Part of International Business course

1. Group 3 Section - B
Nilay Kumar
Albert Basumatary
Jaiesh Kumar
Amit Kumar Mishra
Prashant Tataskar
International Business Project
Historical & Economical Analysis of
Honduras

2. Country, Industry & Companies
Chosen
Country
-
HONDURAS
HONDURAS
HONDURAS
Industry
-
Top 3
Players

3. History
Source -http://globaledge.msu.edu/countries/honduras/history
• 1502 – Christopher Columbus lands in Honduras
• 1525 – Spain begins conquest of Honduran territory
• 1821 – Independence gained from Spain but becomes
part of the Mexican empire
• 1840 – Honduras becomes fully independent following the
dissolution of the Federal Republic of Central America.
• 1969 - A brief yet costly war breaks out between
Honduras and El Salvador over heavy immigration and a
disputed border.
• 1992 - New boundaries between Honduras and El
Salvador are determined by the International Court of
Justice.
• 2002 - Honduras re-establishes diplomatic ties with Cuba,
which were severed in 1961 when Cuba was expelled
from the Organization of American states.
• 2004 - Honduras, Guatemala, El Salvador, the Dominican
Republic, and Nicaragua enter into a free trade
agreement with the United States called the Dominican
Republic-Central American Free Trade Agreement
(CAFTA-DR).
• 2006 - Honduras joins the Bolivarian Alternative for the
Americas (ALBA), an alliance of leftist leaders in Latin
America.

4. About Honduras
Honduras is the sixth poorest developed country in Latin America. (59% people below poverty line and 36.2%
extreme poverty)
Declared as one of the heavily indebted poor country by World Bank an IMF, eligible for debt relief(2005).
Honduras has free trade agreement with USA (CAFTA)
The country has gold, silver, lead and zinc mines but theses are owned by foreign companies. Agriculture is the most
important sector bananas, mangoes, palm oil, corn, beans, rice, citrus fruit, and beef are the major agricultural products
The major imports of the country include machinery, transportation equipment, raw materials, chemicals, fuels, and
foodstuffs.
The leading trade partner of Honduras is the United States followed by Guatemala and El Salvador.
Highest murder rate in the world (79/100,000); Annual costs of violence account for 10% of GDP.
Banana, formally the country’s second largest export until being wiped out by 1998’s hurricane Mitch, recovered
in 2000 to 57% of pre Mitch levels

5. Honduras Economic Sector
14%
27%
59%
Contribution To GDP
Agriculture Industry Services
Agriculture:
Bananas, Coffee, Citrus, Corn, African Palm; Beef; Timber; Shrimp,
Tilapia, Lobster, Sugar, Oriental Vegetables
Industry:
Apparel, Mining, Wire Harness, Wood Products, Agro, Construction
Apparel
It is fourth largest supplier of Apparel to US market in the world and the
largest in Caribbean and Central American
Wire Harness
It is worlds largest supplier of wire harnesses to the US automobile
industry.
Source:: https://www.cia.gov/library/publications/resources/the-world-factbook/geos/ho.html

6. Honduras Economic Data
2010 2011 2012 2013 2014
Population (in million) 7.6 7.936 8.261
GDP/Capita (USD) 4400 4500 4600 4600 4700
Industry Production
Variation % 27.6 27.8 28.1 27.3 26.4
Unemployment Rate(%) 4.9 4.4 4.5 4.5
Inflation Rate (CPI in %) 4.7 6.76 5.2 5.16 6.13
Exchange Rate (vs USD) 18.9 18.92 19.5 20.5 21.1
Exports (USD Billion) 5.879 7.204 7.931 7.881 8.52
Imports (USD Billion) 8.878 10.34 11.18 11.34 11.79
Exchange
Rates(Lempiras/ US $)
18.9 18.95 19.51 20.53 -
Public Debt (% of GDP) 26.1 32.9 35.8 40.6 44.3
Source:: https://www.cia.gov/library/publications/resources/the-world-factbook/geos/ho.html
http://www.indexmundi.com/honduras/economy_profile.html
http://data.worldbank.org/country/honduras

