Honduras - Country Commercial Guide
Investment Climate Statement

This information is derived from the State Department's Office of Investment Affairs’ Investment Climate Statement.

Last published date: 2021-12-02

The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world.  They analyze a variety of economies that are or could be markets for U.S. businesses.

Topics include Openness to Investment, Legal and Regulatory systems, Dispute Resolution, Intellectual Property Rights, Transparency, Performance Requirements, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

These statements highlight persistent barriers to further U.S. investment.  Addressing these barriers would expand high-quality, private sector-led investment in infrastructure, further women’s economic empowerment, and facilitate a healthy business environment for the digital economy. 

Executive Summary

The United States is Honduras’ most important economic partner.  During the past year, the Honduran government has continued to implement reforms to attract investment and promote economic growth, but meaningful improvement has been slow.  Macroeconomic reforms and continued commitment to fiscal stability have led to a stable macroeconomic environment, ongoing financial assistance from the International Monetary Fund (IMF), and stable credit ratings from the major international agencies. 

Foreign investors operating in Honduras operate thriving enterprises, but face challenges including unreliable and expensive electricity, corruption, unpredictable tax application and enforcement, high crime, low education levels, and poor infrastructure.  Squatting on private land is a growing problem in Honduras and anti-squatting laws are poorly enforced.  Continued low-level protests and uncertainty surrounding the November 2021 general elections are additional concerns for private investors.  The World Bank’s Ease of Doing Business Report points to the difficulty of starting a new business, the high burden of paying taxes, and poor contract law enforcement as major disincentives to private investment.

The impact of the COVID-19 pandemic on the economy was both immediate and severe.  The March 2020 shutdown of the formal and informal economies placed a tremendous strain on workers who rely on daily wages.  Approximately 175,000 Hondurans were temporarily suspended from their jobs, 250,000 became unemployed, and almost 300,000 saw their income decrease by at least 40 percent.  This economic contraction was further exacerbated by back-to-back Category 4 hurricanes in November, which caused severe flooding and mudslides, damaging roads, washing away 134 bridges, and killing over 100 people.  The combined effects of COVID-19 and the November hurricanes caused an economic recession, with GDP contracting by 8 percent in 2020 and job losses as high as 800,000 workers (18 percent of the labor force).  Honduran authorities report economic destruction as high as $10 billion from the storms.  The storms’ effects were particularly damaging to the agriculture and tourism industries, both crucial for millions of Hondurans.  NGOs, development banks and Honduran officials are working to reactivate the economy via cash injections and technical assistance for small business and farms, rehabilitation of key infrastructure, and improving climate change resiliency.

The Government of Honduras (GOH) implements a variety of measures to attract investment and facilitate trade.  Trade policy is overseen by the National Trade Committee, chaired by the Minister of Economic Development.  Honduras is a ratifying country of the WTO Trade Facilitation Agreement, which contains provisions for expediting the movement, release, and clearance of goods, and sets out measures for effective cooperation on customs compliance and trade facilitation.  Honduras, Guatemala, and El Salvador operate a trilateral customs union to foster and increase efficient cross-border trade, but implementation remains inconsistent.  In June 2020, Honduras switched to digitized import permits for agricultural products, reducing costs and dispatch times dramatically.  Also, in 2020, Honduras and Guatemala launched an online pre-arrival screening protocol to reduce border times and transit costs for goods.  Many processes, including applications for permitting and licensing businesses are now available online as part of Honduras’ Sin Filas (no lines) initiative. 

Many of the approximately 200 U.S. companies that operate in Honduras take advantage of the commercial framework established by the Central American and Dominican Republic Free Trade Agreement (CAFTA-DR).  Through its participation in CAFTA-DR, Honduras has enhanced U.S. export opportunities and diversified the composition of bilateral trade.  Substantial intra-industry trade now occurs in textiles and electrical machinery, alongside continued trade in traditional Honduran exports such as coffee and bananas.  In addition to liberalizing trade in goods and services, CAFTA-DR includes important requirements relating to investment, customs administration and trade facilitation, technical barriers to trade, government procurement, telecommunications, electronic commerce, intellectual property rights, transparency, and labor and environmental protection. To access the ICS, visit the U.S. Department of Department of State’s Investment Climate Statement.