Guidance

Overseas business risk: Honduras

Updated 19 August 2024

© Crown copyright 2024

This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.

Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.

This publication is available at https://www.gov.uk/government/publications/overseas-business-risk-honduras/overseas-business-risk-honduras

1. Overview

As one of the poorest and least industrialised countries in Latin America, Honduras is heavily dependent on agricultural products such as bananas, coffee and sugar, for its foreign exchange earnings. This makes the economy extremely vulnerable to commodity price and climatic changes.

Other key areas of the economy include manufactured goods produced by local assembly plants (maquiladoras), particularly in the textile industry, as well as tourism and the construction industry. In 2023, Honduras registered the fourth highest economic growth rate in Central America with 3.6%. The global economic crisis of the Covid-19 pandemic and the damages caused by tropical storms ETA and IOTA, domestic challenges of violence and inequality, have had a strong adverse impact on the economy and in recent years it has showed a deceleration, partially attributable to the decline in the demand for textiles in the United States.

The pandemic and storms led to -9.5% economic growth in 2020. Local economy recovered as Covid-19 restrictions were gradually being lifted, showing a continued growth that marked 3.6% in 2023 (World Bank).; while remittances from Hondurans working in the US keep playing a vital part to the economy, reaching a new high of USD 9.2bn in 2023 (over 20% of GDP).

The government is generally open to foreign direct investment (FDI) which is viewed as crucial for resuming sustained economic growth in the future. According to Honduran Central Bank, FDI increased from USD 920.3 million in 2022 to USD 1.8 billion in 2023 due to reinvestment of foreign companies operating in the country.  The largest investments in Honduras came from South America (USD 443.6 million), Europe (USD 398.7 million), Caribbean (USD 133.7 million), Central America (USD 76.5 million), Asia and Oceania (USD 26.5 million). The recent shift of the government to open relations with China will have a significant impact in the foreign direct investment and trade; as well as the measures taken by the government on tax reforms, electricity generation, partial jobs and special economic zones.

2. Politics

Honduras, Central America’s second-poorest country, has one of the world’s highest homicide rates.  Despite some improvements that have been made on security, gangs and transnational crime impact communities and businesses. Its international image has also been undermined by extensive narcotics-related money laundering.

Capitalizing on a 2015 Supreme Court ruling that suspended a constitutional ban on consecutive presidential re-election, and an economy that was performing well, President Juan Orlando Hernández of the centre-right National Party was re-elected in November 2017. At the end of this term, he was deported to the US and convicted on drug trafficking charges.

In the 2021 national elections, left-winged, Xiomara Castro was elected President, becoming the first female president of Honduras and promising progressive reforms to tackle local challenges such as poverty, corruption and human rights. After two years of Castro’s government, the country remains on dire economic conditions and confrontation persists with the private sector, linked to reforms to the tax system and handling of foreign investments at special investment zones. The Government is keen to push for broader implementation of deeper institutional reforms to spurring more dynamic growth and sustainable development throughout the Honduran economy.

3. Economics

The Honduran economy is rated as low-middle income, according to the World Bank; having the fourth largest GDP of the seven Central American countries (USD 34.4 billion in 2023, World Bank). Honduras faces major challenges with more than 51.3% of the population (10.4m inhabitants, World Bank 2023) living in poverty (2023). In rural areas, approximately six out of ten households live in extreme poverty or on less than USD 2.50 per day. The unemployment rate was 8.1% and inflation 6.7% in 20223 (IMF).

The government has been trying to develop new strategies to increase employment, open markets and attract foreign investment that takes advantage of the opportunities that Honduras has, such as its strategic location, a growing industrial base, a young population, and a desire to diversify exports. However, recent legislations such as the removal of part time jobs and special economic zones, electricity generation and tax reforms have caused uncertainty for local and foreign companies. Rampant crime and violence add a major challenge. Although the number of homicides has declined recently, Honduras continues to have one of the world’s highest homicide rates; approximately 38 per 100,000 in 2022.

