NATIONAL INTELLIGENCE SURVEY 73; HONDURAS; THE ECONOMY

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• Collection: NIS
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13 /GS /E
Honduras
August 1973
NATIONAL INTELLIGENCE SURVEY
FOR OFFICIAL USE ONLY
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Honduras
CONTENTS
This chapter supersedes th, economic corcr-
afir in the Gcncral Surrct/ daicd August 1969.
A. Economic appraisal 1
1. Ldonomic growth and government poliov 2
2. Problem areas
B. Structure of the economy 3
1. Agriculture 3
a. Land use and tem.we 3
b. Agricultural inputs and techniques 5
C. ,:,icipal props (i
d. ivestock 6
e. .Fisheries i
f. F'orestry i
1'on OFFICIAL USE ONLY
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Page
2.
Fuels and power
7
3. Financial institutions, money supply,
3.
e
Mining and minerals
8
and prices
4.
Manufacturing
8
a. Financial institutions
Composition of public investment
Fig. 2
-Toney supply
2
a. Food products, beverages,
ges and
C. Prices
tobacco
9
4. Manpower
Fig.
b. Other manufacturing
9
a. Size of the labor force
C. Construction
10
b. Levels of training
5.
Domestic trade
10
c. Labor movement
C. Government finance and economic policy 10
1. Economic policy and programs 10
Public finance
a. Central government 11
b. Decentralized agencies 12
c. Municipalities 0
D. Foreign trade
1. Composition and direction of trade
a. Exports
b. Imports
c. Direction of trade
2. Trade regulations
3. Balance of payments
4. External debt
FIGURES
Prrge
13
13
1
14
14
14
15
16
16
16
16
16
16
18
18
18
ii
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Page
na-- e
Fig. 1
GDP by sector of origin chart)
1
Fig.
15
Composition of public investment
Fig. 2
Economic activity (map)
2
(chart)
Fig. 3
Growth of GDP and selected
Fig.
16
Assets and liabilities of the banking
components chart)
3
system table)
14
Fig. 4
Value added in agriculture table)
4
Fig.
17
Consumer prices and GDP deflator
Fig. 5
Production of priwipal crops (table)
4
(table)
15
Fig. 6
Land use (chart)
5
Fig.
18
Labor force by economic activity
Fig. 7
Farm units by size and area (table)
5
(chart)
15
Fig. 8
Source and use of agrictultural credit
Fig.
19
Labor force: by class of worker
(table)
5
(chart)
15
Fig. 9
Texaco refinery (photo)
7
Fig.
20
Composition of exports (chart)
16
Fig. 10
Value added in manufacturing
Fig.
21
Exports (table)
17
table)
8
Fig.
22
Imports table)
17
Fig. 11
Operations of the public sector table)
11
Fig.
23
Direction of trade chart)
18
Fig. 12
Central government finances table)
12
Fig.
24
Trade with CACTI countries (table).
19
Fig. 13
Central government revenues table
12
Fig.
25
Balance of payments table)
19
Fig. 14
Distribution of central government
Fig.
26
Balance of commodity trade chart)
20
current expenditures table)
13
Fig.
27
External public debt table)
21
ii
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The Economy
A. Economic appraisal
By any standard of comparison. Ilondwas is the
poorest -it tul (cast (I eve hgwd cot lutr in :cntraI
America. Gross domestic prodttc�t ((:I)I)) per capita
cas onl LIS$260 in 1971. comparect with an arrage
of slightly more tban $400 for other Central American
countries anti of $530 for all of Latin An. �rica. The
total output of the I (ondtiran econonn is ver sntall�
approximatel $7 -10 million dollars in 1971. BlIgged
topography, it narrow :rcttttrntl resource base. and it
weak institutional franu�ork all contribute to the
country's poverty and backwardness.
Because of a highly skewed distrib(tti ,n of income
and wealth, the standard of living of nto,t of the
population, especially in the rural areas and in the
rapidly growing slams around "Tegucigalpa, is very
low. Indicative of present deficiencies are the infant
mortality rates. hich are among the highest in the
Western Hemisphere, the almost total lack of Safe
drinking water and other basic scrvices, and tie vrry
high level of iii-a!1)loyinent and underentploynu�nt.
Although f londuras is relatively small in both area
and population. settlements are v dispersed in
scattered valleys, often connected b only tie nu,st
rndintentary transportation. and the econont
conscyuently has been fragmented. TllV Valley's in the
South and west traditionaliv have been more closel
connected with El Salvador and Guatemala than with
the rest of Honduras. 'I'll(- northern coastal area lilts
been devoted largely to growing bananas for export to
the United StatcS. "4'he capital. Tegucigalpa. has been
isolated in the local economy of t) e central plateau.
Honduras is basically it two-level agrarian society
with only it small industrial sector. Most of the 2.5
n)illion people are peasants who eke out it subsistence
living growing corn and beans on tiny plots using tic
most rudimentary techniques. On the other hand.
floncluras also lilts it number of large -scale banana.
coffcc, and cotton plantations �many of them foreign
owned�that use hired !:::)or, apple considerably more
nwdern technielucs, and produce for tic world market.
NOTE�The entire contvnt of this ihapler is ('NC .ASSIFIED
1)u1 is FOR OFFICIAL I'SF. ONLY.
Together the two agricultural sectors acc -iinl for more
than one- third of the comitr\ 's gross domestic product
(Figure I BanaVtaS alone account For 10ci o!' the
GIN and the health of the econont therefore
delu.nds to it great extent on this one crop.
Manufacturing, although it has been groing
rapidly, co;ttribtites only it small share of total output.
-lost industrial enterprises are snt:dl -scale enterprises
(Figure Serving domestic needs. :1llhougi gains
har been made in d(w( doping production for export
or for import substitution, progress is restricted b a
lack of industrial and managerial skills and of
neccss.tr infrastructure. Rich bas caused inestn,ent
capital to be attracted to other Ccntral :1nwrican
countries in preference to Honduras.
Ilondttnts depends heavil on foreign trade,
especial Iy trade with the l'nite(I States. I ree trade
relations math the (ventral .Iirnerican Common Market
(C:WNI) (luring the 1960's enlarged the market for
some industrial products whose manufacture for
domestic use alone 'ould not he ('0111011tic and also
provided outlets for some agricultural staples not
readily marketable elsehew. The termination of the
free trade relations in f anuar 1971 disrupted this
trade, although it aided sonic less efficient Honduran
industries that had suffered from competition within
the (:A( :NI
Public
administration
3.0%
Commercial
services
14.0
Other
19.1
Industry
20.2
Agriculture, forestry,
and fishing
34.9
Mining 2.1
Transport and
communications
6.7
FIGURE 1. GDP by sector of origin, 1970
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0
e A "g Puerto .e
Cartes La Ceiba J
W G i
,p Trujillo
San Pedro Su13 A Tela
t:
T e
K
L" v t
S,1 goid
a m Linda
Lo,,d zw,-
AGRICULTURE
Ag (1t;
b
Benanaa
k
t
Too&xx,
e
e
Teguc
K
Pt,
C
K
1
501788 5.73
FIGURE 2. Economic activity
1. Economic growth and government policy
The econonty has grown sporadically in response to
fluctuations in banana output and developments on
the political scene. Real CDI' per capita rose by an
average of only 0.5i7i per year during the 1950's, front
tile equivalent of S183 in 1930 to $192 in 1960.
Pe was more dynantic in the 1960's (Figure�
i), with an average annual increase of 2.2 in real
GDP per capita. %lost of this growth occurred during,
1964 -68, when substantial investments b%- the banana
companies led to a near doubling of merchandise
exports. After 1968, economic expansion slowed
sharply. and real income per capita remained almost
stationary. This i t.1g,1ation was due� to a number of
factors, including severe hurricane damage to the
banana plantations in 1969 and 1972, poor market
conditions for bananas, political instabilitY and
indecisiveness, and ramifications of the short .car My th
El Salvador in mid -1969.
The Honduran Government never has been an
e ffective force in promoting economic development. It
has neither committed adequate funds and expertise
to inyestrtu,nt a11(1 ec�onomw planning, 1) romot:�(I
legislation to encourage privat irrvestnu�nt, nor taken
'In 1966 1lundimm priers.
INDUSTRY
is Foud p ,,q
Brvr�r:rgrti
A Fr awe nr era nlothinq
g T-ti�
Lumbv, and wuod pruducs
Furnrtunr
Q Ch,�n,,d orr:d.,n.,
obaun prou�ssma
pal, od
,�i G�...r�nt plan;
J& WevoL�um r. �fiomq
11 Hydras 1� +.roc Duv+r�r plant
sufficient initiative to develop the .ecnno
infrastructure nec�essar% to gruth.
Of great importance to Ilondurtn develop nu�nt me�r
tile last dceu(Ie has been the g(ticlauu�e and fin:LUte�ial
support (external finane�iug accounts for approxi-
nutt(I l( i of all public investment) of U.S. and
international institutions.
2. Problem areas
Despite progress during the 1960's, Honduras still
faces several obstinate problems. One of these is the
need to provide entplo anent for a grm%ing labor force.
:ontinued population gro%vth at the present high rate
(3.3 in the early 1970 %will severely strain an
economy that is produc�i ig few new jobs in induslr
and has no case access to new agricultural land. More
intensive use� of the potentially prod(ue�live valley lands
is un ,�ntly needed. Broad -based changes in the
pattern of land ownership are necrssar, but political.
institutional. and fiscal constraints will impede such
changes in the immediate future.
'I'hr need for improved social services and
infrastructure is great. 'There are major deficiencies in
education, health� and nutrition, particularly in rural
areas, despite guiles made in the lart decade. The
transnortation network requires much further
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MINING
Aq
S,1 goid
Pb
Lo,,d zw,-
AGRICULTURE
Benanaa
k
G,t4
Too&xx,
G rnon
1. Economic growth and government policy
The econonty has grown sporadically in response to
fluctuations in banana output and developments on
the political scene. Real CDI' per capita rose by an
average of only 0.5i7i per year during the 1950's, front
tile equivalent of S183 in 1930 to $192 in 1960.
Pe was more dynantic in the 1960's (Figure�
i), with an average annual increase of 2.2 in real
GDP per capita. %lost of this growth occurred during,
1964 -68, when substantial investments b%- the banana
companies led to a near doubling of merchandise
exports. After 1968, economic expansion slowed
sharply. and real income per capita remained almost
stationary. This i t.1g,1ation was due� to a number of
factors, including severe hurricane damage to the
banana plantations in 1969 and 1972, poor market
conditions for bananas, political instabilitY and
indecisiveness, and ramifications of the short .car My th
El Salvador in mid -1969.
The Honduran Government never has been an
e ffective force in promoting economic development. It
has neither committed adequate funds and expertise
to inyestrtu,nt a11(1 ec�onomw planning, 1) romot:�(I
legislation to encourage privat irrvestnu�nt, nor taken
'In 1966 1lundimm priers.
INDUSTRY
is Foud p ,,q
Brvr�r:rgrti
A Fr awe nr era nlothinq
g T-ti�
Lumbv, and wuod pruducs
Furnrtunr
Q Ch,�n,,d orr:d.,n.,
obaun prou�ssma
pal, od
,�i G�...r�nt plan;
J& WevoL�um r. �fiomq
11 Hydras 1� +.roc Duv+r�r plant
sufficient initiative to develop the .ecnno
infrastructure nec�essar% to gruth.
