Americans traveling abroad may be obtained from the Office of Overseas Citizens Services at (202) 647-5225. For after-hours emergencies, Sundays and holidays, call 202-647-4000. Passport information can be obtained by calling the National Passport Information Center's automated system ($.35 per minute) or live operators 8 a.m. to 8 p.m. (EST) Monday-Friday ($1.05 per minute). The number is 1-900-225-5674 (TDD: 1-900-225-7778). Major credit card users (for a flat rate of $4.95) may call 1-888-362-8668 (TDD: 1-888-498-3648). It also is available on the internet. Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled Health Information for International Travel (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800. Information on travel conditions, visa requirements, currency and customs regulations, legal holidays, and other items of interest to travelers also may be obtained before your departure from a country's embassy and/or consulates in the U.S. (for this country, see "Principal Government Officials" listing in this publication). U.S. citizens who are long-term visitors or traveling in dangerous areas are encouraged to register at the U.S. embassy upon arrival in a country (see "Principal U.S. Embassy Officials" listing in this publication). This may help family members contact you in case of an emergency. Further Electronic Information National Trade Data Bank (NTDB). Operated by the U.S. Department of Commerce, the NTDB contains a wealth of trade-related information. It is available on the Internet (www.stat-usa.gov) and on CD-ROM. Call the NTDB Help-Line at (202) 482-1986 for more information. |