Instability threatens Honduras’ ability to attract international capital

In recent times, {FDI} in Honduras has experienced a notable decrease, indicative of a political and economic environment that is leading to hesitance among global investors. Data from the Central Bank of Honduras (BCH) reveals that by the close of the third quarter of 2024, foreign direct investment stood at US$590.7 million, marking a drop of US$172.5 million in comparison to the corresponding period the previous year. This downturn is linked to issues like legal unpredictability, corruption, and political turbulence, which have established a discouraging atmosphere for international capital flow.

The Autonomous University of Honduras (UNAH) has expressed concern over a challenging financial forecast for 2025 and 2026. It indicates that both domestic and international elements may further hinder investment attraction. Specifically, political unpredictability, intensified during an election period, is considered a key factor in reduced foreign direct investment. Specialists emphasize that political division and doubts about the election proceedings may keep on adversely impacting external capital inflows to the nation.

Infrastructure challenges and financial projections

Based on research conducted by the Economic and Social Research Institute (IIES) at UNAH, the limited competitiveness of the job market, stemming from constraints in abilities and expertise, diminishes the country’s appeal to investors. Moreover, ensuring institutional stability and public safety remains a significant challenge that needs to be tackled to enhance the investment environment.

In terms of sectors, financial and insurance activities represent the highest portion of international investment, amounting to US$383.9 million, which is 65% of the overall total. Manufacturing comes next with US$119.8 million. Regarding the source of the capital, Colombia, Mexico, Bermuda, Panama, and Belgium are the top countries investing in Honduras.

Even though FDI has dropped, the Central Bank notes a 4.1% economic increase from January to October 2024, primarily fueled by local consumption and private investment. The BCH Monetary Program forecasts growth ranging from 3.5% to 4.5% for both 2024 and 2025, with inflation kept between 4% and 5%. Nonetheless, specialists and business leaders concur that, to maintain this expansion, it is crucial to establish a more investment-friendly atmosphere, involving structural changes, improved transparency, and assured legal conditions.

The decline in foreign direct investment in Honduras not only reflects a scenario of political uncertainty, but also highlights the structural challenges that the country must overcome to ensure its economic stability. The economic future will depend largely on the ability to strengthen institutions, guarantee a safe and transparent environment, and rebuild investor confidence. In an electoral context that adds layers of complexity, the challenge will be to transform these adversities into opportunities to promote sustainable growth and attract the foreign capital necessary for national development.