Of great importance to Ilondurtn develop nu�nt me�r
tile last dceu(Ie has been the g(ticlauu�e and fin:LUte�ial
support (external finane�iug accounts for approxi-
nutt(I l( i of all public investment) of U.S. and
international institutions.
2. Problem areas
Despite progress during the 1960's, Honduras still
faces several obstinate problems. One of these is the
need to provide entplo anent for a grm%ing labor force.
:ontinued population gro%vth at the present high rate
(3.3 in the early 1970 %will severely strain an
economy that is produc�i ig few new jobs in induslr
and has no case access to new agricultural land. More
intensive use� of the potentially prod(ue�live valley lands
is un ,�ntly needed. Broad -based changes in the
pattern of land ownership are necrssar, but political.
institutional. and fiscal constraints will impede such
changes in the immediate future.
'I'hr need for improved social services and
infrastructure is great. 'There are major deficiencies in
education, health� and nutrition, particularly in rural
areas, despite guiles made in the lart decade. The
transnortation network requires much further
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220 T
200
190
160
140
120
Index
'Estimate
FIGURE 3. Growth of real GDP and selected
components
expansion. Becrarlsc government finances have
deteriorated sharply since the 1969 war, the
govertintent must both increase revenues and curtail
current expenditures before it can devote significant
funds to developing services and infrastructure.
Another key problern is the future of Ilondtlran
relations with the CACNI. This issue is highly
controversial, because sonu� elements of the business
and labor eonlnlunity stand to lose by a return to
regional free trade. There also is widespread concern
o\�t�- the c�otnitry's trade and investment disadvantage
in relation to the other nwm;u�rs.
B. Structure of the economy
1. Agriculture
Agriculture, the mainstay of the economy. employs
65% of the labor force and accounts for about 3Yi of
GDP and nearly 7Mi of export earnings. Bananas
dorttinate the sector and conse�ctuently the entire
econorv but crops such as coffee, cotton, corn, beans,
and sugarcane also are grown on a significant scale
(higrtres 4 an(l 5). Livestock, partie�ellarly beef catllc, is
important both for dcl:nestic c�clnstnnpliun and for
extort.
Agriculture is heavily export oriented. Ili IJ10,
apprtlxinnately 63` "1 of total production carts stud
abroad. Ilonduras also produces nearly all the food
consumed donn�stic�ally. Imports of' food and
beverages usually amount to less thus IO! "i of all
imports. Agricultural output grew steadily front 1963
through 1971. except for !969, when there was heavy
hurricane damage to crops. There was a sharp drop in
output in 1972 as it result of fu tlter hurricane damage.
unfavorable market conditions for bananas, and trade
difficulties with neighboring countries. The following
shows the values of agricultural pri�duction (if)
nillions of U.S. dollars at 1961 -65 average conunodity
prices
`Preliminary data.
a. Land use and tenure
Of a total land area of 27.7 million acres, slightly
more than -1 million are potentially arable. an(f
rougldN 2 million actually were under cultivation in
1971 (higelre 6). Mtich of Ilondttras is loo
ntountainotls for agriculture, and if large part of the
lowlands is too hot and humid (annual rainfall usually
exceeds 100 inches). In the southern and central areas,
on the other hand. there are intermittent droughts. A
large section of the country, extending northeast front
Tegucigalpa to the sea. c�an support little agriculture
because of poor soil. heavy forests, rugged terrain, and
unfavorable c�linrate.
The valleys of the north, south, and east are the
most potentially productive areas. The northern
valleys, of which Valle de Again' \'all( de Sala, and
Valle de Lean are the most important, contain an
estimated 1.5 million acres of productive land, but
only the areas planted to bananas and sugarcane- -less
"Par diacritics on place nann�s we the list of manes on Iho apron
of the Sununar\ Map in the Counln Profile chapter and the map
itself.
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1960 1962 ;964 1966 1968 1970 1972
TOTAL
TL�'AR
CROPS
LIVESTOCK
ACl;ICULTURE
1961
101.5
22.5
124.0
1962
103.6
21.2
124.8
1963
102.4
22.1
124.5
1964
108.4
212
129.6
1965
124.6
21.3
145.9
1966
131.2
22.2
153.4
1967
135.4
23.2
158.6
1968
141.0
25.3
166.3
1969
135.8
25.5
161.3
1970
142.6
27.3
169.8
1971
155.4
29.2
184.6
19"; 2'
129.8
30.4
160.2
`Preliminary data.
a. Land use and tenure
Of a total land area of 27.7 million acres, slightly
more than -1 million are potentially arable. an(f
rougldN 2 million actually were under cultivation in
1971 (higelre 6). Mtich of Ilondttras is loo
ntountainotls for agriculture, and if large part of the
lowlands is too hot and humid (annual rainfall usually
exceeds 100 inches). In the southern and central areas,
on the other hand. there are intermittent droughts. A
large section of the country, extending northeast front
Tegucigalpa to the sea. c�an support little agriculture
because of poor soil. heavy forests, rugged terrain, and
unfavorable c�linrate.
The valleys of the north, south, and east are the
most potentially productive areas. The northern
valleys, of which Valle de Again' \'all( de Sala, and
Valle de Lean are the most important, contain an
estimated 1.5 million acres of productive land, but
only the areas planted to bananas and sugarcane- -less
"Par diacritics on place nann�s we the list of manes on Iho apron
of the Sununar\ Map in the Counln Profile chapter and the map
itself.
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1960 1962 ;964 1966 1968 1970 1972

FIGURE 4. Value added in agriculture
(Miflions of 7 966 lempiras)
ANNUAL GROWT1
FIGURE 5. Production of principal crops*
(Thousands of metric tons)
1960
1963
1966
1969
1970
1960 lit 196S 70
1971
1472#*
Bananas
9:59
1,270
I,2SI
M rcr �t
Bananas
52
53
109
118
120
10.1
Coffeee
0 11
36
-W
11
17
6
Cotton and oil crops...........
:3
S
I1
7
6
2
'tobacco and sugar cane........
i
S
9
12
12
U. 1
Corn
:30
:35
39
12
1:3
3.7
Other cereals
11
11
8
S
S
0.9
Beans
13
Ili
Ili
IS
IS
.3 9
Fruits, vegetables. and roots....
29
30
30
32
311
j.2
Total crops
17.1
197
266
278
290
7.�ti'
Livestock
58
66
Iii
77
Si
3.0
Poultry
13
15
IS
20
20
*Data are for calendar years.
Forestrc
38
0 10
-1.1
51
at)
3.:;
Fishing; and hunting...........
:3
2
d
5
7
Total rietiltur(
2813
:320
�101
�133
-its
FIGURE 5. Production of principal crops*
(Thousands of metric tons)
than 10'/ of the total �arc used intensively. The
remainder serve largely for grazing. Coffee. corn, and
beans are grown on the mountain slopes throughout
the northern, western, and southwestern parts of the
country. Stockraising is widely distributed in the
grassy upland basins and in the Pacific lowlands.
Cotton plantations are found in the southern coastal
plain.
Of the approximately 180,000 farms in the country
(higure 7), almost 70% are under 25 acres, and nearly
half are under 10 acres. Most of these snntll larms are
in less desirable, more nlotnitainous terrain. Only
about 6% of the farms contain more than 125 acres,
but these account for 60 of all farmland. "I'he largest
single landholder is the Standard Fruit Company.
whose several properties total 250,000 acres. On the
large farms, which are located mainly in the
Caribbean lowlands, only it small percentage of the
4
land is cultivated. 'I'll( larger Kurt is unused or in
pasture. The government is a large landholder, but
only a small hart of its land is being worked.
Only about 22 of all farms� nutstly the larger
ones �arc operated by the owners tinder clear.
indivicbtal titles. About are worked by cjfdatarios
(farnivrs who work holdings called c jidos� national
lands which municipalities have the right to allocate
to residents for lifetime use). About I I ri of all farms
are operated by squatters who have no legal title to the
land they arc working (usually national land) and the
remainder by sharecroppers or under sonic mixed forin
of tenancy.
The governments of Honduras have initiated
numerous laws to enc�otirtge� land ownership. The
latest of these %\;t� the \grarian band Reform
(�f I962. l'ndcr it. the \utional \grarian
Imlilnlc tlr: is cntho\\vwd to purchase or
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1961
14116
1967
1965
1969
11 170
1971
1472#*
Bananas
9:59
1,270
I,2SI
1.351
1.280
1,112
1, 1123
1, 220
Coffee
22
20
29
27
:3:3
:3d
31
:37
Cot ton
�1
10
S
S
3
2
2
:3
Cottonseed
2
17
11
13
5
5
5
5
Sugar, raw (centrifugal)
2.1
:37
-15
51
57
5:3
ti1
lit
Co.................................
277
3S9
330
3:53
:3:39
3I6
:359
:300
Beans
:311
14
57
63
:55
55
:50
00
Rice
7
:5
S
7
6
li
1
1:3
Tobacco
:3
:3
S
:i
5
2
3
3
*Data are for calendar years.
*Preliminary data.
than 10'/ of the total �arc used intensively. The
remainder serve largely for grazing. Coffee. corn, and
beans are grown on the mountain slopes throughout
the northern, western, and southwestern parts of the
country. Stockraising is widely distributed in the
grassy upland basins and in the Pacific lowlands.
Cotton plantations are found in the southern coastal
plain.
Of the approximately 180,000 farms in the country
(higure 7), almost 70% are under 25 acres, and nearly
half are under 10 acres. Most of these snntll larms are
in less desirable, more nlotnitainous terrain. Only
about 6% of the farms contain more than 125 acres,
but these account for 60 of all farmland. "I'he largest
single landholder is the Standard Fruit Company.
whose several properties total 250,000 acres. On the
large farms, which are located mainly in the
Caribbean lowlands, only it small percentage of the
4
land is cultivated. 'I'll( larger Kurt is unused or in
pasture. The government is a large landholder, but
only a small hart of its land is being worked.
Only about 22 of all farms� nutstly the larger
ones �arc operated by the owners tinder clear.
indivicbtal titles. About are worked by cjfdatarios
(farnivrs who work holdings called c jidos� national
lands which municipalities have the right to allocate
to residents for lifetime use). About I I ri of all farms
are operated by squatters who have no legal title to the
land they arc working (usually national land) and the
remainder by sharecroppers or under sonic mixed forin
of tenancy.
The governments of Honduras have initiated
numerous laws to enc�otirtge� land ownership. The
latest of these %\;t� the \grarian band Reform
(�f I962. l'ndcr it. the \utional \grarian
Imlilnlc tlr: is cntho\\vwd to purchase or
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l. ;%grivultural inputs aril techniques
TOTAL LAND AREA
27.7 million acres
percent
distribution
I
so Corn
21 Coffee
Beans
Bananas
Sugarcane
0 Sorghum
Other
\griculturaI I )rod uctivit% in Ilond(Iras, which is
:unong the loosest in I.atill :1nu�ric�a, is limited not onl%
b I)rubletns of land tenor� and b unfa%orable soil
and c�litnatt� conditions but also be in
methods of ('1111kation. Use of modern agric�ullltnll
illethods is liuited :Ihnosl to banana
Im)(luclion. Imports of agric�tlllural inpits ananult to
orals $16 million a sear, a lu%% figure considering (he
import.o.. of agriculture and the� (Inavailabilih of
suet iul)(Its from donn�slic sources.
