Report No. 3312-HO FILE COPYCurrent Economic Memorandumon Honduras

July 17, 1981

Latin America and the Caribbean Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

US$1.00 = 2.00 Lempiras (L)L 1.00 = US$0.50

GLOSSARY OF ABBREVIATIONS

ANACH National Association of Honduran PeasantsBANADESA National Agricultural Development BankBANASUPRO National Development Bank Food Marketing AgencyBNF National Development BankCABEI Central American Bank for Economic IntegrationCACM Central American Common MarketCOHBANA Honduran Banana CorporationCOHDEFOR National Forestry CorporationCONADI National Investment CorporationCORFINO Olancho Industrial Forestry CorporationCONSUPLANE National Planning CouncilDIMA Municipal Water Division of San Pedro SulaEACI Isletas Cooperative of Banana GrowersENEE National Electric Power CompanyENP National Port AuthorityFAO U.N. Food and Agricultural OrganizationFECORAH Federation of Agrarian Reform CooperativesFIAFSA Agua Fria Industrial Forestry CorporationFINAVI National Housing FinancieraFNP National Railway CompanyFONDEI National Industrial Development FundHONDUTEL Honduran Telecommunications CorporationIDB Inter-American Development BankIHSS Social Security InstituteIJPM National Retirement Fund for TeachersINA National Agrarian InstituteINVA National Housing InstituteJNBS National Social Welfare BoardJUPEMP National Retirement Fund for Public EmployeesLNB National LotteryPANI National Child Welfare InstitutePRODERO Western Rural Development ProjectSANAA National Water and Sewerage ServiceUNAH National UniversityUNC National Union of PeasantsUSAID U.S. Agency for International Development

Fiscal year

January 1 to December 31

FOR OFFICIAL USE ONLY

HONDURAS

CURRENT ECONOMIC MEMORANDUM

TABLE OF CONTENTS

Page No.

.COUNTRY DATA

MAP

SUMMARY AND CONCLUSIONS .......................................... i-iv

I. INTRODUCTION .......................................... 1

II. GROWTH TRENDS AND RECENT ECONOMIC DEVELOPMENTS ........ 1

A. Growth Trends, 1976-79 ........................... 1B. Recent Developments .............................. 2C. Sectoral Developments ............................ 2

D. Government Development Policy .................... 8E. Monetary Developments ............................. 11F. The Balance of Payments .......................... 12

III. COUNTRY PROSPECTS AND DEVELOPMENT PROGRAMS .13

A. Development Strategy and Main Issues .13A. Economic Growth Prospects .13B. The Public Investment Program .15C. Public Finances Prospects .19D. Balance of Payments and Creditworthiness .26

ANNEX A - Sectoral Investment Programs .................... 30

STATISTICAL APPENDIX ....................................... 46

This report is based on the findings of an economic mission to Honduras in

October, 1980, composed of Mr. Juan Giral (Chief) and Ms. Elaine Hubert.A draft report was discussed with the authorities during May 1981.

I This document has a restricted distribution and may be used by recipients only in the performance of |their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Page 1 of 2 pages

COUNTRY DATA - HONDURAS

AREA 2/ POPULATION DENSITY112,100 kmar 3.7 million (mid-1980) 32 per km

Rate of Growth: 3.1 1/ (from 1961 to 1979) 124 per km of arable land

POPULATION CHARACTERISTICS (1975-80) HEALTH (1979)Crude Birth Rate (per 1,000) 47.0 Population per physician 3,416Crude Death Rate (per 1,000) 12.0 Population per hospital bed 7.3Infant Morta;iLy (per 1,000 live births) 118.0

ACCESS TO PIPED WATER (1978) DISTRIBUTION OF LAND OWNERSHIP (1974)-'% of population - Total 52.0 7. owned by top 12% of owners 73.1%

% owned by smallest 10% of owners 0.5%

NUTRITION (1969-71)Calorie intake as % of requirements 94.0 ACCESS TO ELECTRICITY (l-790Per capita protein intake 5b.0 % of population - urban 25.0

EDUCATION (1979)Adult literacy rate % 57.0Primary school enrollment X 89.0

(adjusted)

GNP PER CAPITA in 1980 US $565

GROSS NATIONAL PRODUCT IN 1979 ANNUAL RATE OF GROWTH (%, constant prices)

US $ Mln. % 1965-73 1973-79 1979

GNP at Market Pr' es 2,061 100.0 4.1 4.4 b.2Gross Domestic Investment 615 29.8 5.3 11.0 9.7Gross National Saving 423 20.5 4.7 -3.0 8.8Current Account Balance 4/ -192 -9.3Exports of Goods, NFS 840 40.8 5.3 4.1 11.2Imports of Goods, NFS 932 45.2 4.8 9.9 10.0

OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 1979

5/Value Added Labor Forcer V. A. Per Worker

U $Mln. % Mln. % uS$ %

Agriculture 599 27.7 .625 59.9 958 46.2Industry 488 22.5 .175 16.8 2,789 134.4Services 813 37.5 .244 23.3 3,331 160-5Unallocated 6/ 266 12.i __ -

Total/Average 2,166 100.0 1,044 100.0 2,075 109.0

GOVERNMENT FINANCEGeneral Government Central Government

tUs$_Mln.) 7. of GDP (US$ Mln.) % of GDP1979 1979 i977-79 1979 1979 9

Current Receipts 388 17.9 18.7 316 14.6 15.1Current Expenditure 330 15.3 15.9 288 13.3 13.9Current Surplus 58 2.6 2.8 28 1.3 1.2Capital Expenditures 135 b.2 7.0 126 5.8 6.0External Assistance (net) 66 3.0 3.5 67 3.1 3-5

1/ Population growth rate is lower than the rate of natural increase, because of net emigration.2/ The 1974 Census does not reflect land redistribution efforts. In 1980, land redistributed accounted

for about 10 percent of total farm land.3/ CNP per capita estimate at market prices, calculated by samc cor.version method as World Bank Atlas.4t1 Includes transfers.

5/ Total labor force: unemployed are allocated to sector of their normal occupation.6. Indirect taxes.

not availablenot applicable

Page 2 of 2 pages

COUNTRY DATA - HONDURAS

MONEY, CREDIT and PRICES 1974 1975 1976 1977 1978 1979 1980(Million US$ outstanding end period)

Money and Quasi Money 266 299 380 467 570 635 682Bank Credit to Public Sector 43 41 40 55 77 99 155

Bank Credit to Private Sector 291 349 419 518 600 678 739

(Percentages or Index Numbers)

Money and Quasi Money as % of GDP 25.6 27.0 29.5 30.2 31.3 29.3 26.7

General Price Index (1963 - 100) 136.4 147.4 154.7 167.9 177.5 193.1 229.4Annual percentage changes in:

General PriL±' Index 13.0 8.1 5.0 8.5 5.7 s8. 18.8Bank credit to Public Sector 2.1 -4.7 -2.5 37.5 40.0 28.6 56.6Bank credit to Private Sector 14.5 19.9 20.0 23.6 15.6 13.0 9.0

BALANCE OF PAYMENTS MERCHANDISE EXPORTS( 1980

1974 1975 1979 1980 US $ Mln 7.(Millions US $) Bananas 220.6 2b.4

Coffee 204.1 24.5Exports of Goods, NFS 331.3 343.5 821.9 928.7 Beef 36.2 4.3Imports of Goods, NPS 456.0 452.4 917.6 1,126.4 Lumber 60.8 7.3

Resource Gao (deficit = -) -124.7 -108.9 -95.7 -197.'