7. Exports
"Honduras Export Treemap" by R. Haussmann, Cesar Hidalgo

8. Role of Government in Industry
Behaviour
• The country signed an Enhanced Structural Adjustment Facility (ESAF) -- later
converted to a Poverty Reduction and Growth Facility (PRGF) with
the International Monetary Fund in March 1999
• Honduras received significant debt relief in the aftermath of Hurricane Mitch,
including the suspension bilateral debt service payments and bilateral debt
reduction by the Paris Club—including the U.S. -- worth over $400 million
• In July 2000, Honduras reached its decision point under the Heavily Indebted
Poor Countries Initiative (HIPC), qualifying the country for interim multilateral
debt relief.
• Honduras's international economic activity surged in the early 20th century.
• These "golden" exports were supported by more than US$40 million of
specialized banana company investment in the Honduran infrastructure and
were safeguarded by United States pressure on the national government when
the companies felt threatened.
• After 1950 Honduran governments encouraged agricultural modernization and
export diversification by spending heavily on transportation and
communications infrastructure, agricultural credit, and technical assistance
• as a result of these improvements and the strong international export prices—
beef, cotton, and coffee became significant export products for the first time.
Honduran sugar, timber, and tobacco also were exported, and by 1960
bananas had declined to a more modest share (45 percent) of total exports

9. Role of Government in Industry
Behaviour
• During the 1960s, industrial growth was stimulated by the establishment of the Central American Common Market
• Investment in irrigation systems powered by solar panels. which will help make farmers financially flexible,even when
their crops are strained.
• After a decade of negotiations, Canada and Honduras have finally achieved a bilateral free-trade agreement (FTA),
including tariff-free status for 98 percent of goods categories
• As a result of the reduction of regional trade barriers and the construction of a high common external tariff, some
Honduran manufactured products, such as soaps, sold successfully in other Central American countries
• The government's acceptance of foreign aid during the 1980s, in
lieu of economic growth sparked by private investment, allowed it
to ignore the necessity of creating new jobs
• Government changed its objectives by focusing on reducing
public-sector spending, the size of the public-sector work force,
and the trade deficit
• Exchange controls had been introduced in 1982, resulting in a
parallel currency market (black market) and several confusing
official exchange rates operating simultaneously
• The president also introduced temporary taxes on exports, which
were intended to increase central government revenue.
• remain large indefinitely

10. • Exchange controls had been introduced in 1982, resulting in a parallel currency market (black market) and several
confusing official exchange rates operating simultaneously
• The president also introduced temporary taxes on exports, which were intended to increase central government revenue.
remain large indefinitely
• External financing—mostly bilateral credit from the United States—rose dramatically until it reached 87 percent of the
public deficit
• This drop in total outstanding external debt was largely the result of debt forgiveness of US$448.4 million by the United
States, Switzerland, and the Netherlands. Scheduled amortization payments of an average US$223.2 million per year,
however, guaranteed that Honduras's gross funding requirements would remain large indefinitely
• Honduran governments have set minimum wages since 1974, but enforcement has generally been lax. That laxity
increased at the beginning of the 1980s. Traditionally, most Honduran workers have not been covered by social security,
welfare, or minimum wages
• By contrast, the banana companies paid relatively high wages as early as the 1970s. Banana workers continued at the
top of the wage scale in the 1990s
Role of Government in Industry
Behaviour

11. Why Industry?
Over the Past 20 years, Bananas in Honduras contributed substantially to
their economies and are an important source of employment and exports
earnings.
Did you know that the first bananas that reached U.S. soil came from
Honduras? They were shipped in 1860 from Utila, an island located off the
North Coast of Honduras
Bananas & Coffee have traditionally made up the bulk of Honduras's
agricultural exportsCurrent Scenario:
 Export rate for Bananas has increased by 20.6% according to figures issued
by the Central Bank of Honduras (BCH), end of 2013
 Banana exports earned 490.1 million dollars in foreign currency at the end
of 2013, higher by 10.8 percent ($47.7 million) than December 2012

12. Top 3 Companies
2
The Banana industry is dominated by Chiquita and the Dole Food Company,
two TNC’s

13. Why only 2 companies ?!
 Both these companies are known for their notorious vertical integration
 In 1899, when UFCO entered Honduras, it quickly acquired 7 small banana
operations there
 Vaccaro Brothers & Co was founded the same year but later merged with
Standard Fruit Co (later known as Dole)
 Cuyamel Fruit Company was founded in 1902 & got purchased by UFCO in
1922
 The U.S. companies controlled the government, financing political parties
which conspired against each other
 The U.S. also began training a Honduran army and air force which were
commanded by the U.S. officers and served primarily to protect the interests
of the banana companies
Example - Las Isletas Peasants Enterprise
 In 1977, Las Isletas attempted to sell bananas directly through the Union of
Banana Exporting Countries at one stage
 Resulted in the arrest 200 members of Las Isletas by militants & and a raid on
the association's headquarters
 Under pressure by the Standard Fruit Company who feared being outlawed by
the process
Source - users.clas.ufl.edu/afburns/afrotrop/honduras.htm
 In 1911 the Cuyamel Fruit Company, another American firm (which was later
bought by United), supplied the weapons for a coup against the government
of Honduras, and prospered under the newly installed president
 US government role - removed president in 1919 when he attempted to tax

14. Thank You
!!!!