Honduras facing 'catastrophic' political-economic scenario

Next Sunday’s internal primary elections in Honduras will set the stage for the general election in November but come amid a worsening outlook.

According to the IMF, the 5.7% unemployment rate is the highest since 2004 and the statistics office said it increased by 21% in Tegucigalpa alone last year.

Ismael Zepeda, an economist at NGO Foro Social de Deuda Externa y Desarrollo de Honduras (Fosdeh), told BNamericas that “official data talks about a decrease of 10% of GDP, one of the highest in the region. Minus 10% of Honduras’ GDP means going back 10-15 years.”

Zepeda said the political and economic outlook is “catastrophic,” as data from the business council suggests up to 40% of small and medium businesses have had to close. This has led to an increase in poverty from 65% to 75%.

The elections are also difficult because the related authorities have lost credibility. 

“That’s the worry that the moment an institution like the national electoral council doesn't have the strength to carry out free and transparent elections the conflict will continue in our country,” said Zepeda.

The National Party (PN) and the Liberal Party (PL) have held power in Honduras for over a century. Although opposition parties have polled better than PN in the past two elections, their failure to unite behind a candidate has led to losses.

The former president of NGO Cohep, Luis Larach, told BNamericas that “there are many good opportunities with that US [trade] policy towards China, as long as we know how to take advantage of that window, we could do very well. But we must not waste time.”

However, Larach believes that any foreign investment this year will go to social housing and infrastructure programs.

FDI has fallen by over 60% in the past four years, and won’t rise anytime soon, according to former finance minister and central bank president Hugo Pino.

“I am convinced that we will have to wait until after the elections [for investment]. The government is so discredited by its ties to corruption and drug trafficking that the main economic players will do very little this year,” Pino told BNamericas.

The winner of the November general election will have to tackle deficits, fiscal adjustment, and unemployment. 

And migration caravans or strikes could make solving these problems even harder.

Larach said, “the wear and tear of 12 years of the current government and the issue of reelection, plus the questioning of our president for acts against the law have created a strong division. We are very politically polarized.”

Corruption and alleged political ties to cartels would further impede progress.

“It’s multifactorial what we’re seeing. It would be too difficult to say that in four or eight years the problems of Honduras will be solved,” said Zepeda.