Interest Payments ( MLT) -6.2 -10.1 -44.9 -52.8 All other commodities 312.8 37.5Workers' Remittances .. . . .. Total 834.5 100.0Other Factor Payments (net) -7.2 -18.2 -61.0 -g950Net Transfers 32.5 17.7 18.5 21.5 EXTERNAL DEBT, DECEMBER 31. 1979Balance on Current Account -105.7 -119.6 -183.1 -324.0

US $ H1nDirect Foreign Investment -1.2 10.4 10.0 5.0Net MLT Borrowing 37.6 92.8 166.1 192.9 Public Debt, incl. guaranteed 745.9

Disbursement (43.5) (99.2) (211.0) (233.2) Non-Guaranteed Private DebtAmortization (6.u) (6.4) (44.9) (40.3) Total outstanding & DisbursedSubtotal 36.4 103.2 176.1 197.9

Capital Grants .. .. ,. .. DEBT SERVICE RATIO for 297 2/Other Capital (net) 65.7 6-7 -0.6 20.0 5Other items n.e.i 5.3 28.6 -7.4 45.1 3/Increase in Reserves (4) -1.9 -16.9 15.0 61.0 Public Debt, incl. guaranteed 13.1 -

Non-Guaranteed Private DebtGross Reserves (end year) 51.7 108.3 230.0 Total outstanding & DisbursedNet Reserves (end year) 11.3 28.2 116.9 55.9

RATE OF EXCHANGE IBRD/ILA LENDING. April 30, 1981 (Million US$):

Through - 1971 IBRD IDAUS $ 1.00 = L 2.00

L 1.00 = US $0.50 Outstanding 6 Disbursed 156.9 69.9Undisbursed 216.6 13.9

Since - 1971 Outstanding incl. Undisbursed 3)Ti 83.t

US $ 1.00 = L 2.00

L 1.00 = US $0.50

1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services.

2/ Ratio of Debt Service to Exports of Goods and Non-Factor Services.

31 Includes a prepayment ot about US$24 million. Excluding this prepayment, the debt service ratio is 10.2 %

not available

not applicable

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SUMMARY AND CONCLUSIONS

Background and Recent Economic Developments

i. Honduras is a poor country, predominantly a land of small farmers.Per capita income was about US$565 in 1980. 1/ Population density is about30 per square kilometer, but the population is growing rapidly at about3.4 percent a year. A large number of Hondurans live in poverty, particularlyin rural areas. The adult literacy rate is 57 percent. One-half of thepopulation is without safe water and three-quarters of the households arewithout electricity.

ii. In the last few years, Honduras' economic growth has quickened.During 1950-75, real GDP growth was inadequate to substantially raise livingstandards, but recently it has shown a remarkable growth rate -- 7.8 percenta year during 1976-79. The most important growth factors were exports andinve'twent. Export growth reflected partly the recovery of banana productionfrom the 1974 hurricane. Both public and private investment were very dynamic.

iii. Gross income (GDY), however, increased slowly after 1977 owingto a sharp decline of coffee prices and large price increases for importedgoods, particularly oil. Imported inflation prevented a return to thetraditional price stability of the Honduran economy and affected adverselyreal wages. Prices increased at 7.7 percent a year during 1976-79 comparedto 3.4 percent in 1970-73 and 10.5 percent in 1973-75.

iv. In 1980, however, the Honduran economy slowed down. Real GDPgrowth is estimated at 2.5 percent a year because real exports and investmentlost their dynamism. Transitory difficulties with banana production, aslower expansion of coffee production, and a continued decline of lumberexports explain the deceleration of the growth rate. Private investment wasadversely affected by political events in the area. Inflation acceleratedin 1980. Prices rose at an annual rate of 20 percent compared to 8.8 percentin 1979, with striking increases for beans and corn, the basic foodstuff ofthe poor.

v. The country's financial position deteriorated in 1980. Importgrowth exceeded significantly export growth and the balance of paymentscurrent account deficit was over US$300 million. The country sufferedforeign exchange reserve losses of US$60 million in spite of large inflowsof official capital. The financial position of the Central Government alsodeteriorated in spite of new revenues brought about by a 1979 fiscal reform.Current and development expenditures increased at about 30 percent, offsettingthe revenue impact of the reform. Furthermore, some public enterprises areconfronting increased financial difficulties or showing signs of futuredifficulties because they followed lax wage and expenditure policies, failedto take appropriate tariff or price actions, and/or became involved in improfit-able operations. Weak public finances brought about a large increase in theuse of domestic credit.

1/ IBRD World Atlas basis; Honduras' per capita GNP places it among theIDA-eligible countries.

Government Development Efforts

vi. The public sector followed more active development policies in the1970s, which laid the basis for much improved longer term growth prospects.A basic transport network was built connecting the main population centers,electric power service was expanded considerably, timber rights were nationalized,large investments were undertaken in sawmills, and primary school enrollmentand health services were expanded considerably. An agressive land reformprogram was begun. At the same time, public enterprises and decentralizedinstitutions increased their role in the economy; the Central Governmentshowed also a much higher level of operations; and public investment forinfrastructure and social services showed remarkable growth as Governmentplanning and executing capacity improved.

vii. For the next few years, the Government's strategy is to supportboth industrial and agricultural growth with large infrastructure investmentsand expanded credit availabilities and accelerate the implementation of socialprojects, particularly for rural development, health, education, safe waterand sewerage, and housing. This strategy entails possible conflicts. Theirresolution will be closely related to success in: (i) maintaining prudentfiscal and financial policies in order to finance the ambitious developmentprogram in a noninflationary manner, and (ii) reactivating private investmentby stepping up efforts to promote private activities, particularly exports.In addition, the Government should avoid further expansion in productiveactivities which so far have proven unprofitable.

Growth Prospects

viii. A favorable growth scenario is possible for the 1980s. The largeGovernment investment program and the favorable prospects for increasingexport volumes of lumber, sugar, coffee, beef, fruits, and even bananas, aswell as diversification efforts, may yield significant results. Although theoutlook for 1981-82 is less optimistic because of private sector uncertainties,real GDP growth could be about 4-5 percent a year during 1981-85. Privateinvestment is the most uncertain growth factor, and the one least subject togovernment control. If it recovers significantly, GDP growth may be onepercentage point higher.

ix. While medium term growth prospects are fairly well established,longer-term prospects are less certain. Expected population growth makesevident the need for a longer-term strategy geared towards increasingproduction, employment, foreign exchange earnings, and improving socialconditions. The country's population will be over 7 million by the year2000 with one million concentrated in Tegucigalpa and over three-quartersof a million in San Pedro Sula. Since rural fertility rates are very high,rural migration will be large to towns and promising new agricultural areas.New sources of growth are needed, which most likely would be agricultural,export-oriented activities. In this respect, Honduras needs to carefullyformulate its longer-term programs and policies for the development ofrural areas and promote a dynamic private sector participation. Essentialto the success of these efforts is also an effective and efficient agricultural

- iii -

public administration. Furthermore, rationalizing urban development has ahigh priority. Rapid population movements to the towns would create seriouspressures for urban services and housing for the poor. Already service levelsin the towns are low and the financial capacity of the municipalities and wateragencies is weak. Undoubtedly, higher property taxes and rates for waterservices are needed to finance the expansion of urban services (see para 61).

