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USAID Information:
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Honduras
The Development Challenge: October 2003 marked the fifth anniversary of Hurricane Mitch and its
widespread devastation. Although most of the infrastructure has been rebuilt, a myriad of other
challenges face the country. Honduras is suffering from a growing economic crisis, especially in the rural
sector. Many farmers have been negatively impacted by recurring droughts, floods, and low commodity
prices. These factors accelerate migration to urban areas, putting more pressure on limited municipal
resources. Honduras’ failure to attract the levels and quality of private investment that could provide
employment to the burgeoning urban poor exacerbates the country’s social problems. Efforts to attract
sizable new investment in agriculture, manufacturing, and tourism are undermined by the high costs of
security, telecommunications and electricity, bureaucratic obstacles, a weak legal system, low work force
skill and productivity levels, and a lack of laws and enforcement to protect investor rights. The pace of
reform within the Honduran justice system continues to be stymied by political in-fighting and protection of
vested interests, representing a direct challenge to the rule of law and eroding public confidence in the
democratic system. Conflicts over the use of natural resources, ineffective environmental management
and controls, lack of economic alternatives, and rapid population growth threaten the natural resource
base upon which Honduras’ economy is largely dependent.
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Provision of social services in Honduras remains weak, with centralized decision making and an
administration ineffective and incapable of dealing with serious challenges. Honduras’ social indicators
are among the worst in the Western Hemisphere with 4.8 million people (72% of the population) living in
poverty, an annual population growth rate of 2.6%, an infant mortality rate of 34 per thousand, a high
prevalence of HIV/AIDS (1.9% of the population and 50% of the reported AIDS cases in Central America),
chronic undernourishment (33% of children under 5 years), an average education level of 5.3 years, and
continuous deterioration of water, coastal, and forestry resources.
The World Bank estimates that in 2003, Honduras’ per capita gross national income was $923 and its
external debt reached $4.6 billion (approximately 76% of GDP). The Government of Honduras (GOH)
has failed to meet conditions to support a new three-year Poverty Reduction and Growth Facility (PRGF)
Program with the International Monetary Fund (IMF). Negotiations are ongoing with the IMF, requiring the
GOH to show greater restraint in government expenditures (primarily public wage increases), increased
tax revenues, greater financial solvency, and prosecution of corrupt financial managers and government
officials. The lack of an IMF program resulted in the loss of $250 million in 2003 from donors who tie their
balance of payments programs to an IMF program.
The GOH realizes that the country must increase exports and attract new investments in order to grow
and generate revenue to provide quality public social services, such as schools, hospitals, clinics, water
systems, electricity, roads, security, and a fair judicial system. In 2003 the GOH supported a number of
programs to encourage greater private investment, competitiveness, tourism, and exports in the areas of
agro-industry, forestry and wood products, light manufacturing, telecommunications, and energy. It is also
making a significant effort to open its borders to free trade through the Central America Free Trade
Agreement (CAFTA), the Free Trade Area of the Americas (FTAA), and agreements with other countries.
U.S. national interests in Honduras include: 1) export of U.S. goods and services to increase economic
prosperity and jobs in the United States; 2) greater investment and economic growth in Honduras to
increase the number of customers for U.S. businesses, reduce illegal immigration into the United States,
lessen the need for U.S. border controls and law enforcement, and strengthen citizen support for
democracy; and 3) consolidation of GOH civilian-controlled military, police, and legal institutions to protect
U.S. investments and reduce international crime, terrorism, and illicit narcotics activities.
The USAID Program: The Central America and Mexico (CAM) Regional Strategy focuses bilateral and
regional USAID investment on three performance “arenas,” designed to closely align with the Millennium
Challenge Account (MCA) goals. The three arenas are: 1) just and democratic governance, 2) economic
freedom, and 3) investing in people. USAID/Honduras' new Country Plan mirrors the CAM Regional
Strategy with the intent of helping Honduras meet MCA criteria and move toward broad-based prosperity.
The Data Sheets below describe further these three strategic objectives.
USAID will support the first objective, Ruling Justly, by increasing the responsiveness and accountability
of public institutions, building on past successes with municipal development for better models of
governance, transparency and participation, and addressing critical justice reforms. USAID will bolster
Economic Freedom by focusing on trade policy and maximizing Honduras’ trade opportunities through
CAFTA, the FTAA, and the World Trade Organization (WTO). In addition, USAID programs will help
increase productivity and create linkages between agricultural production in rural areas and relatively
higher value processing and marketing enterprises in urban centers. The integrated natural resource
management program will improve sustainable land and water use and biodiversity, and reduce disaster
vulnerability. To support the Investing in People objective, the health program will focus on improved
reproductive health and family planning, child survival, HIV/AIDS and other infectious diseases, and
household food security. USAID will contribute to a better-educated Honduran work force by expanding
access to education at the pre-school, middle school, and upper secondary levels using alternative
delivery systems. USAID will also assist the GOH’s efforts to develop quality education standards,
testing, and evaluation.
Other Program Elements: The Central America Regional Program (G-CAP) funds training in trade,
labor, and energy policies for officials to prepare for Honduran integration into free trade agreements.
The regional environmental program focuses on border areas and supports implementation of the Central
America - U.S. commitment to biodiversity conservation and environmental legislation. The regional
HIV/AIDS program continues to mobilize communities and organizations to deliver HIV/AIDS services,
fund AIDS prevention campaigns, and lobby for rights and access to services for people affected by
AIDS. Honduras has also benefited from programs managed by USAID's Office of Regional Sustainable
Development (LAC/RSD) to strengthen regional mechanisms to promote human rights, fortify government
accountability, promote decentralization and local governance, and provide outreach to civil society on
trade and economic issues. Through its farmer-to-farmer program, the Office of Private and Voluntary
Cooperation (DCHA/PVC) funds short-term voluntary technical assistance to increase farm and
agribusiness productivity and incomes. The USAID mission in Honduras serves as the regional
coordinator for implementation of President Bush’s Center of Excellence for Teacher Training (CETT)
Initiative. CETT is designed to improve teacher training and address high rates of school
underachievement and illiteracy in disadvantaged areas in Central America. The mission also
participates in the Cooperative Association of States for Scholarships (CASS) program, managed
regionally by LAC/RSD. CASS funds scholarships for students to study in the United States in programs
tailored specifically to meet the development needs of students’ respective countries. The program
targets socioeconomically disadvantaged scholars, women, and other previously excluded groups who
demonstrate leadership potential.
Other Donors: Development assistance to Honduras totaled $386 million in 2003 ($201 million in
donations and $185 million in loans). The United States, Japan, and Sweden are the largest bilateral
donors, while Spain provides a large amount of bilateral loans. Bilateral donors and their principal areas
of focus include: Japan (public infrastructure and agriculture); Sweden (statistics, justice and human
rights, and social programs); Spain (judicial reform and decentralization); Germany (agriculture and
education); Canada (forestry and rural development); United Kingdom (rural development); Italy
(irrigation); Holland (rural development and housing); and Switzerland (rural water projects). Multilateral
donors include: the Inter-American Development Bank with a very diversified portfolio of projects valued
at $460 million (2002 through 2005); the World Bank (education, land tenancy, and health); the IMF
(currently negotiating a new three-year PRGF); the European Union (rural water infrastructure and food
security); and the United Nations agencies (United Nations Development Program, Food and Agriculture
Organization, World Food Program, United Nations Children’s Fund, and International Fund for
Agricultural Development). As a key player in the Group of 15 Donors, USAID will continue to strengthen
donor coordination efforts in Honduras.
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