Honduras’ economy depends highly on international trade making it very vulnerable to external shocks. Although the light manufacturing sector has increased its productivity, the country’s economic structure has not changed substantially, depending on the agricultural sector as the major source of employment. Its main trading partners are the United States (USD 6.4bn of Honduran exports and USD 7.9bn of imports in 2023) Central American countries (mainly Guatemala) and the European Union (in particular Germany).

Honduras continues to be an exporter of agricultural products and clothing manufacturing. Its main exports in 2023 were USD 4.65 billion manufacturing industry, USD 993 million agriculture, electric equipment and other parts USD 1,377 million, and USD 96.9 million mining. While imports consist mainly of manufactured goods, fuels, energy, transport equipment and industrial materials. Total exports in 2023 were USD 11.4 billion, while imports were USD 19.3 billion.

Foreign investment in Honduras is regulated by the Investment Promotion and Protection Act. This introduced national treatment and new guarantees for foreign investors, such as stability contracts, fiscal incentives and property protection regimes. However, there are some limits for foreign companies relating to which sectors they can operate in, since the state reserves exclusive rights to operate certain basic industries and public services (for public order and public interest reasons); for example, activities related to public health, public drinking water supply, waste management, lottery, among others. There more than 30 regulations that relate to investment and which the National Council for Investment has identified in order to guide foreign investors; these include labour, energy, tourism, and other type of legislations (see more here). Despite the high level of violence and crime and high inequality, the Honduran investment climate has attracted big investors to the country, especially in the textile and tourism sector.

In 2019, when the last Doing Business report of World Bank was published, Honduras was in the 133rd position, between Niger and Guyana.

3.1 Trade and investment between the UK and Honduras

Trade between the UK and Honduras has been increasing over recent years, especially since 2013 when the  Association Agreement between Central America and the European Union (EUCAAA) entered into force. From 1st January 2021, trade relations with Honduras are based on the UK-Central America Association Agreement. Read more information about the Agreement.

Total trade in goods and services (exports and imports) totalled £162 million in 2023, a decrease of 22.9% or £48 million from 2022. UK exports to Honduras amounted to £26million, while UK imports from Honduras were £136million.

More on bilateral trade with Honduras can be found within the Trade and Investment Factsheets.

3.2 Potentialities of the market

The government of Honduras established a National Investment Council that promotes the development of local and foreign private investment as a mechanism to generate economic growth and employment in Hondurans. The Council focuses in five priority sectors, which are receiving different types of incentives and represent opportunities for UK companies now.

Tourism

The main goal is to become one of the top destinations in the Caribbean and Central America. This requires public (and private) investment in infrastructure, consulting services, connectivity (airports/airlines) and talented human resources. In August 2017, the National Congress of Honduras approved a new Tourism Promotion Law which includes a package of incentives for investment. In the first semester of 2023, Honduras received 1.2 million tourists, an increase of 35% compared to the same period in 2022.

Light manufacturing

Light manufacturing production represents 9% of the total exports of the country and it has the potential to make Honduras the most dynamic country in the region. Companies investing in this sector benefit from production incentives.

Infrastructure

Public investment in infrastructure is one of the priorities of the government and there are opportunities in urban planning, modernization of ports and airports, creation of smart cities, public transport, construction of highways, others; all areas of British expertise.

Agribusiness

The agricultural sector is the main motor of the country’s economy, employing 40% of the labour force and it has potential to grow. The government is focusing on improving the value chain through the adoption of better standards, technology transfer and facilitation of higher value activities. The important crops in Honduras are tubercular plants, vegetables, sugar cane, pineapple, melons, watermelons and bananas. There are two big U.S. corporations in Honduras, Chiquita and Dole, they have a disproportionate amount of the country’s agricultural land and produce a substantial part of the income of Honduras by growing the majority of the country’s banana crop (Britannica). UK companies can add extra value to the agricultural sector in Honduras with products that can support the crops mentioned before and products that improve water and soil management.

