Foreign direct investment (FDI) jumped an impressive 60% in Honduras in the first half of 2021 compared to the same period for the previous year. The news is a sign of the Central American country’s economic reactivation following the turmoil of the global pandemic, as more foreigners look to invest in Honduras.
According to newly released figures from the Honduran Central Bank (BCH), approximately $477.9 million of foreign capital entered the country between January and June of this year, compared to $289.6 million in the first half of 2020 (all figures in USD), reported EFE.
That represents a 60% increase year-on-year, and if the rate of investment continues over the second half of the year, would see Honduras exceed levels of FDI seen in 2019, before the pandemic struck.
According to the report, the figures were due to “higher local sales and exports of goods and services” feeding into greater reinvestment of profits into local subsidiaries, as well as an uptick in interest seen for foreign capital to invest in Honduras.
The services sector was the primary destination for FDI during the period, with approximately $165 million entering — much of it reportedly going into the finance industry.
Manufacturing was the second-most popular destination, with $132.1 million entering the country’s growing industrial base. Other major beneficiaries of the increased desire to invest in Honduras were the hospitality sector ($99.2 million) and utilities ($65.5 million).
North America was the number one source of foreign investment in Honduras during the period, with around $137.9 million flowing in from Canada, Mexico, and the United States.
South Americas accounted for around $126.6 million, while other Central American countries were the source of approximately $121.1 million. An estimated $88.2 million entered from Europe.
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Honduran market of growing interest to investors
A variety of factors combine to make investing in the Honduran market increasingly attractive to foreigners, and have arguably led to more people choosing to invest in Honduras.
Central America’s second-largest country by both landmass and population has also witnessed the second-highest growth rate in the sub-region over recent years, behind only Panama. According to the World Bank, the country also has the potential for even more accelerated growth in the future.
Prior to the pandemic, the country had experienced 25 years of almost unbroken growth in gross domestic product, which hit $25.1 billion in 2019.
The country has a young and growing workforce that is increasingly concentrated in major urban centers, where the large services sector and growing manufacturing sector are based, and workers are available to businesses at highly competitive rates.
While Honduras is known for high levels of violence and insecurity, significant strides have been made to improve the situation over recent years, with the intentional homicide rate slashed in half between 2013 and 2020.
Geographic location provides another reason to invest in Honduras, with the country being a major thoroughfare for goods traveling overland through the Central American isthmus. It is also home to the sub-region’s deepest and largest port, Puerto Cortes, which has regular connections with ports in North America, Europe, and Asia.
The country is also home to a number of free trade zones (FTZs), offering investors a range of benefits, such as free imports of materials and equipment, and expedited approval processes for the export and import of products.
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