Instability hampers economic growth and repels investors in Honduras

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 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.

Barriers in structure and financial prospects

According to research conducted by the Institute for Economic and Social Studies (IIES) of the UNAH, the weak competitiveness in the job market, as a result of insufficient skills and abilities, diminishes the nation’s appeal to investors. Furthermore, maintaining institutional stability and ensuring public safety remain significant issues that need attention to enhance the environment for investment.

At the sectoral tier, the financial and insurance sectors dominate with the majority of international capital flows, totaling US$383.9 million and representing 65% of the overall amount documented. The manufacturing field follows with US$119.8 million. Regarding the sources of investment, the leading countries contributing to Honduras are Colombia, Mexico, Bermuda, Panama, and Belgium.

Despite the decline in FDI, the Central Bank reports economic growth of 4.1% between January and October 2024, driven mainly by domestic consumption and private investment. The BCH Monetary Program projects growth of between 3.5% and 4.5% for 2024 and 2025, with inflation controlled between 4% and 5%. However, experts and business leaders agree that in order to sustain this growth, it is essential to create a more favorable environment for investment, including structural reforms, greater transparency, and legal certainty.

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.