There is little mechanization in I lon(luras. The
ase�rai. tv farmer uses it machete to (lig ul) the� soil anti it
slick to sons the seed. In the cottntrs as :t se hole there is
an a(rrage of one l)lo\% for esrr\ four farms.
Lack (If transltortatimi and c�onunnnication and the
l)r�valcnce of iIIiterac�\ hanll)er (Iisu�nlination (If
information un modern fanning methods. I�,xt(
service�s. I)re)%i(Ie(I inainl\ b\ the Directoritte of Rural
I)ew�IoI)nn�nt, are thinb spread and of limited
effecti%eness. The small fit rner, It(, fretlneutl is
t�ulli\ating %ulnerable nountaiii slol)es, sel(Iorn
practices snit consersatinn. (:rule are not rotated, and
only the� largest farms use chenlic�al fertiliz(-rs.
Irrigation. \%hic�h could hell) to c�nnnter effects of
irregular r.tinfall in several Darts of tau country. is
limited Io ahoul 50.000 acres of banana plantations
Mid about 23.000 avers of other crops. 'There are
prac�ticallc no drainage or Ilood protection \corks
r�\(el)t on the banana plantations.
Xgric�ultural credit hasgro%%n in resent \ears(Figur�
ti), but it has benefited mainl\ the largerc�ominerc�ial
farmers. not the lmasants. 0mitnercial banks Flare�
extende(I most of the ne%% credits. I.vitding for
IisrstIwk (I esrlol)nu�nt has been gro%%ing notch more
FIGURE 6. Land use, 1971 estimates
expropriate private land for (listribution to the�
landless. The IN:\ also has promoted nv%% settlt�nenls
on national lands and has Irie(I to encuetrage
cultkittion of idle land. In general. ho%ee\er. the 1962
reform prognun has nade little� progress because of
Door administration, limited financial resources. and
apittlietic national leadership.
The� pattern of farm (listrib(ttion contributes to locc
productivity and income. The concentration of farms
cln it relati% shall extent of nunuttainous terrain
while large areas of plains retrain ime\ploited is
i:(�fficient. \lor(�O%cr. insecurit% of tenure is it
disincentive to imestuent and more efficient
prodtic�tion.
FIGURE 7. Farm units by size and area, 1965 -66*
FARM I Nrr.
'I�otVi 17.S. 1
11)0. f) :i, 111:3 l )n.n
Government estimates.
*I heetare 2.17 acre..
FIGURE 8. Source and use of agricultural credit
A \NI M.
Ac 1:HAG or
n l at l' It S F'.%I t: N T.
Total
\III.I.IaN. of
SIZE IN
Total
Pvt
1.1)(I(r
Percent
nerr.utt:.
1.111111's
of total
acre1
of total
11 I............
\1.11
"i.l
INs
Is..;
!1............
36. 1
/l
2111
Other insli!ution..............
11) 1!1
27.1
I:i.'
atilt
lll..
�II 1!1..........
311.11
5Y1
l; .l
.ill 1111..........
11.1
i.l;
127
l:..i
11111 1!14........
2.5
1..,
3 21
21111 1!1!1........
I.:i
1).;
313
11.
\lore than )0(I..
0.7
1)
!I.i:i
'I�otVi 17.S. 1
11)0. f) :i, 111:3 l )n.n
Government estimates.
*I heetare 2.17 acre..
FIGURE 8. Source and use of agricultural credit
A \NI M.
Ac 1:HAG or
n l at l' It S F'.%I t: N T.
A"t M.
\III.I.IaN. of
GI OW1 II
It It "I
It AT
\mntA.
rl:ItVEN1
11161i 111711 1966 711
Commer�ial Dank-
14. 1
sn.1)
1 1 2.9
Livestock
I. 1
32.:3
1
Drops. I
14.II
1`.(i
.1
National Dv%vlopno ..t Bank....
2:3.2
21.5
1.
Livestock
S..)
10.S
Is..;
('rap.
17.7
1:3.7
l;
Other insli!ution..............
1;.7
III.�
11.1
Total agricultural Ielldilig......
111.:3
11.).1;
23.7
Livestock
11.3
Is.1
$.3.1;
('rap.
:35.1)
117.:)
1:'
5
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rapidl% than lending fur crops. Most peasants, lacking
I) roI)vr I:uul titles, find credit unavailable at
reasonable rates. The governna�nl has attempted to
aid small farmers thro�gh the National I)eyclopma�nt
Bank (B,.kN;kFOBi\I). Lending by this agency has
stagnated in recent gars, f,ut it B:\NAFOIZXI prc grant
fur building grain storage facilities in 'Tegucigalpa :std
San Pedro Sula is polenlfally important fur
agric,tll,trai deveIoI) men t. If t his storage capacil\
leads to higher and more stable prices at the farm
level, it will contribute significantly to agricultural
incomes.
c�. Principal crops
(1) Export crops
Bananas are by far the most important agricultural
crop. Ilonduras is the fourth largest producer of
banamis in the world and the second largest exporter,
follo\\ing F.cuador. Bananas are the chief source of
foreign exchange earnings. V:dete added by the
banana industry accounts for more than 2YC of all
agricultural production and close to 10(i of (:I)I
The banana industry is dominated by two large
l`.S. -owned companies, the Tela Hailroad Contpany
(a division of United Fruit Company) and the
Standard I'mit and Steamship Company. 'These two
firms grow or purchase nearly all the bananas exported
by Ilonduras.
Banana production increased by 50`1 between 1960
Mid 1970 and by about 1 i more in 1971. This
growth was clue mainly to good world market
conditions that stimulated large capital investments.
including the imtrodac�tion of disease resistant
varieties. There was a marked drop in output in 1972,
as there had been in 1969, because of severe hurricane
(lamage.
The Honduran banana industry is not in a
favorable position for future expansion. World
demand for the fruit has not matched increases ill
suppl and labor costs in the Honduran banana
inchtstry are higher than in other exporting countries.
Coffee is the second most important crop. It
accounts for about 10ii of the value of agricultural
production, and more than Wi of output is exported.
Both pro(l(tetion and exports have grown considerably
in the past decade. Although coffee is grown mainly
om small- amd ntedimn -size firm s. ntarketin,g is highl\
concentrated. Honduran coffee is of generally lower
quality than that of other Central rinte�rican countries
because of less favorable soils and less modern
processing facilities.
Tobacco, grown in the western part of the country,
is raised mainly for export. Production has been
stagnant in recent years. largely because of
6
unsatisfactory marketing arrangements, bct Im spec�ls
for expanding output appear good. Most of the crop is
it high- clualit\ cigar leaf, for which work/ (Ic�nuuul is
st rong.
Colton was a major export crop in the mid- 1960's,
but its importance has since dec�lified sharply because
of falling work/ prices, weather and insect damage to
crop and the war with F Salvador, which caused the
loss of thousands of skilled Salvadoran cotton workers.
Ilc�nduran cotton- rcisitg pmc�tic�es are crude, and the
ieict s low �less than 500 pounds per acre.
l i �nduras became self- stffic�ienl in sugar in 196
awl began exporting it, 1967. Sugarcane k grc,wm
untie/\ un commercial farms. The largest single
producer is the Honduran Sugar Company. which has
extensive fields near San {edro Stla.
2 0onlestic� foot/ crops
Food crops consist mutinly of corn and beans. Other
cereals, including rice. sorgftumt. and millet. :re grown
in snall quantities. Iloncfcras raises almost no wheal
but intports s ananutls. \lost corn and beaus
are consunwd locally, bolt there us(all\ is also a
surplus for export. Export vamtings from these crops
have fallen sltarpl\ since the disruption of trade with
1-:1 Salvador. the l arge st market.
:kbout half of all cultivated land is planted to corn.
the mntjor items in the� Ilooduran dict. Thk crop itc-
coutt for about Ill', of the yalne of agricultural not
iml. Most corn k ,rtmn on snr.tll :old llwdirurt-sizc
farnv.. and ntnclerm tnetliml� of cukkation are prac-
tically uukrt(w n. icld, arc lom even in coomparim m
with lho m- of ether (:ent�al :\nwrican countries. I'r)-
cloc�tion rose bs :ot ;tyeratgc of 1`, a se;tr daring the
IWit1's. onlx slidltl\ I;t than popttlatiott.
Bealls, tie seeded basic food crop. provide most of
the protein in the Ilonduran diet. Abdul .10"7 of the
bean crop is grown b primitive methods crt plots of
less than 10 acres.
d. Livestock
Beef cattle are the principal t} pv of livestock. with
herds numbering some Hi million heat/ ill 1970.
About Wi of the cattle are raised by small farmers
whose herds average less than 50 head. but there are
sonic� large producers, notably the two foreign owned
banana companics. In 1970 Honduras also had
550,000 hogs, more than any other Central ;\mcricatl
country. There are more than 150.000 horses �used
both for work on farms and for transportation �as well
as oxen, mules. and donkeys that are used for
farmtwork. Goats and sheep each number fewer than
25,000 head. Poultry flocks never have been adequate
to cover domestic needs. Until the war in 1969, FA
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Salvador was the nu;jor source of poultrs. Dmr% herds
also arc too sn :ell to cover dortesliu requircnn�tts.
Ilonduras is self sufficient in the major INi of
nwat and also exports suhstatilial quantities of hoth
neat products and live auinals. I)ontestic
conasrn lit ion. itI%%ays lot%, has been declining. \lvat
production has been gracing at :ul average rate of
a year since the early 1960's. but exports have f,een
increasing at nore than twice that rate, so that
domestic supply has been reduced. Meat exports go
tnainl\ to the l.'nited States and.Pue Rico.
The livestock industrt has consideraIv grnttth
potential. There are east areas of uuexploited laud
suitable for grazing. :kiso, the qualitc of Ilonduran
beef, vvhic�I is Unite I(M, could he inprowe(
s(tbstantially by better breeding and I
e. Fisheries
Fishing, vvhicli is of only ninor inportance to the
econonv, is conc�eiOmted along the northeast coast.
The govennu�nt ctains fishing rights around offshore�
kevs and islands, in some cases as far as 1011 miles out
front the coast. and is thing to exercise control over
the fishing fleet of' approxiinately 150 vcsscls to
prevent overexploi tat ion of fish resources. It is
estitnated that over 6 nillion pounds of shrinp, the
principal Catch. and a half nillion pound> of lobster
were taken in 1971. Alnnost all shritp and lobster.
after initial processing it, Ilonduran p1mits (see
ManufaCturing). go to the United Stales and Puerto
Rico.
f. Forestry
I londurts has the largest pine and hardwood forests
in (ventral :knu�rica, constituting it rich and relatively
untouched resource. Ssstctnatic� harvesting of forests
FIGURE 9. Texaco petroleum re-
finery in Puerto Cortes
has been h: inpered be the� lack of appropriate
infrastructure, especiall roads and ports. and bs fire,
poor consen :etion practices. and insect danage. \lost
logging is (lone in the pine forests, but Ilou(Icnras also
has \A iii ble tropical hard\ toods, partic�larl\
naho ,ml\ and Spanish cedar. \lore than tftrev-
fourths of all stood c�ut is for fuel.
