Following 2006, which was an excellent year economically for Honduras (a fiscal deficit of just 2%, inflation at 5% and economic growth topping 5.3%), Honduras expects 2007 to usher in even more new business and investment opportunities.

“Economic activity indicators show an expansion across nearly all productive sectors,” says a report prepared by the Central Bank of Honduras and the International Monetary Fund. “This dynamic is fueled largely by the creation of new credits, internal demand and lower interest rates.”

The Honduran financial market has grown even more dynamic with the recent arrival of important regional groups, like Banco Cuscatlan and Banco Lafise. Even more important has been the appearance of some of the strongest banks in the world, such as HSBC and GE Financial, and the expansion of Citigroup, which has been operating in Honduras for several years.

In addition to the benefits brought about by the Free Trade Agreement with the United States, the agreement also qualifies Honduras for support from one of the United States’ most important agencies – the Overseas Private Investment Corporation (OPIC), which has agreed to provide at least US$181 million in new investment funds for Honduras.

These OPIC funds will be used to support the housing sector, renewable energy projects, micro-financing programs and the countries small and mid-sized companies (PYMES).

With the help of FIDE, Investment and Exports, OPIC will also make available to international businesses its Political Risk Insurance, an important resource for investors from developed nations doing business in emerging economies.

Sophisticated

Meanwhile, the Honduran economy is growing more and more sophisticated as the volume of value-added exports increases and the country’s productive sector diversifies.

Honduran-manufactured automotive accessories, for example, are riding the roads of the world’s major cities in some of the top selling automobile brands. The country’s light manufacturing automotive sector produces electric harnesses for well known brands including Ford, General Motors and Hyundai. Honduran factories are also producing luxury wooden interiors for BMW, Mercedes and Lincoln.

By the end of 2006, Honduras had become the second largest exporter of electronic automotive harnesses to the U.S. market, ousting the Philippines from its second place ranking and topped only by Mexico.

The 14 companies manufacturing for the automotive industry in Honduras are taking full advantage of the same incentives that helped the Honduran textile industry to thrive: a young and productive labor force earning competitive wages, world class port facilities and proximity to the most important market in the world.

Among the country’s top harness producers are well-known firms such as Lear Corporation and Alcoa Fujikura, two of the world’s largest manufacturers of automotive accessories.

Also operating in the Honduran automotive sector is Novem, Car Interior Design, a world leader in the manufacture of wooden dashboards. Honduras is home to the firm’s second largest plant after its headquarters in Germany.

“Honduras attracted Novem for its strategic geographical position near our clients, vehicle manufacturers in the United States, and also for its tax-free zones” says Novem plant manager Steffen Binöder.

In choosing Honduras for its offshore operations, Novem also took into account factors such as the experience that Honduran workers have in working with wood – a factor that also attracted the U.S. company Childcraft Industries, the largest U.S. manufacturer of children’s furniture.

Childcraft has launched a joint venture with local Honduran producers called Muebles Infantiles, S.A., exporting to the U.S. cribs that can be transformed into full sized beds and changing tables that can be transformed into bookshelves.

These innovative pieces are designed for middle and upper class U.S. consumers and are sold at 257 independent stores throughout the United States, Canada and Mexico, as well as well known retailers such as Sears, Target, Costco and Babies “R” Us.

A Better Labor Force

The sophistication of the Honduran productive sector has carried with it substantial improvements in the skills of the country’s labor force –an area in which Honduras offers an important advantage compared to other countries in the region-, offering a greater number of young workers who have received sufficient schooling.

This fact is confirmed in the “Study of the Light Manufacturing Sector in Honduras” carried out by the Canadian firm EEC at the request of the National Competitiveness Program known as “Honduras Compite” (for whom FIDE is the Technical Secretary).

The EEC carried out similar studies in Costa Rica, El Salvador, Nicaragua and the Mexican states of Chihuahua and Jalisco. Honduras, it turns out, has the largest young labor force in the region (1.4 million people between the ages of 15 and 24) and the best average length of schooling (between 6 and 9 years) making the Honduran labor force among the most competitive.

“These are very interesting results,” says one EEC official. “Average schooling for the television production channel in Mexico is eight years. This means that in those sectors related to electronics assembly the Honduran labor force is nearly as highly skilled as Jalisco’s and much larger than Chihuahua’s, where electronic audio and video equipment is particularly well developed.”

Another advantage of the Honduran labor force is that a high percentage of Honduran workers speak English, as Honduras is the country in Central America with the greatest number of bilingual schools.

With comparative advantages like these, Honduras has taken on a new shine, thanks to microeconomic and political stability, a dynamic business sector, continually improving infrastructure and the speedy process to open the economy that began in 2006 with the free trade agreement with the United States and in 2007 has set its sights on the European Union.

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