Energy

Renewable energy generation is a priority for the government, especially new technologies that can help mitigate the effects of climate change, i.e. droughts, that affect some sources of power generation. Nevertheless, this sector has challenges due to human rights and environmental issues and lack of proper legal framework (consulting processes with local communities) for the creation of energy projects.

3.3 Tax and customs

As from 1 January 2017 the Honduran corporate tax system is based on the territoriality principle. Companies, whether or not resident in Honduras, are subject to tax only on Honduran-sourced income. Companies domiciled abroad that have agents or representatives in Honduras are taxed in the same manner as residents on their income derived from activities undertaken in Honduras. Honduras does not have any double taxation treaties in force. These are the key taxes in the country:

  • Income Tax: companies are subject to tax of 25%, known as the income on lucrative activities regime
  • VAT: a standard rate of 15% is payable on domestic and imported goods and services (some supplies are exempt)
  • Alternative Minimum Tax: companies and individuals resident in Honduras are subject to this tax. As from 2020, only companies performing general activities that generate more than HNL 1bn will be subject to this tax at 1% rate; while special activities that generate more than HNL 1bn will be subject to this tax at 0.5% rate.  Special activities include natural or legal persons who produce or market: cement, public services provided by state companies, pharmaceutical drugs, oil and its derivatives, bakery sector or industry, products derived from steel for construction, production, marketing and export of coffee
  • Solidarity Tax: applicable only to taxpayers opting for taxes on income from lucrative activities (25% income tax scheme), they must pay 5% calculated on net taxable income exceeding HNL 1 million
  • transfer pricing (TP) policies are applicable in Honduras. The government is entitled to determine differences between transactions done by related parties and others done by independent parties. If the government identifies a difference, this would not be deductible for income tax purposes and a 15% or 30% tax would be paid on such difference

Four incentive programmes operate in Honduras to certain qualifying industries and operations; some incentives are being reviewed and might change under the tax reform that the government is discussing. These are:

  • free zones: tax exemptions on profit derived from sales to foreign countries are applied for 10 years to companies operating in Free Zones or under the Law of International Services, as long as the company has been approved by the Ministry of Economy. Also, they are exempt from income tax for 10-20 years and from municipal income tax for 10 years
  • export and draw-back activities: exemption from import taxes, VAT, income tax for industrial and commercial outfits established under this scheme are some of the incentives available for companies dedicated to export and draw-back activities
  • free-trade zone and tourist zone: exemption from import taxes, VAT, and income tax exist for industrial and commercial companies established within free-trade zones in Honduras. Also, companies operating in the Bay Islands within the free trade tourist zone benefit from these incentives
  • investment in renewable energy sources: Exemption of import taxes for 10 years, income tax for 12 years, income and value-added tax for 10 years, exist as incentives to develop renewable energy projects

Tax reform

In April 2023, the government submitted a tax reform bill to the National Congress (called Tax Justice Bill), through which it intends to reform the Honduran tax system. Some of the main points included are:

  • incorporation of a worldwide income principle, which taxes all income from Honduran source and foreign source, obtained by individuals or legal entities resident or domiciled in Honduras, originated from work, capital or the combination of both
  • elimination of banking secrecy for tax and customs purposes
  • removal of benefits contained in ten tax exemption regimes, including those contained in the Free Zones Law (ZOLI), among others
  • creation of the Incentive Regime for Development (RINDE) and the Free Zone Regime for new investments
  • establishment of a Central Registry of Final Beneficiaries administered by the Revenue Administration Service (SAR)
  • ratification of the Convention on Mutual Administrative Assistance in Tax Matters

These proposals can be modified under the process of approval by National Congress.

The tax reform has been criticised by private sector and others since they claim it will have a direct negative impact in local production and foreign investment. The approval of the legislation is still pending.

ZEDES

In 2013, Employment and Economic Development Zones (ZEDES) were introduced; they were intended to be extraterritorial fiscal and customs zones with the possibility to develop their own internal policies and regulations (including fiscal and monetary). However, in April 2022 the government repealed ZEDES law claiming it was unconstitutional and that it breached Honduras’ sovereignty. 