Public Investment and Finances

x. The 1981-85 public investment program is ambitious. It includeslarge investments for crucial infrastructure projects in power and transport,and for forestry development, as well as for agriculture and social development.Full implementation of this program is not likely because of some limitationsin administrative capacity to prepare and implement projects, particularly inthe rural and social sectors. Nevertheless, the public sector's overalladministrative capacity has shown a marked improvement in the past few years,and it should be feasible to go forward with the major components of theprogram. Public investment would be close to 10 percent of GDP in the nextfew years. Power investments will be the largest, mostly because of the lumpyinvestment required for the Cajon hydroelectric project. To soundly financethis investment program and to avoid excessive balance of payments and pricepressures, it is essential to defer any new large, public project to 1984 andbeyond, and to have sound demand-management policies. Furthermore, given theambitious public investment program, special efforts will be required in thenext few years to increase public savings in order to finance the program in aframework compatible with monetary and price stability.

xi. New revenues were urgently needed in 1981 after the deterioration ofpublic finances in 1980, and the Government had to increase some sales andimport taxes. These measures are expected to yield L/85 million in 1981 andL/125 million in 1982 (1.5 percent and 2.0 percent of GDP respectively).In addition, the Government's intention is to restrict current expendituregrowth to less than 14 percent in 1981 and 1982; raise rates and prices ofpublic enterprises; and restrict domestic and foreign borrowings of the publicsector. The Government's financial program has the support of an EFF with theIMF and represents a significant step towards improving public sector financesand avoiding future fiscal crises.

xii. Sound management of the economy in the next few years will requirecontinued strengthening of the financial position of the public sector toavoid excessive use of domestic credit, which, given the high level of externalfinancing for projects and the availability of official resources in supportof the implementation of the public investment program and the balance ofpayments, should be allocated mostly to the private sector. In this regard,in addition to the recent tax package, tight current public expenditurecontrol is essential together with timely and appropriate tariff and priceactions by public enterprises and autonomous agencies to increase theirsavings capacity; this will ensure sound financing of the public investmentprogram, a significant factor for renewed economic growth in the next fewyears. If excessive current expenditure growth is not properly contained, newtax measures as well as additional price increases in public enterprises willbe needed in 1983.

- iv -

Balance of Payments and Creditworthiness

xiii. The foreign exchange gap is increasing. The balance of payments,in spite of rising exports, is showing higher current account deficits asimport growth exceeds export growth, partly fueled by rising public investmentand by higher prices for imports but also showing the impact of deficitspending by the public sector. Private sector uncertainties, partly relatedto Central American events, a new phenomenon over the last 18 months, arealso adversely affecting the capital account of the balance of payments.

xiv. The balance of payments should strengthen substantially in themid-1980s as a result of the development programs now underway which willgenerate increased exports, particularly lumber and wood products, and reducesignificantly the fuel import requirements of the economy. Real export growthmay reach 9 percent a year. In the interim, substantial inflows of foreignexchange in support of the public investment program are needed. The bulkof these external financing needs is expected to be met through public borrow-ing from official sources. In addition, the Extended Fund Facility arrangementwith the IMF will provide balance of payments support. Private capital inflowsare the uncertain element; if the recent deceleration of private inflows andcommercial credits is reversed, the balance of payments position shouldimprove significantly.

xv. In the past, Honduras has managed to keep its external debt serviceratio low because foreign loans were almost all on concessionary terms. Thedebt service ratio in 1980 was about 11 percent. Honduras' balance of paymentsneeds to finance its current account deficit during 1981-85 are about US$1.5billion, of which close to US$1.0 billion will be disbursed from commitmentsmade through the end of 1980. The country will need to borrow on reasonablesoft average terms in view of its poverty, its dependence on exports of a fewcommodities subject to sharp price fluctuations, and because, historically,natural disasters have sharply reduced the volume of exports every few years.Assuming large inflows of external resources in terms similar to those offeredby the international lending agencies, the debt service ratio could rise toabout 14 percent by 1985, still a low ratio. Continued maintenance of Hondurascreditworthiness will depend mostly on the efficiency with which it choosesand implements its major public investment projects, a careful, continueddemand management, and on its export promotion policies.

I. INTRODUCTION

1. This current Economic Memorandum updates and reviews short termdevelopments and the prospects for the next few years of the Honduran economy.Long-term trends of the Honduran economy were analyzed in Report No. 1165-HO,Economic Position and Prospects of Honduras (August 23, 1976) and updatedin Report No. 1856-HO, Memorandum on Recent Economic Development and Prospectsof Honduras (January 10, 1978). In view of recent trends, further work isunderway by the World Bank on the rural dynamics of population growth, foodproduction and the export potential of agriculture.

II. GROWTH TRENDS AND RECENT ECONOMIC DEVELOPMENTS

A. Growth Trends, 1976-79

2. In the last few years, Honduras' economic growth has quickened,partly the result of the recovery from the effects of one of the worsthurricanes in its history. While the GDP growth rate during 1950-75 wasinadequate to substantially raise living standards -- real per capita GDPgrew less than one percent a year -- Honduras recently has shown a remarkablegrowth rate, about 7.8 percent a year during 1976-79. This is reflected in asignificant increase in per capita GNP to about US$565 in 1980. 1/ Exports andinvestment were the most important growth factors during 1976-79. The quantumof exports grew rapidly at 11 percent a year -- partly the result of the gradualrecovery of banana production from the destruction brought about by HurricaneFifi in 1974 -- and fixed investment increased from an average 15.8 percent ofGDP in 1970-74 to an average 21.7 percent in 1976-79. Both public and privateinvestment were very dynamic; real private investment increased by about 50percent, and public investment by about 70 percent between 1975 and 1979.Domestic savings and external credits expanded significantly to finance themuch larger investment effort.

3. Gross domestic income (GDY), however, increased very slowly after1977 (1.2 percent a year between 1977 and 1979) because of rapidly risingimport prices coupled with a sharp decline of coffee prices from their 1977peak level. This has shaken the traditional price stability of the Honduraneconomy and adversely affected real wages. The annual average increase of theconsumer price index rose from 3.4 percent a year in 1970-73 to 7.7 percentin 1976-79, owing to imported inflation from developed countries, oil priceincreases, and stagnating production of basic grains. During 1975-78,minimum wages were not adjusted for cost of living increases and real wagesdeclined by about one-fourth. For 1979, however, the Government decreed anincrease in minimum wages that reestablished a significant proportion of thelost purchasing power.

1/ World Bank Atlas methodology.

- 2 -

4. The dynamism of economic growth together with the transitory incomeeffect of the doubling of coffee prices in 1976 and again in 1977 resultedin a significant increase in the demand for imports. In nominal terms,imports grew 19 percent a year in 1975-79 and the balance of payments continuedto show large deficits in the current account in spite of the rapid growth ofthe value of exports.

B. Recent Developments

5. In 1980, the Honduran economy slowed down. Real GDP increased only2.5 percent, as exports and investment lost dynamism. The export decelera-tion was closely related to banana strikes, a lower volume of coffee exports,and stagnating lumber production. Investment was adversely affected bypolitical uncertainties associated with recent elections and with politicalevents in the rest of Central America.

6. Inflation accelerated in 1980. The consumer price index rose atan annual rate of 18.8 percent while the yearly inflation rate in 1979 wasonly 8.8 percent. Among food products, the most striking increases were thosefor red beans (100 percent) and corn (42 percent), the basic food staples ofthe poor, because of difficulties with domestic crops. This trend requirescareful consideration and prompt action to improve production conditionsbecause of its longer-term social implications. The sharp acceleration ofinflation eroded real wages, in spite of a 1980 increase in the minimumwage and other wage hikes.

