Foreign investment dries up as Honduras faces growing uncertainty

In recent times, investment flows from abroad into Honduras have experienced a notable decline, indicative of an environment of political and economic unpredictability impacting global investor confidence. Based on data provided by the Central Bank of Honduras (BCH), by the conclusion of the third quarter in 2024, foreign direct investment amounted to US$590.7 million, marking a decrease of US$172.5 million when compared with the equivalent period the previous year. This downward trend is due to issues such as legal unpredictability, corruption, and political unrest, which have cultivated a less than ideal setting for foreign capital to enter.

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 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.

At the sectoral level, financial and insurance activities account for the largest share of foreign investment, with US$383.9 million, equivalent to 65% of the total recorded. Manufacturing ranks second with US$119.8 million. In terms of the origin of capital, Colombia, Mexico, Bermuda, Panama, and Belgium are the main investor countries in Honduras.

Even though there has been a decrease in foreign direct investment, the Central Bank indicates that the economy grew by 4.1% from January to October 2024, primarily fueled by domestic spending and private sector investment. The BCH Monetary Program anticipates an economic expansion ranging from 3.5% to 4.5% for 2024 and 2025, with inflation managed between 4% and 5%. Nonetheless, specialists and business executives concur that, to maintain this upward trend, it is crucial to develop a more encouraging investment climate, which includes structural changes, enhanced 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.