Major expansion of f'oreslrt operilions is hanpered
F,t the Ilondtiran Forestrt LiM of March 1972. 'this
lass, tthic�h re(luires the goternnunt to o%\ it :il f; of
ant najor nett forestrt enterprise, makes it difficult to
obt :tip, investrent capital to launch n(�\% projects.
2. Fuels and pouter
Ilonduras has no vo ail exploration so far has
Ltiled to locate couuuerc�ially exploitable deposits of
petroletun, although geological Conditions suggest
that the\ I'm\ exist. I londtiras imports all its crcule oil.
but siuc�e I9, 1 it has imported no refined oil. Its
I. 111111 b an, I 1 ;er -d ;tv relinert I inure SI (m n,�d :,od
operated bx Texaco. beg:n opernlim. in Augusl 19(i5.
Sonic refined nil has been exported, espec�i ;dlv io
Panama and the Doninican Republic. but exports
have dropped rarkedly because of rapier grooving
domestic re(ltirements.
Wood is important as fuel for household and small
industry use. The 1) rojec�te(I steel plant near
I'eg ic�igal )it if built, vv ill use charcoal rather Uncut
coke.
Electric� power capacity doubled during 196S-T2 to
approximatel\ 165,000 kilowatts (kvv Production has
increased by a \ear and atnounted to 350 nillion
kilowatt hours (kw. -hr.) in 1972. but has barely kept
pace with grr,vving dcinmids. Per capita c�onstttnption
(excluding plant use and transmission losses) ver:ges
115 kw. hr.. one of ;()west in Centrd America.
H
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Industry consumes more than half of output,
households nearly one- fourth. Agriculture uses only
about ?i The northern power district, including San
Pedro Sula, accounts for 60 of consumption, the
central district, NVith 'Tegucigalpa, for 35c/(". barge
areas of the country nave no electric power. 'I'll(-
central and northern districts are interconnected by a
138 -kv. trunk line and several 35 and fig kV. lines.
This system, comprising some 330 kilometers of lines
and interconnecting abott 6055 of the generating
capacity, is the sole transmission system.
Sonic 60% of installed capacity and 75 of annual
output is hydroelectric, but only about lWi of the
country's Waterpower potential- estitnated to be more
than one -third of the total for Central America -has
been utilized. Thernial plants are diesel- fueled.
Public utilities, plainly the government's National
Enterprise for Electric Power (ENF.E), generate 90/7
of total output. Equipment for power facilities is
imported, and as of 1972 some -1 -1 of the power
industry was financed by foreign credits and loans.
Additional generating capacity of 100,000 kw. and
addilional tntwmission lines are plamwd for the
117:i 77 period.
3. Mining and minerals
The mining industry contrihutes only about 2Si of
(;DP, but it is important to the economy because most
of its output is exported. N/lineral exports in 1971
amounted to approximately -I4i of all exports.
Honduras has cennrnercially important deposits of
gold, silver. lead, and zinc and smaller deposits of
FIGURE 10. Value added in manufacturing
(Value in million.; of 1966 lempiras)
cadntittnt, iron, tin, copper, and pitchblende. Silver is
the "lost Valuable metal, hill output of both silver and
gold has been declining. In 1970, Ilondtras mined :3.7
million troy ounces of precious metals, compared With
5.-1 million in 1968. Cro\Ving production of lead and
zinc has partially -�ompensated for the decline in
output of precious metals, h"t Ill( rate of growth for
these metals apparently h.. slowed since 1970.
About 355i of tFc Valte of niaing conics froin
nonmetallic minerals, pztinly building materials such
as stone, sand, and limestone. Cement prodne�tion has
grown rapidly because of strong demand from the
construction industry and tit(- cast/ availability of
high- gr _ide mw nntterials.
Ilondttran mining laws are liberal and encourage
private activity. Most nining is done by t\eo 1
otVned c�otnpanies. 'I'll(- New fork and Ilondtras
Rosario `lining Contpay, the older and larger, has
extensive facilities at its EI \lochito nine, Nest of
Lago de Yojoa, for producing lead and zinc'
concentrates. 'I'hc other f.nn, the `lining Conpany of
Los Angels, produces lead and zinc in the�
Department of I-ranc�isco Worazan.
4. Manufacturing
Honduras is still the least industrially developed
country in Central America, though the�
ntzutufacluring sector has gro\%n rapidly during the
past decade. \;du(, added bV Ilonduran ind.tstry
increased at an averag- annual rate of 9i daring the
1960's (F)gure 10). Growth was especially Vigorous
b(,tWeell 196 3 and 1965, as a result of large
.t 1. t�t: PERCENT (W 1�i)r.11.
Fac�ton production:
Food processing
Beverages and tobacco
1' extilc
hues and clothing
Consumer chemicals
Wood products
Industrial Chemicalss
Petroleum
Construction materials
Metal products
O ther.
'I'otatl
Handicraft production
Total manufacturing
8
19170
11170
1960
19; 0
13.0
:36.S
10. 1
I8.0
12.R
'1.11
7 .3
f: 2
0.5
:3.1
/).f:
/.S
9.:i
17.9
12.(I
lfl.3
I.6
3.11
0.0
I.6
I(,U
:.f;
3.0
10.2
0.7
:i.0
0.9
:3.
12.:3
W.2
127.1
-iS.
7,5.3
:32.9
ilia
1.f;
.H.;
711.1
17:3.
100.()
100.1)
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is west nu�nts in thr sugar industry an(I expande(1
pit rtic�ipalion ill the (:AGM, whiclo fostered the
(It veloptncnt of some ney italustries. The rate of
growth slowed to about 6..;Si it year between 19119 and
1971 because of tits disruption of Irade resulting froth
the war with i ?I Salvador and uncertainty about
regional prospects and government policy.
The last (let kiled industrial census (1967) listed
2,03-1 industrial enterprises. Of these, 6.3.1 had five or
more employees and were classed as "factories." The
remaining I, W were artisan shops. The conlrihulion
of the artisan sector to total industrial production
declined from �11.5 in 1960 to 6.7 "1 in 1970.
,More than 90! of all industrial establishments are
located in three (le,rtrtnu nos� \tl ;utida, :ortes, and
F rancisco Morazim. About 7Y(' are it; San I Sula,
which has better power and transportation facilities
thaii the rest of the countr%. Plants located in and
around Tegucigalpa it re most ly light industrial
enterprises, such as textile plants and breweries.
a. Fend products, becc�rapes, and tobacco
Processed foods, beverages. and tobacco ac�c�otut for
nearly ool� -third of value added u the Honduran
manufacturing sector. Output increased at ;tit
estimated 9.5'1' mmally during the 1960's. Mitch
primary food pvwessing is done on the fare or in
small, astieluatcd stills, bolt an increasing number of
Iro;e up to date plants are prod such products as
sugar, flour, milled rice, dairy products, animal feed
concentrates, and industrial oils. Some of the older.
inefficient plants also are being modernized and
expanded. lit spite of its recent gro:yth, the food
processing industry provides only the most basic
processing seryiccs. False added by the food
processing industry is only about 7.5 of the total
y;luc of Honduran food production, whereas in
industrialized countries tit( share is 3Yi to 10o 7 i.
Sugarcane processing accounted for almost :30'1 of
value added by the food- processing sector is 1970.
,\Ithough Honduras has fe(�n exporting sugar since
1967, little profit is realized from sugar sales on tit(-
world market because of relatively high production
costs. '!'here are three sugar companies, which, unlike
most sugar operations ill Latin i\mvric�a, are o\%-[,:'(l by
public shareholders rather than wealthy families. "They
are the Chambaym Sugar Processing Conopally in
Santa Barbara, tit(- n(�w Choluteca Sugar Compall\.
and the Ionduran Sugar Processing Company in San
Pedro Sala �the largest which has it capacity of
6,5M tons of call( per dad.
The meat processing and packing industry grey by
an average of 10Si it year betwe 1967 and 1971,
chiefly is response to it growing market for frozen
boneless beef in the United States and Pict Bice.
F.\porls during this period grey b\ W( it year and
I!wtaled some -12 million pounds in 1971, well over half
of production. five plants are certified b, the V.S.
Coyenunenl for export to the United States. and about
a dozen other slaughterhouses prodnc�e for the
(Iotneslic market. Be I; ma tion of I'.S. inport
restrictions in 1972 will I this in(Icstry,
bit'. growth also depends on better liyesiock supplies.
The dairy products industry is small, though
growhog. ''s'hcre are processing plants in San Pedro Sula
and Tegucigalpa. Ilondtims exports mine milk
p oducts� especially ice cream �to Ni, ragcta and El
Salvador, but it is it net importer oI these *m ducts.
Si\ small fish- processing plants are in operation, and
three more are planned or under constnoc�tion. Only
the� simplest preliminar\ operations are performed
before the fish are shipped in fn�( rer ships to New
Orleans and other southern U.S. ports.
An important nesy food processing ac�tkity began
\yith the inauguration in 196.7 by the l'nited Fnoit
('mill"an of thr mald', I:rge.t plant fair c.mnvd .oat
frozen banana pnme and banana chips. This plant.
located in Lit Lisrt. C ;u process 20 million pounds of
bananas amorally. It produces exclusively for export,
chiefly to the United Slates, C;�.nada, Western 1?urope.
and Japan.
Other ne\y food processing plants pro(luc�e cotton
and sesame seed and citns fruit concentrate. The
vegetable oil industry, which produced enough to
permit net exports of oils in 'he late 1960's. has been
hart by the decline in cotton production and the
disruption of Central American trade. I londuras has if
small tobacco industry, producing nuoink cigarettes
for domestic consttntption but also it growing number
of cigars for export.
The beverage industry. \yhic�h consis!s almost
entirely of beer brewing, is one of the oldest and
largest industries in Honduras. \'aloe added by the
beverage industry in 1970 e(lualed 8`i of total y:due
added by the entire nuuufacturing sector. Ionduras
also has one plant producing gin and vodka for export
to the United States.
b. Other manufacturing
The \yood products industry. which is next in
importance following the food and beverage
industries, produces mainly basic lumber products.
More than 100 small sawmills. using rudimentary
technology, were in operation in 1971. There arc also a
plywood plant and it few furniture factories and
cabinet shops that produce for export. Honduras has
barely begun to realize the potential of its vast stands
of timber, but investment restrictions on foreigners
9
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hinder the �xecrttiou of it( wood-processing projects
such as a lark planned pulp :utd paper still.
1'rodtiction of textiles, clothing, auld shoes
aeeotutted for 9r(" of value added in manufacturing in
1940. I'roduc�tion of clothing and textiles greoy
vigorously during the� 1960 but the country still is a
net importer of these items. Exports have dropped
considerably as it result of trade difficulties with the
:kCN1. Honduran textile products are generally
unsalable outside of Central America because of high
prices and low duality. Most clothing and textile
enterprises are family -owned firms "ith Iovy
Productivity, although t nod.nt stills oyillt
sontroyhat hett.rst:a :u :!rcisopened in the ntid_I9)6O's.
The footwear industry, consisting of more than :300
small shoemaking firms, increased both output and
exports rapidly during the early 1960's. It \vas severely
hurt by increased competition front more efficient
producers in the other CACNI countries but has
revived somewhat since the recent difficulties in
CACM trade.