7. The current account of the balance of payments showed a deficit ofabout US$324 million in 1980, 12.7 percent of GDP. Import growth significantlyexceeded export growth, partly owing to a 55 percent increase in the value ofimported oil and partly to large imports of capital goods for projects underconstruction, such as a new cement plant. In spite of large inflows ofofficial capital, foreign exchange reserves declined by about US$60 million.

8. The financial position of the Central Government deteriorated in1980. The main reason was a 30 percent increase in current expenditures.This development effectively offset the revenue impact of a December 1979tax reform. In addition, some public enterprises and autonomous agenciesare confronting financial difficulties. (These issues are explained furtherin Section I.)

C. Sectoral Developments

Agriculture

9. Honduras is predominantly an agricultural economy; agriculture'sshare of GDP is close to 30 percent and about two-thirds of the populationand work force are rural. Raw and processed agricultural exports representabout four-fifths of total exports. In recent years, however, agriculturehas not completely supplied the food needs of the country and maize, rice,and milk have been imported, in sharp contrast with the 1960s and early1970s when exportable surpluses of maize and beans were produced.

- 3 -

10. Poverty is widespread among small farmers and landless peasants.In the 1974 census about 78 percent of the farms had 10 or less hectaresand accounted for only 17 percent of the farmed area. Small farms had a

much higher intensity of cultivation with little fallow land and weremostly dedicated to annual crops. Farmers with less than 2 hectares makefuller use of the land than other, larger farmers but are unable, in generalto shift production to higher value crops. 1/ Their incomes are low andsubject to wide fluctuations. Rural poverty, however, has another dimension:there are a large number of landless rural families, estimated at over120,000 in 1974. 2/ Since 1972, the Government has undertaken important stepsto remedy the situation. Significant efforts have been made to expand andstrengthen the program through comprehensive agrarian reform legislationenacted in 1975; considerable financial support has been given to the agrarianreform institute (INA) to settle landless peasants; and the provision of

credit and other services by the agricultural bank (BANADESA). Three well

established peasant organizations (ANACH, UNC, and FECORAH) are involved inthe agrarian reform. Farmers are usually settled in groups (asentamientos)

and work on a cooperative basis. The following table shows the number of

Table 1: LAND REDISTRIBUTION BY PEASANTORGANIZATIONS, THROUGH 1978

Organization Number Members Area(Year of (Thousands) Per Active

Established) Groups Initial Present Granted Arable Member(thousand hectares) (arable

hectares)

ANACH (1962) 518 19.9 13.7 69.3 48.5 3.5

UNC (1972 1/) 319 10.8 7.4 40.1 23.6 3.2FECORAH (1973) 150 6.8 5.3 51.2 48.5 9.2Independents 217 8.3 6.9 40.4 30.2 4.4

TOTAL 1,204 45.8 33.3 201.0 150.8 4.5

1/ Previously the Peasant Leagues organized in 1967.

Source: INA, Resumen de Datos Generales del Sector Reformado, Dec. 1978.

1/ For example, only about 11 percent of the farms below 2 hectares areproducing coffee; they represent 17 percent of the coffee farms, butproduce only 4 percent of the country's coffee production.

2/ This is a very crude estimate that most likely is too high; totalrural population was divided by the average size of rural families(about six) and reduced by the number of families that owned a farm.Thus, it includes rural families in non-agricultural jobs (about20 percent of the rural working force), and families of laborers oncommercial farms (about 20,000 in the banana companies), who may be

better-off in their present occupations.

-4-

beneficiaries and the hectares allocated per member, organization, and Depart-ments through 1978. Although land distribution slowed down drastically after1976, it has continued. Over 48,000 families had benefitted at the end of1980 but only about 36,000 remained on the land. About 8 percent of thetotal farmed land had been distributed through 1980.

11. Some families abandoned the settlements because they did not receiveenough productive land and support services; others because they could notadapt to hard living conditions in the settlements of the Aguan valley.Limited absorptive capacity and financial and trained human resources haveprevented the Government from providing the needed service levels to allsettlements. These constraints together with major policy changes haveshifted the emphasis of the program, although a significant number of landlessfamilies still exists. The Government is now consolidating the gains of theagrarian reform and concentrating its efforts in the potentially most productiveareas.

Agricultural Production

12. Real value-added in agriculture grew 2.5 percent a year during1970-79, in spite of the extensive destruction of the banana plantationsin 1974 and the lack of growth of domestic market-oriented crops of cornand beans. Export crops provided the main thrust of agricultural growth.

13. Coffee production recorded a 50 percent increase in the late 1970sin response to higher coffee prices, which doubled in 1976 and again in 1977.The 1979/80 coffee crop is estimated at 1.6 million quintals, twice the1969/70 level. Coffee exports grew from US$26 million (one-third of the valueof banana exports) in 1970 to US$223 million (11 percent above the value ofbanana exports) in 1980. Further expansion of coffee production is underway;the Government expects it may reach 2 million quintals by 1985. An importantelement will be improved yields and higher plant density. Nevertheless,recent price declines in the coffee market have triggered the application ofexport quotas. Honduras' quota of 1.1 million bags of 60 kilos for 1981 issomewhat below the expected exportable surplus of 1.2 million bags, and mayraise some financing problems for the producers and/or the banking system.This may also adversely affect the 1985 production target.

14. Sugarcane production, which has steadily increased in the past,surged upwards in the late 1970s with the completion of four new sugar mills.Sugar exports jumped from 10,000 metric tons in 1975 to 83,000 metric tonsin 1980 and is expected to reach 100,000 metric tons in 1981. Higher sugarprices contributed also to the increase in value exported in 1980. Furtherexpansion of sugarcane plantings is expected in the near future, and there isa possibility of increased alcohol production for use as car fuel.

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15. Banana production has recovered from the damage of the 1974 hurricaneand exported volumes are very close to the pre-hurricane peak level. Higherprices explain the more than doubled export value from 1970 to 1980. COHBANA,the government banana corporation, is programming an expansion of about15,000 acres for 1981-85, mostly in cooperatives, at an estimated cost ofabout L/80 million. However, any expansion of COHBANA's activities should beclosely scrutinized because the corporation has increasing yearly operatinglosses related to its large administrative costs. In addition, COHBANA isinvolved in the poorly managed Isletas Cooperative of Banana Growers (EACI),which creates additional pressures on its resources. Commercial foreign loanshave helped COHBANA to finance (transitorily) its losses. This situation,however, will most likely end with the Central Bank or the Government paying

these loans if no corrective action is taken.

16. EACI produces about 10 percent of the bananas exported by Hondurasand benefits 1,300 families but it is now losing money. Its cumulativedeficit of about L/12 million has been covered by COHBANA. The losses appearto be the result of poor management as EACI's production and administrativecosts per banana box increased more rapidly than its prices. Since Hondurashas a strong comparative advantage in banana production, it should not bedifficult to produce them at a profit. EACI needs to bring down its costsper box and cover its commitments to COHBANA; otherwise, other means oforganizing the growers for production and marketing must be found. Further-more, all plans to expand Government participation in banana activities bycooperatives must be carefully weighed. The country's ability to export ata profit one of its main sources of foreign exchange could be jeopardized ifother inefficient EACI's are created.

