No. of Manufacturing Plants in Honduras
4.4.2. Direct Investment
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Business Service Centers: With the creations of new service centers, this sector is expected to generate 50,000 new jobs for young and bilingual personnel who would be up to date in the latest trends for business processes and information technologies.
In its second phase, the national program is projected to reach and inject new investment funds to the agro-industrial and housing sectors. The government views as a vital priority the improvement of the country’s economic indexes boosted by projects that will attract new investment, generate employment and bolster local economies through the generation of income and development of the country’s most productive areas. In its endeavor to achieve this goal two other parties play an equally important role to the public sector: 1. Private sector and 2. McKinsey Global Institute, which will be acting as a consulting firm and was the firm commissioned to identify the key productive sectors this program should focus on. The three parts mentioned above will operate under a “Transformative Unit” with complete autonomy and ample legal faculties to promote the development of initiatives that will attract direct investment and channel accordingly (Honduras Presidential House, 2016).
4.4.2. Direct Investment
As Honduras becomes more open to international investment by creating an attractive environment for people from all over the world to invest, the gradually positive trend observed in the foreign direct investment in the past three years will continue on the rise. This positive trend enhanced by government support, improvements in cities safety, security indexes, manufacturing productivity and efficient logistic hubs will surely continue to attract foreign investors from different nationalities in the upcoming years.
By the end of the year 2018, Honduras positioned itself in the second position of the Central American region (Previous year it was the third position behind Costa Rica & Guatemala) in terms of receiving foreign direct investment. The country received a total of US$ 1,225.8 Million during this year, just behind Costa Rica which received a total of US$ 1,594.7 Million in foreign direct investment during 2018 (Honduras Central Bank, 2018). The US$ 1,225.8 Million represented an increase of 3.4% compared to US$ 1,185.7 Million received in 2017.
Two sectors have stood out in recent years as the major drivers for foreign direct investment:
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contributing country of origin, during 2018 the United States of America accounted for a 25.4%
(equals to US$ 311.1 Million) of all foreign direct investment in Honduras, once again demonstrating how deeply rooted to the USA the Honduran economy is in all of its aspects.
Figure 19: Foreign Direct Investment in Honduras 2009-2018
The year 2009 represents one of the worst years in the history of Honduras. The country was not only recuperating from the financial crisis that struck the world in 2008 but on top of that on June 2009 a constitutional crisis occurred when the Honduran Army following orders from the supreme court ousted President Manuel Zelaya and sent him into exile (Olson, 2009).
This combination of events led to a foreign direct investment reduction of almost 50%
compared to the year 2008 in which the country had received US$ 1,006.4 Million in direct investment. The international reaction to the 2009 Honduran coup’dètat was widespread, the United Nations, the Organization of American States (OAS) and the European Union all condemned the removal of President Zelaya as a military coup. The outrage was so far-reaching that in July of 2009 all member states of the OAS unanimously voted to suspend Honduras from the organization. This further isolated the country, which became increasingly unattractive for foreign investors as they viewed Honduras as a highly risky investment due to political
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Foreign Direct Investment in Honduras
Total Foreign Direct Investment (Millions US$)
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instability and uncertainty. Since then, the country has gradually returned to normal figures of foreign direct investment by actively promoting an attractive investing environment to the international community. In the last five years, Honduras averages a 3% yearly increase in the reception of foreign direct investment of which a larger portion of is directly contributed to the investment in the manufacturing industry, more specifically industrial parks serving the textile and automobile parts industries.
Table 6: Foreign Direct Investment by Economic Activity (In Millions US$)
Economic Activity 2016 2017 2018
Agriculture -$29.20 -$4.20 -$7.60
Tourism $156.50 $110.30 $120.60
Construction $20.30 $27.20 $9.80
Electricity, Gas & Water $4.30 $77.10 $47.70
Manufacturing Industry $430.20 $456.50 $466.90
Mining Industry -$64.80 $36.50 $8.10
Business Services $419.70 $337.00 $379.60
Telecommunications $202.40 $145.30 $200.70
Total $1,139.40 $1,185.70 $1,225.80
The manufacturing industry displays a positive trend in the influx of foreign direct investment averaging a yearly increase of 4% in the last three years. The other largest economic activity, the business services industry, has seen considerably high influxes in the last three years however their trend has a lot more variability than that of the manufacturing industry. The agriculture industry stands out from the previous table due to its continuous disinvestment in the last three years; this trend reflects the country’s goal in shifting from agriculture products based economy into a manufacturer of finished goods and service provider one.
The United States of America maintains itself as the largest individual contributor to the foreign direct investment in Honduras throughout history with one notable exception being the year 2016 in which the North American country actually disinvested US$ 3.6 Million. Investment coming from the USA has gradually returned to a normal state since 2009 accounting for 17.1%
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