Customs union between Guatemala and Honduras

The Customs Union between Guatemala and Honduras entered into force in June 2017; and in August 2018, El Salvador officially joined. This created a single customs territory of 242km2 and 34.8 million of inhabitants; figures that represent more than 68% of all Central America, including 69.4% of regional trade and 50.2% of regional GDP. This union means free transit of more than 75% of goods, by accelerating mobilisation of more than 95% of goods at the border with the use of a document for electronic transfer and payment of taxes in real time (FYDUCA).

This customs union only covers products (not services), and 38 products groups are excluded. Among these excluded are: alcoholic beverages, vehicles, living animals, chemicals, dairy, tobacco, and cement,. These products would use the regular customs documents and would have to go through the regular line at customs; whilst products included go through a special line and only use FYDUCA.

Discussions are on-going regarding the free transit of nationals from the Northern Triangle countries (Guatemala, Honduras and El Salvador) between their respective borders, without the need to clear customs. Implementation of this is yet to be realised.

Since the entry into force of the customs union, authorities of the three countries are present at customs offices at the respective borders to facilitate the movement of goods.

3.4 Services - education

  • approximately a third of Honduras’ population is between 18 and 35 years old (2020).
  • approximately 73.8% of inhabitants are economically active (15 years or older)
  • the Honduras literacy rate is approximately 88.2%
  • according to the English Proficiency Index, Honduras English proficiency is ranked moderate.  However, it is higher among young and urban generations
  • second to Belize, Honduras has the largest number of bilingual schools in Central America
  • Honduras has 6 public and 14 private universities

UK education offer in the country

The British Council currently does not have an active presence in the country but does offer IELTS exams on specific dates to those interested with the support of UNITEC Tegucigalpa and San Pedro Sula. Pearson Education is active in Honduras offering educational services, including English language tests. Under the previous presidential international scholarship programme, Honduras 2020, the government explored agreements with foreign universities for Hondurans to pursue postgraduate degrees in one of the six areas prioritized under Honduras 2020 and in health related specializations; this programme was cancelled by the current administration but a new one is already operating under the name of “Becas Solidarias” being administrated by the Social Development Secretary (SEDESOL). Hondufuturo has also established partnerships with UK universities to allow Hondurans to pursue postgraduate education in the UK.

Business process outsourcing (BPO) sector

The BPO sector employs around 20,000 people in Honduras. Progressively it has become an attractive investment destination for contact centre companies. The country has a large volume of private English-language schools which provide a good source of bilingual agents.

Whilst in neighbouring countries operations are mostly focused on a single urban centre, Honduras’ outsourcing sector has been established in multiple urban centres thus decreasing the risk of oversaturation. Moreover, the establishments of Altia Smart City in Tegucigalpa and Altia Business Park in San Pedro Sula have offered investors state of the art facilities for interested businesses.

BPOs offer a wide range of services such as customer service, telemarketing, collections, data feeding outsourcing of financial and administrative services. Leading multinational companies such as Alorica, StarTek, KM2, Convergys and Knoah Solutions are situated in the country.

Technical education

Due to socioeconomic factors, limited access to secondary education, the rural/urban divide and gender barriers, many young Hondurans are unable to access higher education. Thus, strengthening the vocational education sector in the country is regarded as a top priority by both the private and public sector.

Established in 1972, INFOP is the governing body of vocational training in Honduras. It offers technical courses such as automotive mechanics, construction, refrigeration, electronics and carpentry, amongst others.

Private and public universities are also expanding and investing in their technical degree programmes. For instance UNAH, the largest public university, offers a broad range of vocational opportunities through over 47 of its university’s career programmes. UNITEC, a private university also offers technical programmes in areas such as English for call centres, nursing, web design and development and network installation.