Table 2: EACI: BANANA PRICE AND UNIT PRODUCTION COST

(in Lempiras per box)

Annual Growth1977 1978 1979 Rate 1979/77

Price per unit 5.15 5.22 5.58 4.1Production Costs 2.94 3.14 3.47 8.6Gross Operating Profit 2.21 2.08 2.11 -2.3Administrative Costs 0.09 0.17 0.22 59.4Sales Costs 1/ 1.49 1.73 1.62 4.3Financial Costs 0.25 0.09 0.25

Other (net) -0.11 -0.13 0.13Net Profit (+) 0.50 0.22 -0.11

1/ Includes export taxes.

Source: COHBANA

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17. Production of corn and beans, the staple food of the poor, hasstagnated. Corn production grew at 0.6 percent a year and bean productiondeclined 1 percent a year during 1970-79. About 40 percent of both corn andbeans production comes from farms with less than 5 hectares; about 70 percentof both crops comes from farms below 20 hectares. 1/ Factors that account forthe lack of dynamism are higher profits in other crops, particularly for themedium and large farms, reflected in the rapid growth of some export crops;limited technical assistance and low support prices (US$6.50 per qq ofcorn in 1979 and US$7.00 in 1980) with a small margin over production costs(estimated at US$5.20 with a yield of 25 qq per manzana). Retail prices ofcorn and beans increased during the 1970s but real prices in 1980 were onlymodestly above the 1970 level.

Forestry

18. Honduras is relatively well endowed with timber resources (about5 million hectares of active forests, of which 2 million hectares are conifersand 3 million tropical hardwoods). About a third of the land suited forforests has been denuded by poor exploitation practices, migratory agricul-ture, and grazing. Furthermore, every year about 5.5 million cubic meters oflumber are used for fuelwood, putting additional pressure on forest resources.In spite of depletions, a 1978 survey showed that there were about 66 millioncubic meters of commercially exploitable pine lumber or about 25 times theannual exploitation rate, and about 204 million cubic meters of broadleafforests, 70 percent of which are commercial varieties.

19. A 1974 Forestry Law nationalized timber rights, established theguidelines for private sector participation, and created the state-ownedforestry corporation (COHDEFOR) in charge of exporting wood products andforest management. As a result of COHDEFOR's more conservation orientedpolicy, production and exports of sawnwood and timber declined; the 1980quantum of lumber exports was about 56 percent of the 1974 level.

20. COHDEFOR's operation so far has been profitable, generating yearlysurpluses of about L/15-20 million, part of which has been transferred to theCentral Government. However, current expenditures, particularly wage expendi-tures, are increasing rapidly and, if not carefully controlled, will lead toan operating deficit in the near future.

21. COHDEFOR has undertaken a substantial expansion of the country'slumber industry. The major focus is in the development of the Olancho forestarea with an estimated pine reserve of 32 million cubic meters (smaller thanan earlier estimate of 48 million cubic meters). CORFINO, a COHDEFOR ownedcorporation, was created to build and operate two sawmills in the Olancho areafor which significant road and port infrastructure is now under constructionto provide an outlet for their production. CORFINO sawmills will almostdouble lumber exports in the next few years. The first sawmill is expectedto begin production in 1982 and to reach its full capacity of 170,000 cubicmeters of sawnwood and 128,000 cubic meters of chips in 1983 or about three

1/ 1974 Agricultural Census.

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years behind the original schedule. The second sawmill is expected tobegin production in 1983 and to reach its full capacity of 119,000 cubicmeters of sawnwood and 90,000 cubic meters of chips in 1984. Both sawmillshave been scaled down from the originally planned capacity and plans fora third one have been abandoned because of the downward revision of the pinereserve. COHDEFOR has also built two smaller sawmills in the central zone ofHonduras with annual processing capacities of 25 and 50 million board-feetrespectively. The largest one is running into serious difficulties with thelumber supply in the Yoro area and may have to be relocated.

22. Pulp and paper production is the next step in the development of theOlancho forest reserve with a plant projected at 125,000 annual tons capacityusing 220,000 tons of chips from the Olancho sawmills. The feasibilitystudy is at an advanced stage.

23. Better forest management and protection is essential for the long-term success of the lumber industry. COHDEFOR's effectiveness will depend onits capacity to develop technical and administrative manpower to manage andprotect the forests but also on its ability to organize the peasants toexploit under supervision some forest resources, such as pine resin, "liquidamber oil", tuna latex, pine seeds, and firewood. Results of a program toorganize peasant cooperatives have been limited so far. COHDEFOR plans callfor the expansion in the number of peasant cooperatives and for the constructionof 115 fire detection towers to control forest fires. COHDEFOR expects toexpand its protected area from 587,000 hectares in 1978 to 1,400,000 hectaresin 1983. Although COHDEFOR is gradually building up field competence in fireprevention, detection, and control, a sound program will take probably atleast a decade to become firmly rooted. Reforestation is underway or plannedin four project areas: PRODERO, Plan Comayagua, CORFINO, and La Mosquitia.Natural reforestation, however, is under consideration for most of theCORFINO project areas. Since this has shown a limited success in the past,this choice raises serious questions about the long-term viability of theimportant forest resources.

Manufacturing

24. Manufacturing accounted for about 17 percent of GDP at factor costand employed about 12 percent of the working force in 1979. Moreover, itexpanded rapidly, averaging 9.6 percent annually during 1975-79, which sharplycontrasted with the slow real growth (3 percent yearly) of the 1960-75 period.The improved performance of the manufacturing sector was due to a much largertransport investment effort, which resulted in a better integration of thedomestic market; improved Government economic management, including a cleardefinition on basic incentive legislation; an active role of the governmentindustrial finance corporation, CONADI, in promoting industrial development;and the more favorable conditions created for local industrialists by thecessation of trade with El Salvador and the introduction of bilateral treatieswith the other members of the CACM.

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25. By far the most important policies affecting the manufacturingsector have been determined by the reinstatement in 1973 of the CentralAmerican Agreement on Fiscal Incentives as the basic incentive legislation.This had important effects in encouraging industrial investment but hasbeen costly in terms of revenue foregone (about 15 percent of total CentralGovernment tax collections). In addition, the system has a definite biastowards production for the CACM; the future of regional exports, however, issubject to significant uncertainty, since some neighboring countries needto reduce imports and civil disorders are rife. This situation emphasizesthe need for increased attention to manufactured exports outside the regionand makes essential a revision of the incentives system in the CACM, whichhas been under consideration for some time.

D. Government Development Policy

26. The public sector's role in the economy expanded significantlyduring the 1970s. This expansion is noticeable in more active developmentpolicies, particularly in forestry and agriculture; the increasing role ofpublic enterprises and decentralized institutions in the economy; and the muchhigher level of Central Government operations that rapidly expanded infra-structure and social services.

Public Investment

27. Since 1972, improvements in Government planning and implementationcapacity resulted in a substantial increase in public investment, whichreached 8.8 percent of GDP in 1980 compared to 3.3 percent in 1972. Given theserious lack of basic infrastructure and the mountainous topography of thecountry -- which makes the expansion of the road network difficult and costly --

a very large share of public investment has been traditionally allocated totransport and power. From 2.5 percent of GDP in 1972, infrastructure invest-ment increased steadily to about 6.1 percent in 1980. This has permitted thecompletion of a major network of highways linking the main population andproduction centers, the development of port facilities on both Oceans, and arapid increase in power generation which still serves only one-third of theHonduran population.

