Honduras sees sharp drop in investment due to political tensions

In recent years, international investment in Honduras has decreased notably, mirroring an atmosphere of political and economic unpredictability that is impacting the trust of global investors. Data from the Central Bank of Honduras (BCH) shows that by the close of the third quarter of 2024, international investment amounted to US$590.7 million, indicating a drop of US$172.5 million compared to the same time frame the previous year. This reduction is linked to issues like unstable legal conditions, corruption, and political unrest, which have fostered a challenging environment for foreign capital influx.

The National Autonomous University of Honduras (UNAH) has warned of a complicated economic outlook for 2025 and 2026, noting that both internal and external factors could make it even more difficult to attract investment. In particular, political uncertainty, accentuated in an election year, is seen as a determining factor in the decline in FDI. Experts highlight that political polarization and mistrust in the electoral process could continue to negatively affect foreign investment in the country.

Infrastructure challenges and financial projections

According to studies by the Institute for Economic and Social Research (IIES) of the UNAH, the low competitiveness of the labor market, due to limitations in skills and competencies, reduces the country’s attractiveness to investors. In addition, institutional stability and citizen security continue to be important challenges that must be addressed to improve the investment climate.

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 drop in overseas direct investment in Honduras not only indicates a situation of political turbulence, but also underscores the fundamental obstacles that the country needs to conquer to maintain its economic peace. The economic prospects will heavily rely on the capacity to bolster institutions, ensure a secure and open atmosphere, and restore investor trust. In a voting context that introduces additional layers of intricacy, the task will be to turn these challenges into chances to foster sustainable development and draw in the necessary foreign funds for national progress.