國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
These figures stress the importance of the manufacturing industry in Honduras, not just from an employment source point of view, but also from a macroeconomic standpoint. It is clear to the eye how reliant the country’s economy is on the exports of products elaborated within the industrial parks and how incredibly impactful to the commercial balance our trading relationship with the USA actually is.
4.1.2. 4.1.2. Imports
At the close of the year 2018, Honduras total CIF (Cost, Insurance and Freight) imports amounted US$ 12,200.00 Million divided as follows:
General Goods: US$ 9,482.8 Million
Goods for Transformation (Mostly raw material like threads and clothes destined for use in industrial parks): US$ 2,708.0 Million
Other Goods: US$ 9.2 Million
Figure 14: Honduras Total CIF Imports 2015-2018
$11,175.20
$10,558.90
$11,323.50
$12,200.00
$9,500.00 $10,000.00 $10,500.00 $11,000.00 $11,500.00 $12,000.00 $12,500.00
2015 2016 2017 2018
Honduras Total CIF Imports 2015-2018
CIF Imports (Millions US$)
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
products in this category include fuels, medical and surgical equipment, mobile devices and automobiles. The second largest partner in the imports of general goods is Central America with 20.2% of the total (US$ 1,912.1 Million). Notably for this research, during 2018 a total of US$ 704.8 Million worth of imports were received from Europe consisting of machinery to be used in the textile industry.
The goods for transformation were primarily sourced from the USA, with a total of US$ 1,879.1 Million worth of raw materials to be worked within the country’s manufacturing industry (69.4% of total).
4.2. The Manufacturing Industry
Manufacturing industry refers to those industries which are related to the processing and manufacturing of items, these items can have two natures: new commodities or value-added commodities. Manufacturing industries came into being with the occurrence of technological and socio-economic transformations in the western countries in the 18th-19th century. This was widely known as the industrial revolution starting in Britain with a disruptive force replacing the labor-intensive textile production in the country with mechanization and use of fuels (Economy Watch, 2010).
Manufacturing industries are important for an economy as they employ a big share of the labor force and produce goods required by sectors of strategic importance. In the case of Honduras, the previous chapter made it clear on how important this sector is for the country’s economy in terms of employment and finished goods exports.
4.2.1. National Perspective & Background
The manufacturing industry represents one of the most productive and economically impactful sectors of Honduras; throughout the years, it has bolstered employment as well as harnessed the consolidation and development of companies dedicated to the transformation of raw material into finished goods.
The manufacturing industries in Honduras really took off in the 1980’s, when the decree for the creation of the “Industrial Zones for Manufacturing of Export Goods” was approved. This decree awarded immense facilities and preferable treatment regarding import/export taxes, property taxes, municipal taxes, company establishment tariffs, government procedures, etc for
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
companies that established themselves within these designated areas. This led to the origin of the first industrial parks known as INHDELVA and ZIP CHOLOMA located in the northern part of the country in the department of Cortes, which would later hold the highest concentration of manufacturing plants in Honduras. Later in the 1990’s these zones became nationwide and not tied to specific geographic locations and became known as “Free Zones”, as long as the company passed all requirements they could apply for the preferential treatment. This behavior can be observed throughout many Latin-American countries during this decade; the belief was that by awarding more facilities and benefits to international investors they would be more motivated to invest in the local country and further improve the national competencies. This proved to be the case for Honduras, where foreign investment in the free zones skyrocketed since the 1990’s and since then has positioned the manufacturing industry as a vital contributor to the country’s economy.
The favorable evolution of external and internal demand and increase of private and public investment in the country has resulted in economic growth of 4.8% and 3.1% in 2017 and 2018 respectively (Honduras Central Bank, 2017). The positive trends are expected to extend into the year 2019 as new government projects and foreign capital investments take place.
4.2.2. Gross Output (GO)
Gross Output (GO) is defined as a measure of an industry’s sales or receipts, which can include sales to final users in the economy (GDP) or sales to other industries (intermediate inputs).
Gross output can also be measured as the sum of an industry’s value added and intermediate inputs (Bureau of Economic Analysis, 2018).
During the year 2017, the gross output of Honduras manufacturing plants reached L.
150,583.00 Million (Approximately US$ 6,275.00 Million), this represented a 3.9% increase compared to the previous year. The vast majority of the goods accounted for the GO correspond to textiles and apparel with a 75.9% representation of the total with a 3.0% yearly increase. The automotive parts reflected a similar 3.0% increase compared to the previous year due to higher demand from the USA (Honduras Central Bank, 2017)
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
4.2.3. Gross Value Added (GVA)
Gross Value Added (GVA) is an economic productivity metric that measures the contribution of a corporate subsidiary, company or municipality to an economy, producer, sector or region.
It basically provides a dollar value for the number of goods and services that have been produced in a country, minus the cost of all inputs and raw materials that are directly attributable to that production (Kenton, 2019)
In order to calculate the Gross Value Added (GVA) of the manufacturing plants in Honduras, another vital piece of information is the total inputs that were used for the production output.
The value of these inputs in the year 2017 reached L. 117,330.8 Million (Approximately US$
4,888.00 Million) reflecting a 4.1% increase compared to the previous year.
The result of subtracting the total inputs from the gross output will result in the country’s gross value added for the year 2017: L. 150,583.00 M – L. 117,330.80 M = L. 33,252.20 (Approximately US$ 1,385 Million). This figure presented a 2.9% increase to that of 2016. The major components of the GVA were: Salaries 65.8%, Social Contributions 8.3%, Tax on Production 0.9% Gross Operating Surplus 25.0%. The GVA represents an important figure since it can be used to observe how much value is added (or lost) from a particular region or state as well as serving for the calculation of the gross domestic product (GDP) as described in the next section.
4.2.4. Contribution to Gross Domestic Product (GDP)
The manufacturing industry represents one of the fastest growing and productive industries of Honduras. Throughout the years, they have achieved this in part due to the creation of an effective vertical integration of the production processes in which the final goods are manufactured under a single roof. This promotes the reduction of costs for the companies and optimizes the transformation process by reducing the time to process while at the same time standardization and quality is increased. Another phenomenon arising from the success of these companies in the country is the birth of economic groups, which are compromised by the companies who import the raw material and other which provide freight service, equipment maintenance, quality assurance, job placements, miscellaneous items providers, etc.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
In order to measure the true growth of the series, the following chart presents the manufacturing’s industry contribution to Honduras GDP in constant prices:
Figure 15: Manufacturing Industry Contribution to GDP 2015-2018
In the year 2018, the manufacturing industry was officially the largest contributor to Honduras Gross Domestic Product by having a 19.3% participation of the country’s total GDP, which stood at L. 214,705.00 Million (Approximately US$ 8,946 Million) in constant prices. Other major contributors include the agriculture sector with a participation of 14.5%, financial intermediation services with a participation of 18.7% and hotels & restaurants with a participation of 11.6%. The increasing trend on the contribution of the manufacturing industry is clear to the eye and is expected to continue in that same way for the near future as new investment projects take off. On the other hand, the yearly variation on what percentage the manufacturing industry represents of the GDP is not drastic with it being between 19% and 20% of the total GDP since the year 2015 (2015 – 19.6%, 2016 – 19.4%, 2017 – 19.3%, 2018 – 19.3%). (Honduras Central Bank, 2018)
$1,551.23
$1,597.50
$1,662.25
$1,726.08
$1,450.00 $1,500.00 $1,550.00 $1,600.00 $1,650.00 $1,700.00 $1,750.00
2015 2016 2017 2018