28. Although receiving a smaller share of public investment, social andproductive sectors have acquired more importance since 1972. Allocations forsocial investments have risen from 0.5 percent of GDP in 1972 to 1.3 percentin 1980. Productive investments also have increased substantially as aresult of the nationalization of forest resources and the agrarian reformprogram; they increased from 0.03 percent of GDP in 1972 to about 1.4 percent

in 1980.

Public Finances

29. Public finances reflected in recent years both the better performanceof the economy and the expanded government role. During 1975-79, currentsavings increased from 3 to 4 percent of GDP while capital expendituresexpanded from 9 percent to 11 percent of GDP. As a result, the overall deficit

increased from 4.5 percent to about 6 percent of GDP, mostly financed with

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external borrowing. In 1980, the situation, however, showed some importantchanges. Current savings declined to 3 percent of GDP and, even thoughcapital expenditures declined, the overall deficit increased to 8.7 percentof GDP. Domestic financing played a larger role than in earlier years, atrend that was initiated in 1979.

30. Taking into account the financial implications of its ambitiouspublic investment program 1979-83, the Honduran Government negotiated an EFFprogram for IMF assistance for a three-year period beginning in mid-1979.This program centered on a strengthening of the public sector's financialposition by limiting current expenditure growth to 14.5 percent a year,undertaking tax measures equivalent to two percent points of GDP, and othermeasures to increase the operating surpluses of state enterprises. Similarundertakings were considered before El Cajon negotiations with the World Bank.Unfortunately, current expenditures exceeded in 1980 the agreed target, the1979 fiscal reform was less than sufficient, and the financial position ofsome state enterprises continued to deteriorate.

Table 3: PUBLIC SECTOR INDICATORS

(in percentages of GDP)

1970-72 1975 1978 1979 1980 (p)

Current Savings 2.2 3.4 4.1 4.2 2.9Capital Expenditures 5.5 8.5 11.0 10.4 11.7Overall Deficit (-) -3.1 -4.5 -6.4 -5.3 -8.7

External Financing 2.3 5.0 6.5 4.9 5.5Domestic Financing 0.8 -0.5 -0.1 0.4 3.2

(p) Preliminary

Source: Central Bank

Central Government Finances

31. Central Government finances showed greater dynamism in recent years.During 1975-80, while current revenues increased at 20 percent a year, totalexpenditures (excluding debt amortization) grew at 22 percent a year; theoverall deficit, as a percentage of GDP, widened substantially from 2.3 percentin 1970 to 4.5 percent in 1979 and 7.5 percent in 1980. 1/ These trendscontrast significantly with those of earlier periods when revenues were lessbuoyant and expenditures were constrained by lack of projects and a moreconservative current expenditure policy. The growing deficits were financedby large amounts of external credits and also by increasing the use of domesticcredit, particularly in 1980.

1/ In 1980, a portion of the large increase is associated with loans to the-entral Government which were transferred to the power company.

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32. Current savings remained low in spite of rapid revenue growth. Somerecovery took place in 1977-79, but savings did not exceed 1.3 percent of GDP.In 1980, a significant deterioration took place. This poor savings performanceis explained by the rapid real annual growth of current expenditures, over11 percent and 1.7 times the GDP growth rate, during 1975-80. In 1980, whenthe economy slowed down, the real growth rate reached 12 percent, 4.8 timesthe GDP growth rate. Moreover, this large increase is about double the levelthe Government had programmed.

33. Current expenditures for wages, goods and services, and transfersshowed large percentage increases during 1975-80. Average real wages, however,declined slightly, and the larger wage bill resulted from expanded employment,about 6 percent annually. The Government expanded significantly operatingexpenditures for education, health and defense. Budgeted current expendituresfor education showed an annual real increase of about 12 percent, for health14 percent, and for defense 11 percent.

Table 4: CENTRAL GOVERNMENT FINANCIAL POSITION

(in percentage of GDP)

1960 1970 1975 1978 1979 1980 (P)

Current Revenues 10.9 13.1 13.7 14.9 14.6 14.9Taxes 10.0 11.0 11.1 13.8 13.2 13.6On Income and Property 1.7 3.2 3.5 3.5 3.5 4.6On Domestic Transactions 2.8 4.3 3.9 4.0 3.8 3.6On Foreign Trade 5.5 3.5 3.7 6.3 5.9 5.4

Export Taxes (0.5) (0.4) (1.0) (2.8) (2.6) (2.5)Import Taxes (5.0) (3.1) (2.7) (3.5) (3.3) (2.9)

Non-tax Revenues 0.9 2.1 2.0 1.1 1.4 1.3

Current Expenditures /1 9.5 10.9 13.0 13.9 13.3 14.5

Current Savings 1.4 2.2 0.7 1.0 1.3 0.4

Capital Receipts 0.1 - - - - -

Capital Expenditures 2.5 4.5 6.1 7.3 5.8 7.9Investment 2.3 3.4 3.6 4.8 3.6 3.4Capital Transfers 0.2 1.1 2.5 1.8 1.5 1.8Net Lending and Others - - - 0.7 0.7 2.7 2/

Overall Deficit (-) -1.0 -2.3 -5.4 -6.3 -4.5 -7.5

Financing (net) 1.0 2.3 5.4 6.3 4.5 7.5External (net) 1.1 0.9 3.9 4.5 3.1 4.8 2/Domestic (net) -0.1 1.4 1.5 1.8 1.4 2.7

/1 Including current expenditures classified "development expenditures"by the Government.

/2 Includes loans received by the Central Government for the power company.

(P) Preliminary.Source: Central Bank and Ministry of Finance

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34. Central Government current transfers are mostly for autonomousinstitutions, basically INA (the agrarian reform institute), the university,and the national social welfare institute. While the transfers to the welfareinstitute grew 9 percent a year during 1975-79, transfers to INA and theuniversity grew at 30 percent and 20 percent a year, respectively. Whileexpenditures in support of INA benefit mostly poor peasants and have a favor-able income redistribution effect, transfers for higher education are regress-ive because the poor benefit little from them. A more equitable way --through higher tuition charges to the more affluent families -- could bedesigned to finance higher education.

35. As a percentage of GDP, capital expenditures of the Central Governmenthave been very high since 1976. Fixed investments are mostly for highways,health centers, and schools. Capital transfers are also becoming increasinglyimportant in support of investments for the agrarian reform, safe water, power,social welfare, and higher education.

36. The Central Government's current revenues increased as a percentageof GDP during 1975-80 because of the performance of export taxes. A tax onbananas was introduced in 1974 and increased gradually until it reachedUS$0.50 per box in 1979. In 1975, coffee taxation was revised; an ad-valoremtax with marginal progressive rates ranging from 10 percent for coffee pricesbelow US$50 a bag of 60 kg to 20 percent for coffee prices above US$60 a bagsubstituted the earlier tax of US$5 per bag. This change in the coffee taxrate, coupled with the much higher export prices, resulted in significant newrevenues.

37. Total tax revenues from non-export sources showed limited buoyancy.While income and import taxes showed some buoyancies of 1.09 and 1.24 during1974-79, domestic transactions taxes had a buoyancy of 0.96. This situationreflects partly the per unit excise taxes on beer, liquor, soft drinks, etc.Tax collections on these items increased rapidly when new tax rates were putinto effect in 1975 but afterwards additional revenues from these taxes weredetermined by expanded unit production.