Honduras produces only the simplest chentiezil
products� such as soaps, d\-es, cosmetics, plastic
products, and some drugs. The level of technology in
tale chemical industry is loss, but the rate of grooyt I
has been rapid. Value added increased by an average
of -10'/r per year behyeen 196 -1 and 1970. This industry
has suffered from the dl,ra:ption of CALM trade,
because it large part of its output Lis exported to the
GkC M countries.
Metal processing and ntac�hime boil(ling are at a loo\
level of development. Ilonduras must import nearly
all basic metal products and machinery and
equipment, as well as many consumer durables. One
rolling mill, at San Pedro Sula� produces sin; off
commercial shapes front steel billets imported front
klvxico. A number of small plants manufacture such
items as electric household appliances ,111(1 stores,
metal furniture and utensils, and industrial pipes and
tubes. Construction of it S35 million -S -10 million iron
Mid steel plaint near 'Tegucigalpa has been tinder
consideration for more than i t decade but is being
delayed by financial problems and the uncertainty of
economic prospects.
'I'll( construction materials industry grew b 14S;
annually during 1966 -40, and its share in total
manufacturing rose from 5.Wi in 1960 to 11.5`,'(' in
1970. There is one c�errtent plant, located in San I
S111a.
c. Construction
Because of rising demand for industrial installa-
tions, housing, and public works, constriction activity
expanded vigorously daring 1966 -69, grooving at an
average annual rate of I8"1 it year. 'I'll(- construction
industry accounted fur 5.3!1 of GDI' ill 1969
compared oyillt 3 ).W4 in 1966. Actiyit�- slooyed during
1970-72, because both private and public investment
slackened. (lousing accounts fur tit(- largest share of
constntc�tion, but its share dropped front more than
one -half in 1964 to less loan one -third in 194 1 vyltil.
tic share for roads, bridges, and other public facilities
ruse. Large internidicrnally financed projects usually
ctnplu\ foreign contractors instead of the small seal.
domestic construction firms.
5. Domestic trade
The market systc�nt is practically c�onfi'ted to tit.
urban areas, although neoy roads built r�ceutly bay(-
increased coma ercial activity by bringing mtanN
preyio(tsly isolated people into onlac�t vyitlt the money
.c�011011ly. Wholesale and retail trade is doininated by
Tegucigalpa. the twain popu;ation and fin.lnc�ial
center. 'I'll(- ports of Puerto Cartes and Tela on the
Caribbean coast are important distribution points for
imported goods. Other centers of c�onunerce inchide
La Ceiba. San Pedro Sula, Choluteca, Contav gua, and
FA Progreso.
i\lost ru:1l inhabitants produce.� their o\% it food.
textiles, and other basic necessities. Some products.
such as coffee and native handicrafts, are sold to
pa unit purchase of it fevy ntamil'aclured items. In
small towns. bazaar -t.pe markets and itinerant traders
are cvnunon. lu larger tosyns. cons +user goods are sold
throng! a yarieh of outlets, including small specialt\
shops. vet stalls, and outdoor markets.
C. Government finance and economic
policy
1. Economic policy and programs
The Il!rnduran Government pla\s a less significant
role in the economy tban is usual in it developing
c�o(rnlry. It makes investments. operates public
enterprises, and exercises various direct and indirect
controls, but it never has been it motivating force for
ec�011011tic growth. Most of the development pr>,grants
it has adopted have been instigated b\ U.S. or
iit ternati )it al financial i list it tit ious upon vyhiell
Ifoil (luras depends for financial support.
The govern utent of President OsoyaIdo Lopez.
oyhic�h was in poorer from late 196.3 to early 1941. was
committed to c�onlini ing the program of moderate
economic� reform began under the preceding
administration of President Hanlon Villeda Morales.
In 1965 it prrblish.d it National Plan for Economic
and Social Development 1965 -69), calling for
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diversification of agriculture to broaden the export
base, stinttclatiou of industrial expansion, and
increased public expenditure for infrastructure. It did
not, boweve�r, follow through energetically on
executing either this plan or the previously euac�ted
Agrarian Reform Lrxy of 1962, altbotigh it did launch
a vigorous public investment program in 1969 -70. It
also failed to shift to an alternate tax base to replace
revenues lost when tariff revisions in the 1960's eroded
receipts from trade taxes. Conse(Iuently, financial
difficulties developed that pe "sist to the present.
Tice regime of President Ramon Cruz, which
followed the Lopez administration, was particularly
maladroit in economic administration. :1lthmigh it
produced two development )falls little was done to
promote economic development, and it allowed
government finances to deteriorate further. Ill 1972
President Lopez returned to power confronted b% a
shaky financial situation which overshadowed
development problems.
The government has tried to stimulate expansion of
industry I,y granting tax concession and by providing
credit and promotional support. Since the mid 1960'x,
the National Development Bank has clianneled funds
from the Agency for International Development and
the Inter American Development Bank to manufa.�-
Wring firms and also has estal an Industrial
Development Division to condi et feasibilih studies.
promote investment, and provide technical assistants.
Nevertheless, Ilonduras has been less successful than
its Central American neighbors in attracting new
investment, largely because of its limited resource
base, inadequate infrastructure, and relatively high
wage levels but also because government leadership
has been weak.
The greatest government stimulus to industrial
growth in the 1960'; was tbv association %yith the
CALM, whose common external tariff provided
protection for infant industries and increased access to
markets of the other member countries. Reversal of tit(,
FIGURE 11. Operations of the public sector
(Millions of current lempires)
1060 196
Current revenue 0:3.9
Current expenditure 73.11
Current surplus 15.9
Capital revenue 0.14
Investment expenditure 23.2
Overall deficit Ii.5
Net external financing 8.5
Net domestic finaei Ing 2.3
*Preliminary data.
115.2
1'20. ti
21.6
e. 9
2'i 8
0.3
free trade position ill January 1971- ailhough it
benefited some industries, such as the manufacture of
textiles, clothing, and footu which had suffered
from e�ontpetition within the CACM- probably will
damage the industrial sector as it whole by raising costs
and prices and encouraging iue ffi_i< nc y.
2. Public finance
Tlly public sector consist.-, of the central
government, decentralized agencies and enterprises
operated b% the central government, and tit(
municipalities. Public sector �wenut�s and expendi-
tures (Figure II). represented 17 Si and 22`0.
respectively, of 1970 (:1)1'. In ;971, tile public sector
incurred a deficit eelual to 195; of its total expenditures
and to 457 of GI)). Public investnu�rtt in fixed c�apit:d
accounted for 5.ffi of GDP 1971.
a. Central government
The central government accounts for abmit three
fourths of current public reventt ,s and expenditures. It
accounts directly for about two thirds of Public sector
investment and indirectly for it much larger share.
through apital transfers to decentralized agencies.
I Revenues- Foreign trade taxes provided half if
all revenues in tit(- early 1960's and still accounted for
about i05i at tit(, end of the decade, despite extensive
sid)stitution of domestic and free -trade goods for
extraregional (revenue- produc�ing) imports. 'I'IIe
import�utce of direct taxes ill total revenues has
decreased b(,cause of a drop in receipts from taxes on
the banana companies, but receipts from sales and
luxury taxes have b.�en increasing and provided more
than one -third of tit(, central governmenCs revenue in
1971.
Most of tit( substantial increase in myenues during
th(, 1960's jigurvs 12 and Ill resulted from rising
national income, improved admin ?strttion, and
increases in tit(- number of ta- payers, not from new
19e3N
1967
196s
1969
1970
1971
162.5
180,8
201.1
214.5
2:37.5
21:3.1
1:36.5
149.1
1ti�i.I
I9s.1
210.5
21S.i.
26.0
31.7
37.0
16.7
27.:3
24.e.1
2.1
0.7
1.0
1.9
I.0
1.9
:35.7
46.5
5S..1
89.�1
117.1
5:3.0
7 .13
14 1
20.4
70.S
65.3
56.2
6.(i
10.7
IS.2
3:3..1
4I.S
35.3
I.0
3.�t
2.2
37.4
20.5
17.9
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FIGURE 12. Central government finances
(Millions of current lempiras)
141it1
Current revenue
Current expenditure
Current account surplus
Capital revenue
Investment expenditure
Overall deficit
Net external financing
Net domestic fin :uleing
*Prelimivan data
73,2
63.
4. 7
0.5
I6. S
ti 6
7.:i
ll tl
Ili
113.
I6 S
0.0
17.5
0.
1.2
11.11
1 4110)
1 467
1 4115
1969
1070
147 1
123.5
125.!1
1.111.8
155.4
17:3 .S
177.1
103.1)
113 A
12:1.4
151.:;
162, 2
167 .2
20.2
15.5
20.
0.0
I.6
0.0
11.6
0.11
III.:?
11.0
O.0
211.4
0.0
31 1
35.0
:ill. ti
113. 1
:15.7
6. 7
15.6
1 1. 1
19.0
151.8
15.5
1.5
7 .6
13.5
I.S. I
2ti.s
21.6
2.2
8.0
0.3
30.!1
35.0
311.9
FIGURE 13. Central government revenues by source, selected years
taxes. The minnposition in janaary 1971 of tariffs on
imports from the CMAI countries has failed to boost
gosernnunt receipts appreciably, and no nesv.
dvix-ndable source of incon)e has been developed.
(2) E.rpenclitl/res Cuyernnu nt current expcildi-
tures grew rapidly thronghout the 1960 and
especially rapidly during 1969 -7 1, when defense
rclated spending rose markedly. I lalf of' the increase in
current spending during the 1960's went to social
services (Figure I -H. The share of current expenditures
going to general services and to cc�ononnic services
declined daring the period. hiblic� invesUncnl also rose
during the 1960s, but it (Ieclined in 1971 because of
deterioration of govcnnnwnt finances and c�onse(luenl
cuts in spending.
In terns of total goven)nu'nt spending including
transfers economic services are grossing ins innpor-
tance relative to social services. Agriculture rcecives
only it small percentage of total governnu�nt funds,
but transportation receives it large an(I gro\%ing share.
The sizable increase in public investnnent in the late
1960's and in 1970 resaltvd largely front spending in
the transportation and power sectors (Figure 15).
12
especially the expansion of the North Road and the
Bio hildo hvdroelec�tric� project.
(3) 1)( ficits -With lark increa es in both current
:nut inyesUnenl expenditures, the goyenanu�nt deficit
ruse sharply in 1969 and has remained at a high Ievel.
During 1969 -7 1 it averaged 22'(' of expenditures. To
c�uv( the deficit, both external and domestic financing
were consideral)ly expanded. Before 1969. bank credit
to dw central governnu'nl had been either negaliyc or
negligible.
b. Decentralized agencies
I)ec�entcalizvd agencies. syhic�h include both public
enterprises and aulononnlos institutions account for
about one fourth of public revenues and about one
third of public spending. The difference consists
largely of transfers fronn the central goveni nenl.
hiblic� enterprises. which include four public utilities,
lh(� National (lousing Institute, the National Lottery,
and, since the end of 1965. the National Port
Authority, expanded operations c�owidcrably in tit(
Jule 19ti0's, but total expenditures of decentralized
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190 tit
A cE HAG e
14117
1969
1411
Pe rccid
'lazes on foreign tradee
m.1;
111,.1
?U.1
iU.l
tI1lpUrl taxt
ll
Export taxes.
.li
j
3. 7
3.l;
Direct taxes
2S.:i
Taxes oil ballad: colllpallies............