Overall, demand to develop technical skills is increasing in areas such as English language, agriculture, hospitality and tourism, programming, 3D animation, handling of industrial machinery, electricity, health services and maintenance.

Opportunities and challenges

There are other education/English language opportunities in the country. For instance, English for business, teaching methodologies and development of specific course material.

There are also a number of private schools and universities in Honduras (including government programmes such as SEDESOL’s “Becas Solidarias”) who could establish partnerships with international education providers for their students to improve English language skills and immerse themselves in a foreign culture.UK institutions and their quality of education are highly regarded and recognized.

There are however several challenges in the education sector. One of them is the strong competition with other English language providers. Honduras has closer cultural and commercial affinity with the United States in comparison to the UK. The BPO sector also favours developing in house skills and focuses voice coaching on American clients.

Public entities are also unable to contract services over a certain amount without having to open a bidding process. They are unable to contract foreign companies without a legal registration in the country unless they are unique providers of a service. Therefore, on most occasions UK education providers must seek and establish local partnerships to take forward such opportunities or opt to undertake a local registration process (see section 7 for further details).

Public private partnerships (PPPs)

Under the Public Private Partnerships framework, Honduras implemented several infrastructure projects, both urban and services projects at local and national level. These were based on the General Law for the Promotion of PPPs (Decree 143-2010) that aimed to manage and regulate the procurement processes that allowed the public-private collaboration for the delivery of public works and services to increase investment that leads to economic development. Projects under this model included the modernisation of ports, government administrative centre, highways, construction of new international airport, among others.

The government is evaluating the delivery of infrastructure projects done under the PPP model and  reforms to the PPP law are currently under review.

PPP Project: International Airport Palmerola

The new International Airport at Palmerola is the biggest and primary airport of Honduras. It is located 70km from the capital, Tegucigalpa. This ambitious project is the core of the national plan to make Honduras the logistics centre of the Americas. The construction was done under the PPP model, through a concessionaire. The total amount of investment was more than USD 160million. Operations began in October 2021.

Global trade and international agreements

Honduras is highly dependent on international trade, and thus international trade agreements play an important role. Honduras has been a member of the WTO since July 1995 and has signed 12 trade agreements, giving preferential treatment to more than 40 trade partners, including the UK. Its largest trading partners are the United States, Central American countries and the EU (in particular Germany). Moreover, Honduras has 11 bilateral investment treaties which support the protection and promotion of investment with commercial partners.

Intellectual property

Honduras has been part of the World Intellectual Property Organization (WIPO) since 1983. The country has a legal framework to protect intellectual property rights which is based on two key laws: Industrial Property Law and Copyright and Related Rights Law.

Another three laws that strengthen this scheme: E-signature Law, Protection of New Varieties of Plants Law and the Law of the Implementation of CAFTA-DR (the FTA with the US obliged Honduras to modify some of the regulations in order to strengthen the protection of intellectual property rights). Nevertheless, even though this legal framework exists, sometimes it is not properly enforced.

Companies interested in registering a trademark, patent, industrial design, copyrights etc., under the Honduran legislation need to approach the Directorate-General of Intellectual Property (DIGEPIH), attached to the Property Institute (IP), since it acts as the intellectual property office.

See Honduras’ trade agreements.

4. Business and human rights

Historically, Honduras has maintained an open and welcoming posture to international human rights agreements. The country has ratified and supported numerous resolutions. However, in practice it continues to face implementation difficulties. According to Human Rights Watch World Report (2024), journalists, land and environmental defenders, as well as LGBT individuals are among those most vulnerable to violence.

The current government will continue to develop its National Action Plan (NAP) framework to implement the UN Guiding Principles on Business and Human Rights. However, the Ministry of Human Rights has flagged that it will focus on the third pillar, remedy and work together with the Ministry of Economic Development. The UN Business and Human Rights working  group visited Honduras in 2019 and made suggestions to all sectors in order to advance the NAP. The Ministry of Human Rights will lead the BHR efforts. However, due to financial restraints BHR NAP might advance at a slow pace.

