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Fall in foreign direct investment in Honduras, an effect of the world recession or caution due to political destiny?

At least 29% of foreign investment is lower with respect to the year 2021, in the first half of 2022, according to data reflected by the Central Bank of Honduras (BCH, for its acronym in Spanish), in its latest quarterly report. This translates into a decrease of USD 125 million, which Honduras stopped receiving, despite the projections that the same BCH estimated, from which a growth was expected.

The figure is worrisome, since, if we consider the direct investment data of previous years, considering from 2019 to 2021, a clear growth could be observed. Although it is true that most of these were capital reinvestments, not new projects or new companies, the country’s financial and productive system remained dynamic, but this was not the case in the data reflected in 2022.

We could consider that there is a global context that we cannot ignore, such as the fact that there is a war arising from the Slavic conflict, which has directly impacted energy prices, which is critical for all supply chains and includes our main economic partner, the United States, which certainly affects the development of domestic industry.

On the other hand, Honduras is in a historical moment of political transition. Naturally, changes initially generate uncertainty and then adaptation. For this reason, it is valid to consider that the political change in Honduras has paused foreign investment in 2022. In addition to the change, the new government marks a clear trend of social ideologies that Latin American countries have been experiencing in recent years. Certainly, such political ideology has not traditionally been an ally of the sponsoring countries, which could be having a significant impact on foreign investment in Honduras.

Of course, what is certain, and hopeful is that as new needs arise and are met thanks to accelerated global growth, incorporating the obvious digital revolution that breaks new ground with virtuality and innovation, and is increasingly accessible to the population, we must remain attentive to the economic turnaround that could occur in 2023, in which the economic growth curve, initially projected, is expected to continue.

Melissa Ayala
Senior Associate
García & Bodán