!l,:i
:1.:i
7.
Other iuionle tax
16.7
,.'u. t;
in.o
P ropeity tax
11.11
l.1
n. ,c
I.0
faxes on domestic transactions............
.5.:i
2S.,,'
i..:
.i",.a
Sales tax
0.11
:Automobile tax
1.l
BVVI� NI X
10.1
.l
1;.,`
1
Other taxes
Ii.
1d.l
I,.7
IS 1;
Nontax rev entit
S. /i
\.jl
lll.j
11).9
taxes. The minnposition in janaary 1971 of tariffs on
imports from the CMAI countries has failed to boost
gosernnunt receipts appreciably, and no nesv.
dvix-ndable source of incon)e has been developed.
(2) E.rpenclitl/res Cuyernnu nt current expcildi-
tures grew rapidly thronghout the 1960 and
especially rapidly during 1969 -7 1, when defense
rclated spending rose markedly. I lalf of' the increase in
current spending during the 1960's went to social
services (Figure I -H. The share of current expenditures
going to general services and to cc�ononnic services
declined daring the period. hiblic� invesUncnl also rose
during the 1960s, but it (Ieclined in 1971 because of
deterioration of govcnnnwnt finances and c�onse(luenl
cuts in spending.
In terns of total goven)nu'nt spending including
transfers economic services are grossing ins innpor-
tance relative to social services. Agriculture rcecives
only it small percentage of total governnu�nt funds,
but transportation receives it large an(I gro\%ing share.
The sizable increase in public investnnent in the late
1960's and in 1970 resaltvd largely front spending in
the transportation and power sectors (Figure 15).
12
especially the expansion of the North Road and the
Bio hildo hvdroelec�tric� project.
(3) 1)( ficits -With lark increa es in both current
:nut inyesUnenl expenditures, the goyenanu�nt deficit
ruse sharply in 1969 and has remained at a high Ievel.
During 1969 -7 1 it averaged 22'(' of expenditures. To
c�uv( the deficit, both external and domestic financing
were consideral)ly expanded. Before 1969. bank credit
to dw central governnu'nl had been either negaliyc or
negligible.
b. Decentralized agencies
I)ec�entcalizvd agencies. syhic�h include both public
enterprises and aulononnlos institutions account for
about one fourth of public revenues and about one
third of public spending. The difference consists
largely of transfers fronn the central goveni nenl.
hiblic� enterprises. which include four public utilities,
lh(� National (lousing Institute, the National Lottery,
and, since the end of 1965. the National Port
Authority, expanded operations c�owidcrably in tit(
Jule 19ti0's, but total expenditures of decentralized
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FIGURE 14. Distribution of centic+l government current expenditures
(Millions of current lempiras)
*I'relinlin:u�c data.
"Viglin's differ from those is Pit:ure 1:3 hec;llho of iucuu >i (caries is official data.
1l ncil drdincd in 19 ;111(1 1971 ;1 ;1 n �1111 I)f Iln�
t;ll\t�rnrnvnt's fiscal difficulties.
Public enterprises generall\ finance current
expenditures from their o\\it m\enues but rel\ tttt the
central gm and foreign sources fc in\rslnu�nt
financiltk. \I( )It a11t )III lllltlIS IrlstitIItitHIS (lVIWIId MI
Transportation
56.1
Power
ZZ 16.8%
8.3% Agriculture
OtF�cr
6.6 �0 2.6 Communications
Health 3.7 J L 3.6% Education
L 7.3% Housing
Economic development
83.6%
Social welfare
16.2%
FIGURE 15. Composition of public investment,
1971
central goxernntent transfers for both openitiug and
capital funds. Onl\ the Ilondimm In slituty of Social
Security is large1% self- st11>1mrting
c�. Municipalities
The mllnicipalities are large(\ self supporting and
acc�onnt for onl\ ;tbmit of public slmnding. The
le\el of spending b\ local g()\enonent inc�rc ;ised ()rtl\
slightly bet\\ren N67 and 1971.
3. Financial institutions, money supple, and
prices
a. Financial institutions
The banking s\stent consists of the Cviitrll Bonk of
Ilondtims� the National De\elopment Batik. the
%lunicipal Development Rio IIk. nine c() nlnlercial
banks (four I'()reign I)\\ned). several specialized credit
institutions. and ;1 minder (If savi I t-I's and loan
eooperalivcs. The Cviand R;utk, founded in 1050. acts
..s the governincids fiscal agent. issncs ctlrrcnc\. sets
interest rates and reser\c requirements. anti controls
eolcl and foreign e\c�I ange reser\es. Mon -fir\ llolic�\
has been directed nntinl\ to\\ard protecting the value
of the lempira within a s\stetn of free con\vrtibilil\.
'1'hc� Bank fre(II wilt IN has re( IIiired aid front the
International tMonelar\ fund to maintain a sufficient
level of international reser\�es.
The state -o\\ ned Notional Dvv(dolnncnt Bank
also doting from 1950, in addition to
I:i
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200070014 -3
1'1�:nl'ENT
Prat Cl: NT
I -I-A" EM
1111111
o1, '1'OTA1.
1967
OF TOTAL
1117 1
n '1'"'1 .11,
(i(- %d Se1'\�iVE'S
111.1
I1.7
1;.S
1i1.5
,1.11
t l 111 i llist tat it/Il...........
12.
"o.
21. 1
Is. 1;
33.2
19.9
1)t4t'nst' and politr.........1
l 1. l
1 1_'.:3
u.S
211.2
12. 1
.1 list e stic
l .I.it
d.:;
1.1
.!1
Interest ou public debt.....
_'.1
3.3
I.:i
>.s'
10.3
1;.
Snci:d Sel'Cil�t'S
2.1 I
.?S.!I
Ili. 1
40 :l
1 .it
?duc:uion
I1.:3
.J_'. :i
21. 1
25.0
17.0
!S.1
Health
li.5
10.2
10.9
!l,6
111.11
11..,
ltlei:ll
1 .7
i
(i 1
li .11
7.5
Ot tier
1.ti
..1;
11.3
ll.,i
11.11
4,.;
1'a'l1llomic sel \'iee5...........
i-1 .5
22..
17.3
l :i �i
2 1 i
A g I'll' 1111 it n
2 .5
.;.!I
6.l
ollllilllllit atlut.s.
3. 1
j.N
1. 1
3.!I
5. 1
t IISlx/l'I:l t ill 11....
11.2
5-S;
...1
11,11
01111
i
i..i
I .II
ll.!
1 .5
\djustnu�ul
I.I
\,11
11.11
'Fol II expendit lll�t'
67.6
lull.O
113. 1
lllll.11
1111 .2
11111.
*I'relinlin:u�c data.
"Viglin's differ from those is Pit:ure 1:3 hec;llho of iucuu >i (caries is official data.
1l ncil drdincd in 19 ;111(1 1971 ;1 ;1 n �1111 I)f Iln�
t;ll\t�rnrnvnt's fiscal difficulties.
Public enterprises generall\ finance current
expenditures from their o\\it m\enues but rel\ tttt the
central gm and foreign sources fc in\rslnu�nt
financiltk. \I( )It a11t )III lllltlIS IrlstitIItitHIS (lVIWIId MI
Transportation
56.1
Power
ZZ 16.8%
8.3% Agriculture
OtF�cr
6.6 �0 2.6 Communications
Health 3.7 J L 3.6% Education
L 7.3% Housing
Economic development
83.6%
Social welfare
16.2%
FIGURE 15. Composition of public investment,
1971
central goxernntent transfers for both openitiug and
capital funds. Onl\ the Ilondimm In slituty of Social
Security is large1% self- st11>1mrting
c�. Municipalities
The mllnicipalities are large(\ self supporting and
acc�onnt for onl\ ;tbmit of public slmnding. The
le\el of spending b\ local g()\enonent inc�rc ;ised ()rtl\
slightly bet\\ren N67 and 1971.
3. Financial institutions, money supple, and
prices
a. Financial institutions
The banking s\stent consists of the Cviitrll Bonk of
Ilondtims� the National De\elopment Batik. the
%lunicipal Development Rio IIk. nine c() nlnlercial
banks (four I'()reign I)\\ned). several specialized credit
institutions. and ;1 minder (If savi I t-I's and loan
eooperalivcs. The Cviand R;utk, founded in 1050. acts
..s the governincids fiscal agent. issncs ctlrrcnc\. sets
interest rates and reser\c requirements. anti controls
eolcl and foreign e\c�I ange reser\es. Mon -fir\ llolic�\
has been directed nntinl\ to\\ard protecting the value
of the lempira within a s\stetn of free con\vrtibilil\.
'1'hc� Bank fre(II wilt IN has re( IIiired aid front the
International tMonelar\ fund to maintain a sufficient
level of international reser\�es.
The state -o\\ ned Notional Dvv(dolnncnt Bank
also doting from 1950, in addition to
I:i
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200070014 -3

acting as it (I evelopnterit bank also provides
coninterc�ial banking svrvice.: to Darts of the c�ountry
not adequate(% served h% the coutnterc�ial hanks. It
obtains funds main!% front the gov (-nunent fut also
front foreign hit it and international finartc�ial
institutions and grunts c�rvdit to both industry and
agriculture. It provides fit) to ti5lf' of total bank
credit to agriculture, mostly in loans to small- and
median( -sired producers who cannot obtain ordinary
commercial credit.
Conitnerc�ial banks control about half of tc,tad
banking assets. w1 ich grey by an average of I it
year during 1966 -7 1. At the end of 19 tltc four
foreign controlled (mainly U.S.) hunks held about
52r of c�onunercial hank assets. In 1912, legislation
wits proposed which would require foreigners to divest
themselves of holdings in Ilondurun bank.
Specialized credit institutions include four sin :11
sayings and loan institutions, a state -owned bank for
eIrkilneling funds to municipal govertnnews. and t%%
1 rivate investment hanks, one of which, operating
nutinly on All) loads, is an important sotirce ef
investment funds for the manufacturing sector. "There
art� also six insurance conipanics and some 125 sin,111-
scaly credit unions in the cottrutry.
b. Money supply
During the ntid- 1960's the banking systene iw(ptired
resottrc�es npidh. and credit expanded without
(.,using inflation or balance of pad inents difficulties
Figure 1 6). A sharp credit expansion with it
concomitant decline in net international reserves in
1961 was followed by i t substantial ,eeIlntulatiort of
reserves in 1968, but further brisk expansion of credit
in 1969 and 1910 led to balatlee of paN merits problems
and brought foreign exchange res(-nes to it Io%% level.
With restraiue�d expansion of cri�dit, fure�igu excttarige
reserves increased main in 1911 and 1972.
c. Prices
Prices have been relatively .table fe,r it number of
years. Th(- oyer:dl price le%el increased ()ills negligil,1%
dtiriog 1968 I, although c�onsunu�r Iric�es apparently
rose by ari a%crage of 2 it year, with food price rises
in 1910 :ltd 1911 ac�c�ounting for it large part of the
inc�re�r,se (F igure 1
4. Manpower
a. Size of the labor force
The Ilonduran labor force:' ntunbers :ippro \intatcl\
WO, 000, or a l :prexiniitIvIy i2r.( cf the total
population. It grew during the 1960 at an average
aurinal rate of 3.2 or slightly i(-ss r :epidl than tnta!
population. In 1912. 65S of the work force %sits
etnplo in agricultural activities, enl\ 0.2`( less than
in 1971. !)(-spite it decade of fairly rzipid in-
dustrialization, ntandiwhiring still ii(votinted foronly
Sri of the total in 1912 and stil! ranked third in
entplo\ntent categories, behind both agri(�ulturc� and
finatc�ial and housing services (Figure IS). S(-If-
eniploled persons and unpaid fancily nu�nu1w rs
together stake alt over half of the work force (Figure
19).