38. Tax collections for 1980 reflected the impact of a December 1979,fiscal reform. The fiscal burden increased to 14.9 percent in 1980 comparedto 14.6 percent in 1979. This reform consisted of the introduction of apay-as-you-go system for income taxes; increases of the excise tax rates oncigarettes, beer, soft drinks and liquor; new export taxes on beef and sugar;a 1 percent tax on all exports, except bananas, coffee, beef, sugar andminerals; and minor revisions of sales and property taxes. Most of therevenue impact of the reform was due to the new payment system for the incometax of corporations, so that most of the incremental effects of the reformwill vanish in 1981. This and the higher level of current expendituresexpected in 1981 required new tax measures in April 1981.

E. Monetary Developments

39. Credit expanded rapidly during 1976-78 at a rate slightly higherthan that of monetary GDP. Both private and public sectors received increasedcredit allocations; the public share was 11 percent at the end of 1978.

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Financial private savings doubled as export earnings expanded rapidly, andincreased its ratio to GDP. This increase is mostly explained by the growthof quasi-monetary deposits at 27 percent a year. Domestic savings weresupplemented by substantial foreign borrowings and loanable funds exceededdomestic credit demands. Thus, net international reserves of the bankingsystem grew from US$48 million in December 31, 1975 to US$134 million inDecember 31, 1978.

40. This favorable situation, however, has changed since mid-79. Thegrowth of financial savings weakened as a result of political uncertaintiesand low domestic interest rates, while foreign medium- and long-term borrowingfrom commercial banks was limited by a reduction of the exposure of foreigncommercial banks in Central America and by sharply rising interest rates inforeign financial markets. Domestic credit demands exceeded the supply ofloanable funds, and also private banks in Honduras experienced a liquiditysqueeze. The slow growth of private financial savings continued in 1980and total credit growth at 13 percent, even though it exceeded loanablefunds, was negative in real terms. Foreign exchange reserves of the totalbanking system declined to US$55 million in December 31, 1980.

41. While the domestic capacity to expand credit by the monetary systemwas sharply reduced in 1979-80, credit to the public sector doubled; itsshare increased to 17 percent at the end of 1980. As a result, credit to theprivate sector increased nominally by 23 percent while inflation reached29 percent in 1979-80. The reduction in real credit affected adverselyprivate sector activities.

F. The Balance of Payments

42. The balance of payments position of Honduras traditionally dependson the export of a few commodities (bananas, coffee, lumber, beef, sugar).Recently, coffee has become as important as bananas. From 75 percent of thevalue exported in 1950 the banana share dropped to 25 percent in 1980.

43. During 1974-75, Honduras' balance of payments was adversely affectedby a 1974 hurricane, the oil price rise, and the OECD recession. The severebalance of payments difficulties eased in 1976-80, with the gradual recovery ofbanana production, the extraordinary increase in coffee prices and a 40 percentexpansion of coffee production, and the growth of sugar and other exports.However, the balance of payments current account continued to show largedeficits as imports grew rapidly because of higher prices for oil and otherimported goods and the more dynamic performance of the economy. Expansionarypolicies which led to the more rapid economic and investment growth also hadan impact on the quantum of imports. Increased foreign loans financed thegrowing current account deficit and even permitted some accumulation offoreign exchange reserves towards the end of 1978. More recently, however,capital inflows were not enough to cover the current account gap and netforeign exchange reserves declined to an equivalent of about one month ofimports. The debt service ratio was about 11 percent in 1980.

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III. COUNTRY PROSPECTS AND DEVELOPMENT PROGRAMS

A. Development Strategy and Main Issues

44. For the next few years, the Government's strategy is to support, onthe one hand, the promotion of industrial and agricultural growth throughlarge infrastructure investments and longer-term credit and, on the otherhand, an accelerated implementation of social projects, particularly for ruraldevelopment, health, education, water supply and sewerage, and housing, todirectly improve the welfare of the population. This dual strategy of accel-erated growth and expanded social programs entails possible conflicts, whoseresolution will be closely associated with the Government's determinationto: (i) maintain prudent fiscal and financial policies in order to providesound financing for its ambitious investment program, and (ii) restore theprivate sector's confidence and reactivate private investment by improvingthe political and financial climate, stepping up efforts to promote privateactivities, particularly exports, and avoiding further expansion in productiveactivities which the public sector cannot profitably undertake. These areserious issues requiring timely and effective actions.

B. Economic Growth Prospects

45. Relatively favorable growth prospects are foreseen for the 1980s,especially when compared to other Central American countries. The largeGovernment investment effort will accelerate growth by the mid-1980s, and thegood prospects for increasing export volumes of lumber, sugar, coffee, beef,fruits, and even bananas, as well as diversification efforts in productssuch as cacao, cashew, and citrus fruits may yield significant results in themid to late 1980s. The outlook for 1981-82, however, is less optimisticbecause of the political climate in the area and the decline in coffee prices.As a result, real GDP growth is expected to slow down to about 4-5 percenta year during 1981-85 unless the response from the private sector is morepositive. If private investment recovers significantly, however, GDP growthmay be about one percentage point higher. Moreover, by the mid-1980s, much ofthe public and private investment will permit a greatly accelerated growth.

46. Real export growth, nevertheless, is expected to be somewhat slowerduring the early 1980s than in the recent past. Banana production has almostrecovered to prehurricane volume levels, coffee production growth will likelyslow down for a while since prices are down and quotas have been introduced inthe world coffee market, and industrial exports to the CACM may be adverselyaffected by financial constraints. The most dynamic and crucial new exportwill likely be lumber -- once the new sawmills become fully operational during1982-84 -- while exports of beef, sugar, minerals, and seafood products arealso expected to expand. Based on an assessment of known plans and prospectsfor these exports, the quantum of exports may expand at 9 percent a yearduring 1981-85 compared to 12 percent during 1976-80.

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47. Public expenditure levels will also be an important growth factoras the Government continues with the implementation of its 1979-83 investmentplan and further expands some programs to improve the welfare of the poor.Public consumption is expected also to grow significantly but at a slower pacethan in the recent past if the Central Government is successful in its declaredintention of slowing down current expenditure growth.

48. Private investment is the uncertain element for the next few years.On one hand, the limited increase in domestic credit permitted by the slowgrowth of the banking system resources during 1980 was mostly siphoned to thepublic sector with negative effects on private investment. This togetherwith high interest rates and political uncertainties in the area had negativeeffects on private investment. Furthermore, CONADI's support for largeprivate projects, such as the sugar mills, may have peaked since most ofthem have been completed and CONADI is in financial difficulties that effec-tively limit its capacity to enter new operations on a sound base. On theother hand, an expanding public investment and increased credit availabilityfor the private sector (if the Central Government strengthens its finances)could provide the right environment for private growth, if existing politicaluncertainties are resolved.

49. In the longer run, the Honduran population is expected to grow toover 7 million by the year 2000 with one million concentrated in Tegucigalpa,and over three-quarters of a million in San Pedro Sula. This populationgrowth and urbanization trend reflect much lower mortality rates as well ashigh rural fertility rates (in spite of an expected one-third decline), theexpected increase of population density with respect to arable land (over230 people per square kilometer by the year 2000) and its related impact oninternal migration. Large number of people would be migrating from the poorWestern and Southern highlands to the main growth poles on the San PedroSula-Tegucigalpa axis, the Atlantic littoral, the Aguan Valley, and theOlancho area. The speed and direction of this internal migration would dependon the creation of jobs and other opportunities in the towns and in promisingnew agricultural areas; the advances of the land reform program; and theaccess of the rural population to social services, including family planning.