From within the private sector, the creation of the Industrial Committee of Human Rights with the support of The National Association of Industries (ANDI) is pushing forward the Business and Human Rights agenda. The dynamics between the private sector and the current government are yet to be seen. Voluntary principles on Security and Human Rights are also gaining interest and are being embraced by several companies.

The Honduran Foundation for Corporate Social Responsibility (FUNDAHRSE) based in San Pedro Sula promotes corporate social responsibility initiatives within the private sector. It offers memberships and trainings to companies focusing mostly on implementing ISO norms and corporate volunteering. FUNDAHRSE’s small and medium sized unit specializes in offering trainings, consultancy services, research and technology with the aim of advancing CSR practices within this sector.

4.1 Indigenous groups and investment projects

Honduras’ indigenous population is composed of seven different groups: Lenca, Maya-Chortí, Tolupán, Pech, Tawahka, Miskitu and Nahua. In addition, there are another two different afro-descendent ethnic groups: Garifuna and a black English-speaking population.

Although there is no up-to-date information on the indigenous population in Honduras, according to the 2001 national census 7% of the population were indigenous or of African descent. In 2007 indigenous organizations conducted a census in which it was discovered that the indigenous population or people of African descent amounted to 20% of the population.

In 1994 Honduras ratified ILO Convention 169. The Convention recognizes that due to different historical factors, indigenous and tribal groups have been unable to exercise their fundamental human rights to the same degree as the rest of the population and that governments should assume the responsibility to ensure that indigenous and tribal groups are able to exercise, under equal conditions, the rights and opportunities available to the rest of the population under local laws.

The Convention also establishes that the state should consult indigenous groups on all administrative or legal measures which could directly affect them. This includes but it is not limited to coordinating consultation processes between indigenous groups and companies looking to establish operations in their territories. In addition to affecting indigenous groups, the consultation process is also an issue which affects non–indigenous communities. Currently, there is no consultation law or existing regulation which outlines the steps to correctly undertake consultation processes.

The Special Rapporteur’s report (2016) on the rights of indigenous peoples in Honduras shed light on their critical situation. The report highlighted their vulnerability to acts of violence when claiming their rights over lands, territories and natural resources. In a context of general violence and impunity they lack access to justice.

Indigenous people have claimed that various energy projects, extractive projects, agro-industrial, tourism and infrastructure projects have infringed their rights as these projects had been taken forward without prior consultation and proper observance of international standards.

Amongst other observations and recommendations, the Special Rapporteur emphasized that “before applying for permission or signing contracts relating to investment projects, companies should carry out studies on the presence of indigenous peoples in or around sites proposed for such projects and on the rights to lands, natural resources and prior consultation that indigenous peoples have under international standards.”

In late February 2022, the government announced the country will not allow mining permits and has declared the country free of open pit mining projects. In recent years, opposing mining projects has been deadly for environmental activists.

4.2 Advancements and challenges ahead

To date the Honduran government has been unable to establish clear consultation regulations with indigenous communities. There have been several registered cases of social unrest, attacks against human right defenders, and the suspension or closure of projects. Particularly, the prosecution and murder of indigenous leaders who defend their lands is concerning.

The most internationally well known case is the murder of Lenca leader and environmentalist Ms. Berta Cáceres in 2016. Cáceres lead protests against the Agua Zarca hydroelectric project. Her murder is feared to be directly linked with her work in defence of the rights of Lenca people in relation to this project.  

In November 2018, a court ruled that seven men, including an army major and the manager for social and environmental matters for Desarrollos Energéticos (DESA), were the material and intellectual murderers of Berta Cáceres. Although, the ruling was welcomed by civil society organizations, many still argue that the masterminds behind the murder  have not been properly charged. Later, in 2022, other actors involved were convicted, however, the sentences were appealed and since then the final decision has been in the hands of the Supreme Court of Justice, which has given no indication of issuing a decision soon.