'I'll(- reserve of w()rkers who (night he brought into
the labor force is quite large perhaps 250,000- is
mostly felrtale and (mostly untniined. Vnentployrnent,
concentrated nwirtly in the urban areas, apparently
`The econnmiealh actke pupulatiun at!e 15 and mer-
FIGURE 16. Assets and liabilities of the banking system
(Millions of current lempiros)
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19'iti
1967
19115
1969
1970
1971
:Assets.
F oreign ssets
10.0
2S.1
52. ti
W.I
11.11
2 11.2
Domestic credit
20 :3.;
257.2
279.7
313.
125.5
161 .5
'1'o the puhhe wetor......
10.9
1:3.7
S. 1
23.9
5 :1.S
77.0
To the private sector
170.1
31:3.5
212. ti
291.7
317.3
:3119. 1
Other assets
23.4
29.7
25.7
22.2
21.4
I5 .1
Total assets
2.13. 1
2S:i.13
:3:33.3
:359.9
-113.5
190.7
l.iahili!ies:
M one,\
105.11
120.3
1:35.'3
157. I
167.3
152.2
Quasi- money
711.11
!11.5
109.�1
130.11
1137.1
196.2
Foreign liabilities
27. 6
:32.3
12 9
17.9
d8.0
-15, I
Other liabilities
3:3.:3
�11.1
11.5
A, 5.0
1311.5
11(1.9
Total liabilities
213.4
25-5.(1
333.:3
319.9
11:3.5
190.7
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FIGURE 17. Consumer prices and GDP deflator
(Percentage annual changes)
ANN VA
AN ERM;E
14tIS
1969
1970
1471
1968 71
Consumer prices
1.8
1.3
f.0
1.8
.2.0
Of which, food............
1.H
GDP deflatorr
Domestic prices...........
-U.:
l.rl
U.'
ti.
n.l
1- :xport prices
/.,i
rl.,s'
N. e;
1. l
I as risen in recent years to about 8r'; 1 1 ntlerenploy
ment is widespread. especially in rural areas.
b. L.erels of trainin.;
I fonduran workers are poorl% educated and trained.
Sonie 8 -ISC' have had no formal education at all.:khout
121 have had some prinutry schooling, but only
have attended secondary school and fewer than I `,i of
all employees have a university degree. :1t least Iwo-
Agriculture
65.2%
Financial and housing services
12.1
Manufacturing
9.4
F-1 Commerce
5.4
1 Construction
2.2 0
Transport and communications
a 1.8%
Utilities
0.5
Mining and quarrying
0.3
Other (public administration and defense)
4.1
FIGURE 18. Composition of the labor force by economic
activity, 1971
thirds of all industrial and service workers have had no
formal education, and in agriculture the proportion is
higher. Vocational training is a recent innovation illid
has helped onl% it small number of \%orkers.
Ilonduras suffers front :i severe shortage of skilled
and setniskilled craftsnen, machinery operators and
tnechanics, technicians. supervisor% personnel. and
administrators. The logy iluality of the labor force has
handicapped the coinitry in its efforts to attract u(
iudustry and utilize domestic resources. The logy levels
of skills acid worker nuitiyation. combined with poor
tu:utagentent and logy capitali_':ation. lead to low
productivity. which. in turn, makes labor in I londuras
relatively expensive even though wage rates, as shown
in the follo%%ing schedule of average %%eekly earnings
in various fields (in Icnipiras. 19)70). are lo%t:
AyL�'RACE WEEKLY
SALARY
Agriculture 48.66
Mining and quarrying 31.56
Manufacturing 41.76
Construction 63.30
Utilities 78.48
Commerce 62.76
NOTE� Figures are for a working week of six 8-
hour days in 282 companies with 10 or more workers.
Wage and
salary earner trirrirr ii111TTR1RTT19 }191 40
employed Hll }I }l }t }I }l 38%
Unpaid
family worker 167
Employer 1%
Other* 5%
*Includes people not otherwise classified who were employed and also
people unemployed during the year that were seeking work at the
time of the census.
FIGURE 19. Labor force by class of worker, 1971
15
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c. Labor niorement
Organized labor accounts fur c,nl\ a snall part of
the I londura n labor force, but it is of considerable and
gro%%ill inporlancr. :\l the end of 1969 there w n
30,000 union nu�ndwrs in a score of organizations. l
main industries are orgauized: banana %orkcrs.
refiner\ \\orkers. longshorellWil, and espccfalk 01�01
power workers. "There also is a peasant organization
with considerable political influence. Union nilit; :nc�y
is high. Strikes are frecluenl and often cause
substantial economic loss. The unions had sone
success in inproving wages and working conditions,
particularly in the banana industry, but in general the
bargaining position of Iloncluran corkers is poor.
Organized labor is a vigorous proponent of I: ud
reform. mininum \eage lacs, and an inprued social
sec�urit\ system.
D. Foreign trade
Foreign trade is extrenu�Iy important to the
ecouon. l ?xport earnings regularly anounl to about
10"1 of (:DP. a high figure even for an undcr-
developed country. Ilonduras must export extenskcly
in order to be able to purchase needed capital goods
and consuner durables not rnanufac�hred donu�sti-
c�aII y.
I. Composition and direction of trade
a. Exports
Bananas dominate Iloncluran exports. The\
accounted for more than half the total in 194 (Figure
20). Despite recent difficulties in both gro\\ing and
Bananas
50.5%
CU P'godut t'a
Coffee
12.1%
I i Other
Indus c 6.0%
Pro
Reexports 2 b M e a t
and unclassified 4
S 4.7 f
Mineral Lumber
products Other 10.0%
4.3"x, 6.9y.
FIGURE 20. Composition of exports, 1971
16
marketing banaims. the \;duc of banana exports has
inc�reas�d (�onsideclbly. With a value of swi million ill I) I, it as larger than in 1965. Mhcreas the
value of other exports \\,IS slightly snaller (Figure 21
has a breakdown of vahu�s of Ilondcran exports).
Although coffee exports are limited b quotas set
under the International Coffee ;\grevnwilt, c�offe is
growing ill importance and accounted for I?`( of total
exports in 19i I. 1-:sports c,f� most other agric�u1hral
products have declined. The v;duc of cotton exports in
194 \%as otl\ about 6 of their value in 1966.
?xporls of corn, beans, and lire aoinuds ha\c been
hurt b\ the disnption of C, trade.
Until 1969, \chcn difficulties \\iIII the (MAII
began, Honduras as nrocicratcl\ successful in
diversifying exports and expandiiii; the share of
industrial goods. particularl\ seniprncessed agricul-
tural and forc�str\ products. Fxports of lumber and
chilled meats have gro\%n steadily during the past 10
sears :old constituted about 15'( of the total .:due of
exports in 1971- Honduras also expanded exports of
such manufactured goods as soalps, c�osinetic�s,
clothing, and shoes to the (MAI area daring 1966-
00, but this trade dropped sharply in 19; I. F sports of
nanufactured goods other than lumber and mu�ats
nade ,p 15`(' of the total in 1970 kit only-Ti`; in 1971.
b. Import~
I he r;ltio of Ilporl" to CDI' roil� lrulll klot 20',
ill the carp 191101*', to Hideo� than .311', in N70 'I'hc
slrnclurc of import .11 umisidrl :11)1c.
Beflec�ling increases in fixed investment and expansion
of the industrial sector, imports of capital goods and
industrial ra\c nrclerials grew nuc�h more rapidl\ than
imports of consunu�r goods. The share of the latter in
total imports declined frc,n about t0 in 1960 62 to
i0 "1 in 197 I. Fignrc� 22 gives a breakdocc n of v:aloes
of Iloudurao imlporls. I'1�Irolcnnl. coil.lroction
materials, steel, and c�hcrnicals are the principal race
malcrial imports. The most important consnmu�rgoods
inports arc \c heat. pharmaceuticals. horse appliances.
textiles. artomn,biles. and automobile spare parts.
c. Direction of trade
Developed countries account fur the bulk of
Ilondcran trade. kith the I'nited Stales far in the lead
(Figure'?i). The l'niled Slates. Western 1� :urope, and
Japan bought about 78(1 of Honduran exports in
19 the United Stales alone taking 5?`'(. Imports
from developed countries accounted fur 6 7 1 of the
total (the remainder coming almost entircls from
Latin :1nu�ric�a), %cith the share at 1I'i. F\purls to
the United States inc�1rdc bananas, coffee, sugar. and
invat. Imports consist mainly of nmc�hiner\, transport
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FIGURE. 21. Exports
(Millions of U.S. dollars)
PH PA, I %IINAItY
AgricitItIt raI products
.17.:3
112.0
121 .:3
107.5
111 .0
1 1 anas
25.2
75.:1
79.7
71.1
75.3
Co ffee
11.'s
11.0
20.5
IN..)
25.8
Cot tof)
0.11
5.5
-I.S
:1,6
I.1
T oba evo
0.5
'2.5
2.7
2.3
2.2
Corti
1.0
1.9
2.11
I1.!1
0.4
13eat1S
0.4
2.7
-1 1
:3.2
1.11
Li ve IIIIiIIIIIIs
2.4
:3.:3
2.S
I1,9
0.0
0 0her
1.11
3.:3
3.5
�1.0
3.11
Industrial products
10.7
:32. -1
:34.11
.18. it
:12.3
Nlea t
I 1
-1.-1
1.7
4.0
4.7
Lumber
S.2
II.5
11.11
15.3
313.2
Textiles
0
0.7
I.6
1.5
1.5
Clothilig and shoes
0.2
:3.2
3. 1
:3. 1
1 .5
C hemicals
0
5. :3
13.11
13.0
13.:5
Petroleum
0
0
2.1
1.8
13.
Other
1.2
7.:3
13.it
5.9
10.1
Jlitteral product
�1.�1
7.11
11.7
9. 1
S.S
Silvvr
2.:3
I._'
7.S
4.5
1.1
IXMI alld YIIII..........................
2,11
3.6
3.S
�1. 1
1.5
Gold
0.1
0.1
0.1
0.2
0.2
13eexports told 11110 %ssified exports.........
1 .9
3.5
S.2
-1 .9
i.5
'total exports, Lo.b 64.3 155.5 1511.5 170.7 177.13
*Included io Other.
1960 1967 19fiS 1969 11170 1971
130.1
96. tl
1,3.0
0.5
2.1
1.5
o l
tul
4.0
ll1.11
Y
:3.2
4.13
8,2
3. S
.1 2
0.2
10.5
1 90. 1
FIGURE 22. Imports
(Millions of U.S. dollars)
Consumer goods
2S.6
ondur able
21.0
Dura ble
7.6
hale materi als
22.1i
Alrricultur e
�1:1.9
Industrc and mining
IS.:i
O' c: nstruction
I.I
Lubricants and fuels
13.0
O'ap3ta1 I: 00ds
1.1 .3
A griculture
2. 1
Indus �p
S.I
T rans port
:3. -1
t'rclAssified imports and balance of pa
1
aletlts adjustment
I.6
1460 1966 1967 19135 1464
nu
Total import,, c.3.f 73.1
etlttipim-tit, chemicals, and consumer goods. West
Gcrmanv is the� second largest buyer of Ilondwan
exports and until 1967 was also the second largest
supplier. it position now held by japan.
