Honduras - International trade

Honduras conducts a majority of its trade with the United States. In 1999 over one-third of Honduras's exports went to America, not including merchandise produced in the maquila sector. Although technically a function

Trade (expressed in billions of US$): Honduras
Exports Imports
1975 .295 .400
1980 .829 1.009
1985 .780 .888
1990 .831 .935
1995 1.220 1.643
1998 1.533 2.500
SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.

of manufacturing, Honduras lists maquila as a service export instead of a product export. With maquila exports included, the United States received over 70 percent of total Honduran exports. Nearly half of Honduras's imports—about 47 percent—came from the United States (over 60 percent with maquila). Other trading partners included Germany, El Salvador, Nicaragua, Guatemala, Mexico, and Japan.

During the 1980s coffee and bananas in Honduras accounted for a majority of total exports. Over the past decade, exports were diversified. By 1999, due to a widening agricultural base and the effects of Hurricane Mitch, which destroyed much of the banana crop, the export share of coffee and bananas had been reduced to 25 percent.

In 1999 coffee and shellfish were the leading export earners. Coffee receipts came to US$256.1 million, and shellfish exports generated US$193.2 million. Revenues from banana exports, which were US$279.8 million in 1996, fell in 1998 to US$175.7 million. After Hurricane Mitch, banana receipts dropped to US$37.7 million.

The Honduran government in the 1980s instituted policies to curb imports. This led to pent-up demand, and a decade later when trade was liberalized, import levels rapidly rose, exceeding export levels and widening trade deficits . The situation was exacerbated by Hurricane Mitch, which lowered export production and raised the demand for imported goods. By 1999, trade deficits, excluding maquila value, had widened by 60 percent to US$1.48 billion (US$764.2 million with maquila).

Honduras is looking to expand its regional trading relationships in order to lessen its economic dependence on the United States. Honduras, along with El Salvador and Guatemala, established a trade agreement with Mexico in June 2000 which was meant to reduce tariffs on industrial and agricultural products and give Central American countries enhanced access to Mexican markets. In 1993 Honduras also entered into a free-trade agreement with Guatemala, El Salvador, and Nicaragua. Central American policy makers hoped the creation of the free-trade area, known as the Group of Four (G4), would make the region more competitive in the world economy. Efforts to expand regional trade have been partly successful. In Honduras, exports to G4 countries rose from 13 percent of the total in 1997 to 17 percent in 1999. However, border disputes between Honduras, Nicaragua, and El Salvador could potentially complicate the agreement.

Problems arose in 1999 when Honduras recognized Colombia's right to a stretch of maritime land off the coast of Nicaragua. Nicaragua, claiming ownership of the land, responded by levying a 35 percent surcharge on all Honduran imports. The dispute, which is still unresolved, has left relations between the countries strained. Disputes in other areas between the countries have led to violence. Military clashes have occurred over fishing rights in the Gulf of Fonseca, and in recent years Honduras has also clashed with El Salvador over contested land in the province of La Paz.

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