In the area of extractive industries several challenges persist. In 2013, the Honduran Government passed The General Mining Law (Decree No 32-2013) which established the Honduran Institute for Geology and Mines (INHGEOMIN). INHGEOMIN is legally mandated to manage the mining sector in accordance with EITI transparency principles.

Nevertheless, the General Mining Law was met with opposition from several communities and organizations in Honduras. Some of the main concerns raised were water sources communities depended on being left unprotected, mining not being prohibited in populated areas, limited access to information about technical and financial aspects of the projects and companies involved, amongst others.

In October 2020, Honduras was found to have made meaningful progress with considerable improvements in implementing the 2016 EITI Standard. However, due to inadequate progress with civil society engagement, Honduras was suspended and was given 18 months to carry out corrective actions regarding industry engagement. On November, 2023, the EITI International Council determined that Honduras had “almost fully met” the requirement relating to industry participation, and “partially met” the Requirements that focus on government commitment, civil society participation, multi-stakeholder group and work plan.

Learn more about EITI in Honduras.

5. Rule of law and transparency (corruption and bribery)

Honduras continues to struggle to develop an effective rule of law and little improvements have been made on transparency issues. Resolution of title disputes in court often takes years, in part because of the judicial system’s weakness. Politically, the country remains polarized due to a contested election in November 2017 (see point 2). The instalment of the Mission to Support the Fight Against Corruption and Impunity (MACCIH) gave some hope to boost transparency but internal differences and non-committal support from the Honduran government caused its closure.

In November 2020, Honduras created the Secretariat of State in the Office of Transparency to fight corruption. The Castro government, shut down the Secretariat of State in the Office of Transparency in April 2022 and instead created the Secretary of State in Office of Transparency and Anticorruption. 

In the latest Transparency International Index 2023, Honduras scored 23/100 and has a ranking of 154 out of 180 countries. The report has Honduras under the worst performers and highlights the issue of extortion of small businesses and ordinary citizens by gangs as a serious problem that goes unpunished – holding back economic development and heightens insecurity with illegal flows of money going to the financial system.   

In February 2022, President Castro announced that her government had requested to the United Nations the creation and establishment of the International Commission Against Impunity in Honduras (CICIH). On 15 December, the Honduran government and the UN signed a MoU to set up CICIH. The group of UN experts have made 4 visits to the country to evaluate the legislative and institutional obstacles that exist in the country to combat corruption, however, progress to install the CICIH has been slow, which is highly criticized by the civil society, international human rights organisations, among other actors.

In July 2022, Congress approved the: Special Law for the Proposition of Candidates for Magistrates of the Supreme Court of Justice (CSJ). After a six month long nominating process, it whittled down prospective judges to a list of 45. In February 2022, Congress elected 15 magistrates based not on their grades or their suitability, but instead their political views and affiliation for the period of 2023-2030.

6. 5.1 Study Case: The Mission to Support the Fight against Corruption and Impunity in Honduras (MACCIH)

In 2016 following months of protest demanding the fight against corruption to be taken forward by an independent organization, the Honduran government requested the Organization of American States (OAS) to establish The Mission to Support the Fight Against Corruption and Impunity in Honduras (MACCIH). MACCIH aimed to improve the quality of services delivered by the justice system and to prevent and fight corruption and impunity in the country. The commission’s mandate includes selecting and overseeing a group of judges, prosecutors, police officers, and forensic scientists to pursue corruption cases.

During its first year, MACCIH had several successes and began investigating several high-profile corruption cases. The case of Los Cachiros linked former President Porfirio Lobos (2010-2014) and the cartel Los Cachiros as beneficiaries of hydroelectric projects the assassinated activist Berta Cáceres opposed. A second case named La Caja Chica de la Dama provided proof against former first lady Rosa Elena Lobos of creating a sophisticated money laundering network. As a result of the investigation she was arrested.