'trade with C;ACN/I partners grew rapidly during the
late 1960's !tut dropped substantially in 1969 because
of the war with EI Salvador and declined farther in
:11.0
56.2
65.
60.3
117.7
37.-1
10.9
17.2
1:3.0
�1:1.9
13.6
15.3
17.5
17.3
21 .5
.53 i
57 5
135.3
f 1 .3
8.1 S
.5 1)
5.3
:i.:3
5.0
7.9
1
d�1.
:12.1
W.2
li5.6
7.:i
7.5
7.9
10.1
11.1
7 .13
8.0
12.2
12A
11.13
35.3
31 13
10.9
14. 1
55.3
:i.2
5.S
5.6
7.8
S.d
21 .5
2
23. S
29.0
:32.:3
5.11
11.0
11.5
12.3
11.13
:3.7
:3.7
:3.11
3.11
0. 1
1
167.:3
157.0
157.0
222.S
1971 as a result of continuing politicill difficulties with
other member countries (I ;urc 2 -1). In 1971, exports
to CACM countries were only 23 %i of those in 1968,
and imports front the area only 28Si of the 1968 figure.
Trade with El Salvador, long the major Latin
American trade partner, has practically ceased. Loss of
CAC M markets has been particularly disadvanta-
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Percentage distribution
United States 41.1
West Germany 5.4
Italy 0.9
Japan 8.0
Other
developed 10.2
CACM
countries 25.3
Other
Latin America 8.4
Other 0.7
United States 53.7
West Germany 10.6
Italy 5.6
Japan 1.3
Other
developed 8.3
CACM
countries 11.6
Other
Latin America 81
Other 0.2
FIGURE 23. Direction of trade, 1971
IMPORTS
(c.i.(.)
US$222.8 million
EXPORTS
((.o.b.)
US$177.6 million
genus for newly developed industrial e,gports such !!s
soap, vegetably shortening, and clothimr.
2. Trade regulations
All foreign exchange transactions are carried out at
the official rate, set in 19 16, of two Iempiras to oli
U.S. dollar. The gold parity of the lennpira was
IH
Tariffs and 'Trade ((;AT I').
changed in May 1972 to maintain t'u� elutionsllip
With the U.S. dollar. "There are no exchange
restric�tious oll foreign payments.
Export and import duties are a major sour(-(- of'
government revenue and an important instrunivia for
influencing the nature and level of trade. Steep tariff
surcharges enacted in 1968 and 1970 nn imports front
outside the CACA1 boosted intraregional trade. but in
January 1971 flondtires repealed the surcharges and
introduced dirties ou CACN1 goods. The otherCA(:.%4
inembers then responded with import duties on
Ilonduran products. "Trade %%ith the CACM area
consv(pientl\ dropped sharply.
Both exports and innpoits are taxed. but exp;:rt
duties are logy. %lost unprocessed agricultural export
goods are taxed at specific unit rates that vary with the
product. Imported food and niw nnutcrials also are
taxed at specific unit rates, whereas luxury items.
naci inerv, and transport eytipment are subject to ad
rulorent rates that range front Yi on capital goods to
50'; uu some liixtiry goods.
Ilonduras is a member of the Central American
Bank for Economic Integration (CAB I "I) and also is a
signatory to the International Coffee Agweine�ut. It
clots not participate in the General Agnrnu�nt on
3. Balance of payments
Typicall\ llondoras has a deficit in both foreign
trade and services. Until 1969 the deficit on current
account was covered by inflo\ys of private capital
(direct investment. loans, and stipplier's credits) and
by official capital and transfers Figure 25). In 1970.
intennatioual reserves were� rediwed to it dangerously
logy level as a result of sharpl} increased deficits on
current accounts. The trade account deficit tgew from
86 million in 19178 to $16 million in 1969 (Figure 26)
bec�aose of a drop in agric�ulturtl exports� espec�ialk
banan resulting front hnrric�ane damage, an(I to $-15
Million in 1970 as it result of increased imports. Sizable
capital inflows in 1970, restltintg largely from
increased foreign borro\ying by the public sector.
prevented the balance of pa\ntents from beconing
unmanageable, and in 1971 the situation improved as
imports declined stbstantially. The problem persist(-
in 1972� however, as exports rennaincd sl(tgp
imports increased again, and inflows of foreign capital
slowed.
4. External debt
The external public debt store than dotiWed
between 1967 and 1971 (Figure 27) and increased
from the e(Icnivalelit of I I of GDP to 19r(. of
the� increase wits due to borrowing by the e�enlral
government. Although the Icycl of indebtedness is
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FIGURE 24. Trade wiih CACM cruntries
(Millions of U.S. dollars)
FIGURE 25. Balance of payments
(Millions of U.S. dollars)
1966
r:xron'
1966
196!1
I I-otrrs
1!1,
Export. lf. o. b .i
1967
1965
191111
1970
1971
19117
1965
1969
1970
11171
('osta Rica
:3.:i
5.7
6.-1
7.9
1.9
5.1
6.6
i.6
13.(1
:3.3
El Salvador
13.:3
15.0
7.(i
0
0
19.:1
3:3.1
1:3.0
0
(I
Civatenialu
7.1
5.0
7.1
S."
�.S
I1.S
1.1.1
I8.2
29.:3
S.I
Nimragtut
:3.(1
1.9
:i.3
.1
1.5
.3.5
I.S
(i.Ii
II.3
5.1
Total
3:1.9
33.(1
36.:3
20.7
(i.5
10.5
19,3
15..1
511.3
16.S
*Lo. b.
3.5
0.1
1.:3
Transactions with international onl aiiirations...
2.11
0.11
1 t
n.5
0.7
1 .0
*c.i.f.
0
0
0
a
:3,3
2.7
Errors and omissions
1
I 1
3.S
FIGURE 25. Balance of payments
(Millions of U.S. dollars)
*Yretiminan
high, rvixtyr ent schedules are favorable, because
most of the loans were extended by international
lending agencies, particularly the World Bunk and the
CABEI. At the end of 1971, nearly 95`1 of the delft
was in loans with; it final maturity of 15 years or more.
Debt service is moderate, but payllients doubled
between 1967 and 1971. 'I he ratio of debt service
payments to exports of goods and services was
expected to reach 5.8ii in 1972.
Aid conunitn enls front U.S. and international
agencies mostly long -term, logy- interest develttpntent
loans for schools, roads, and nuditria eradictttion-
totuled $101 million between 1968 and 1971. Nearly
890 million of contracted loans retrained unused tit
the end of 1969, but the figure was halved by the cnd
of 1971. Honduras typically is slow in using aid fonds
because of the shortage of adniinistrative and
technical personnel needed to inlplenugnt projects.
19
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1966
1967
1966
196!1
1970
1!1,
Export. lf. o. b .i
I1!.a
155.5
ISII.S
170.7
177.6
1!10.1
mport. e. i. f.'
151 .3
167.3
157.11
157.0
222.
197. 1
Trade def icit
7.0
11 .5
(i.3
16.3
15.3
7.0
Net inconuv from mmfactor service.........
1 .0
1 1
I .6
:3.11
3. 1
11.7
Net factor imomc
15.5
31 3
3:3.1
IN. 1;
33.5
21.2
Net transf ers
1.:3
1.7
6.3
7.:3
6.11
6. 1
Current account balatue
19.3
211.1
31.7
30.G
61.'_'
31.5
Private capital, tiet
9,3
III.�
19.5
11.1
IS,3
!1.0
Official capital. uet
5.7
111.3
9.11
1S. I
23.9
17.3
Banking sYstem
1'6
2.3
5.3
3.5
0.1
1.:3
Transactions with international onl aiiirations...
2.11
0.11
1 t
n.5
0.7
1 .0
:Allocations of SI)13s
0
0
0
a
:3,3
2.7
Errors and omissions
1
I 1
3.S
1 .9
5.5
9.:3
13alallee of pacuumts surplus or deficit
2.5
5. S
13.1
3.3
1 1 .0
1. 1
International reservv at end of Ye:u'............
311.0
11.3
26.:3
33.0
11.0
M. l
*Yretiminan
high, rvixtyr ent schedules are favorable, because
most of the loans were extended by international
lending agencies, particularly the World Bunk and the
CABEI. At the end of 1971, nearly 95`1 of the delft
was in loans with; it final maturity of 15 years or more.
Debt service is moderate, but payllients doubled
between 1967 and 1971. 'I he ratio of debt service
payments to exports of goods and services was
expected to reach 5.8ii in 1972.
Aid conunitn enls front U.S. and international
agencies mostly long -term, logy- interest develttpntent
loans for schools, roads, and nuditria eradictttion-
totuled $101 million between 1968 and 1971. Nearly
890 million of contracted loans retrained unused tit
the end of 1969, but the figure was halved by the cnd
of 1971. Honduras typically is slow in using aid fonds
because of the shortage of adniinistrative and
technical personnel needed to inlplenugnt projects.
19
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Millions of U.S. dollars
240
200
160
120
i
80
40
Imports
(c.i. f
Deficit.
i
Exports
0 1 1 1 1 1 1 1 1 1 1 1
1 %1 '62 '63 '64 '65 '66 '67 '6111 '0 70 71
Millions of U.S. dollars 45.1
Deficit 16.3
12.4 11.5
7.1 7.0 6.1 7.0
1 %1 '62 6S
0.6 1.3 '63 '64 66 '67 '6e 69 70 71
Surplus 6.0
FIGURE 26. Balance of commodity trade
20
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FIGURE 27. External public debt by borrower, lender, and maturity
(Millions of current U.S. dollars)
'I"Ital exiel 11.11 publi� debt
BY llorrowvr:
Centel go�el-11111�ilt
Rest of public sector
Stane ffilallcial illterlm-diarivs
Other (govvrinn�nt guar:tritt-tqj)
BY lender:
International Bank for Reconstruction a
I )vvvlo 1) Illell t
Inter American Devel Bank
Central American Bank for �vonoiniv Inte-
g ration.................................
AgelleY for IlltVl'll:Lti0ll:d Ih e elopuu nt
E'xport-Import Bmik
('01"Inercial hanks
'4upplivrs
B. 111,Lturit.%
I to 5 ea rs
1; to 10 v ("I n
II to 15 v v:irs
Ovvr 1- vars
FOR OFFICIAL USE ONLY
21
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DECEMBER 31
1961;
1967
196N
1969
1970
11171
55,2
62-s
7S.2
100.5
1 29.7
135.7
25. 6
29. 1
317.5
17 ,6
67.3
7!1.1
1 5A
17.-�
20.7
211. 1
317.17
33,11
11.:3
111.1
1 1 0
i5.3
15.17
17.1
7.0
S,5
11) 2
21 1
22.17
25.3
33. N
1 1.7
16. 1
13.7
16.9
2:3.2
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FOR OFFICIAL USE ONLY
21
APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200070014-3