In early 2018 MACCIH requested the arrest of five congressmen and initiated an investigation against sixty congressmen potentially implicated in embezzlement of public funds. Shortly afterwards Congress passed a law which constrained and blocked MACCIH’s powers to investigate public funds, transferring them to the National Audit Office, which is known to be influenced by political parties. Once the amendment was approved, the five congressmen who had been arrested were freed and the investigation of the other congressmen was suspended. The amendment also limits MACCIH’s ability to investigate bribes related to Odebrecht.

Following the approval of the new law MACCIH’s Head of Mission, Juan Jimenez, resigned citing a lack of support from authorities in Honduras and clashes with OAS leadership. Moreover, in March 2018 the Supreme Court accepted a challenge against the agreement which established MACCIH, adding further pressure to its work. MACCIH’s mandate ended in January 2020 after 14 cases against 113 individuals. Currently, the Special Prosecutor’s Unit Against Impunity of Corruption (UFECIC) continues to follow-up on corruption cases under threats and little support from local authorities.

7. Security (organised crime)

Despite the descending trend for murder rates over the last few years, figures are still high at 38 per 100,000 inhabitants (2022). Due to widespread extortion, crime and presence of gang members in some areas of the country, most businesses invest in private security. Experts estimated in 2021  37,000 private security agents were working in Honduras, exceeding the number of officers in the national police force, which at the time stood at 16,000. Public forces are unable to meet the growing security demand.

The last government had expanded the military’s role in combating violent crime by creating the Public Order Military Police Force (PMOP). This decision has been contested by several members of civil society and the National Human Rights Commission (CONADEH). In a December 2015 report, it listed complaints it has received against the Military Police and Army personnel alleging abuses that include killings, abductions, torture, rapes, and robberies. In March 2022, the newly elected government ordered the demilitarisation of the Honduran Prison System, with a projected deadline of 10 months to transfer control of the prisons and the National Penitentiary Institute from the Armed Forces to the National Police. However, due to a recent confrontation between inmates in a women’s prison that left 41 prisoners dead, President Xiomara Castro decided to remilitarize the prisons.

8. Terrorism and protective security advice

See the FCDO Travel Advice Honduras for the latest information.

9. Regulatory environment

Honduran laws on tax, labour, environment and health and safety do not forbid foreign investment or foreign companies to operate in the country. However, there are some restrictions. If foreign companies want to operate in certain sectors; agriculture, fishery, forestry, etc., the company needs a majority ownership by Honduran citizens. Also, bureaucratic processes for obtaining certain permits and licences represent a challenge for foreign companies/investors that do not know how the system operates (in comparison to the domestic companies that are more familiar with such processes). In addition, in order to participate in government procurement processes in some cases it is needed for foreign companies to be legally registered in the country, or at least on a temporary basis, making it easier to partner with local companies.

The Honduran Labour Code regulates the employer-employee relationship and sets the benefits and obligations that have to be met; these include: vacations, social security, working hours, minimum wage etc. The minimum wage is renegotiated on a multi-annual basis between the government, private sector and labour unions. It currently stands at a range of between HNL 8,500 – HNL 16,700 per month (approx. USD 340 – USD 675), depending on the economic activity.

The maximum working hours are 8 hours per day and 44 hours per week, with at least one 24 hour rest period per week; 10 work days paid as vacations per year; two bonuses of two complete salaries per year (one in June and another one in December). Additionally, there is a requirement for all foreign companies to hire Honduran workers; at least 90% of the total workers have to be Honduran and at least 85% of the payroll has to be paid to Hondurans.

There are price controls on some products, which are set temporarily by the government establishing a fixed price to guarantee their affordability. This is most commonly done in the holiday season when sellers increase prices to make more profit, on products such as beans, sugar, beef, poultry, etc. There are no exchange rate controls.

For a more comprehensive list of regulations and procedures, the Honduran government has created this website with the support of the international network of transparent investment procedures of UNCTAD.

10.1 Commercial

10.2 Business and human rights

10.3 Education

10.4 Rule of Law and transparency

10.5 Security

10.6 Think tanks

11. Contact

Contact the DBT team in Guatemala for further information.

Back to top