50. Expected population growth makes evident the need for a longer termdevelopment strategy for Honduras geared towards increasing output, employment,and exports and improving social conditions. Medium-term favorable growthprospects are fairly well established barring unpredictable events, such asnatural disasters. Beyond 1985, however, the future prospects are lesscertain. New sources of growth which could take advantage of the largepublic investments now underway need to be identified. These new sourcesof growth most likely would be agricultural, export-oriented activities,including the processing of agricultural raw materials, such as lumber.Dynamic private sector participation would be essential to the success ofthese activities. At the same time, the country has to continue its effortsto diminish the fuel import requirements of the economy by pursuing thedevelopment of further hydropower plants and intensifying its petroleumexploration promotion activities.

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51. Honduras also needs to take a longer-term view of its rural develop-ment. Rapid rural population growth means mounting pressures on naturalresources, such as forest and arable land; increasing numbers of landlesspeasants and pressures for more land redistribution; and a rapidly growinglabor force because lower fertility rates will have little impact in decreasingthe labor supply in the late 1980s and early 1990s. Evidently, agriculturemust grow rapidly to absorb productively a large proportion of the new entrantsto the rural labor force; otherwise, rural migration to the towns will accel-erate even more. Fundamental long-term decisions will be needed about programsfor the development of rural areas; increased support to small farmers; andthe future scope of agrarian reform efforts and the technical, managerial,credit, and marketing support to its settlements. Essential to the success ofrural development efforts will be major institutional improvements to ensure amore efficient and effective agricultural public administration.

52. Even if progress is made in the rural areas, rationalizing urbandevelopment has also a high priority. Honduras already is experiencingshortcomings from the present unregulated physical development and lowservice levels of its towns and cities. Rapid urban growth will createserious pressures for improved access to water and sewerage services,housing for the poor, street lighting, garbage and trash removal, accessstreets, etc. In addition, the finances of the municipalities and thepublic water and sewerage enterprises are weak, limiting their ability tomeet these needs.

B. The Public Investment Program

53. A projection of the possible 1981-85 public investments shows largeinvestments likely for infrastructure, particularly for on-going power andtransport projects, which are still crucial given the country's developmentstage; and heavy investments for export diversification, mainly throughforestry development. Major expenditures are also likely for agriculturaland rural development to advance incomes and social conditions of the agrarianreform peasants and the small farmers, and increase agricultural production,exports, and productivity; and for primary and technical education, health,particularly water supply and medical facilities for Tegucigalpa, San PedroSula and provincial towns, as well as expanded health services in rural areas.Parallel increments in current expenditures are planned to staff and equip theeducation and health centers. The Bank mission examined CONSUPLANE's projectlists and prepared a scaled-down investment program essentially taking intoaccount physical and financial constraints of the public sector (see para. 62).

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Table 5: PUBLIC INVESTMENT PROJECTION BY SECTORS

(in percentages)

Actual Projected1978 1979 198 0(p) 1981 1982 1983 1984 1985

I. Infrastructure 74.8 71.3 69.5 68.6 68.6 70.9 65.2 48.3

Transport 47.9 43.7 28.3 24.7 26.6 23.8 19.1 17.8Telecommunications 8.0 2.7 1.8 2.6 4.0 5.8 5.3 5.3Energy 13.0 18.0 36.1 39.8 36.7 40.2 39.7 24.3Urban Development 5.8 6.8 3.3 1.5 1.3 1.1 1.1 0.9

II. Productive Sectors 8.6 11.5 16.3 17.0 18.4 14.3 18.5 35.8

Agriculture 5.5 5.8 5.6 5.4 6.4 6.1 6.7 7.7Forestry 1.7 4.5 9.8 11.2 11.6 7.9 11.5 27.9COHDEFOR (1.7) (1.7) (2.0) (3.7) (3.7) (4.9) (4.0) (3.6)CORFINO ( - ) (2.7) (7.8) (7.5) (7.9) (3.0) (7.5) (24.3)

Tourism 1.1 1.1 0.9 0.4 0.4 0.3 0.3 0.2Industry 0.3 - - - - - - -

III. Social Sectors 16.6 17.2 14.2 14.4 13.0 14.8 16.3 15.9

Education 3.1 3.3 3.8 4.3 4.6 4.3 4.0 4.2Health 7.5 9.3 8.2 8.2 6.4 8.7 10.4 9.7Housing 1.4 1.1 1.1 1.1 1.5 1.4 1.4 1.4Social Welfare

and Others 4.6 3.6 1.1 0.8 0.5 0.4 0.5 0.6

IV. Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

V. Public Investment/GDP 9.9 8.4 8.8 8.1 8.4 8.9 8.7 8.6

(p) Preliminary

Source: Table 5.4, Statistical Appendix.

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54. Power investments will be very large during 1981-85, representingalmost 40 percent of the public investment program. A large hydroelectricproject at El Cajon will double power generation by 1986 and reduce the shareof thermal electricity generation from 35 percent in 1979 to 16 percent.The project, operating at full capacity, will have a significant balance ofpayments impact since it will reduce the demand for imported oil by aboutUS$90 million a year at 1980 prices. Unfortunately, the project is verycapital intensive with total financing requirements (including interestduring construction) at about US$600 million. Substantial financing onconcessionary terms will significantly reduce the financial burden.

55. Transport investments will also be large for the trunk highwaysystem and the roads and new port (at Castilla) for wood products exports.This will permit most of the important agricultural areas to have all-weatheraccess to major urban areas and ports. With the primary network virtuallycompleted, the emphasis in road building is shifting towardl secondary andfeeder roads as well as proper maintenance of existing roads. The investmentprogram includes a large feeder road program to support increased agriculturalproduction and to improve rural living conditions. However, investment levelsprogrammed by the Ministry of Public Works exceed CONSUPLANE's ceilings andwill have to be spread out over a larger time period to avoid an excessivedemand of financial resources for road construction.

56. Telecommunications investments are not large, but include a ruraltelephone system, two large phone centers in Tegucigalpa and San Pedro Sula,a national digital transmission network, and a new international telephoneexchange.

57. Forestry investments by COHDEFOR and CORFINO are substantial.COHDEFOR plans to undertake feeder road development and maintenance in theOlancho and Comayagua areas, the development of two mid-size sawmills(at Las Lajas and Rancho Grande) by 1984, the purchase of forest protectionequipment, and substantial reforestation, particularly in the Mosquitia andWestern areas. There are other wood industries under consideration, suchas a scaled-down hardwood complex. The Las Lajas and Rancho Grande sawmillsshould be carefully evaluated, particularly given COHDEFOR's recent experiencewith a sawmill which has an insufficient timber supply. In addition, COHDEFORwill require financial resources above what it can provide itself to completethis program, given the significant contribution required for its majorityparticipation in forest industries. CORFINO is responsible for theconstruction in 1982-84 of two large sawmills in the Olancho area and for apulp and paper plant during 1985/87.

58. Reforestation in the Olancho area will be crucial and it is essentialthat COHDEFOR or CORFINO undertake this task, which cannot be left alone tonatural reforestation. Similarly, lumber marketing is another area which needsa policy definition so that benefits from the Olancho sawmill operation canbe maximized. COHDEFOR is the only agency legally authorized to export woodproducts, but a practical formula must be found to let CORFINO market itsproduction to take full advantage of fluctuating market demand for specificwood products.

- 18 -

59. Agricultural fixed investments are large and mostly in supportof the agrarian reform projects of INA, particularly in the Aguan Valley.These projects will produce African palm oil, cacao, grapefruit, cashewnuts, sugarcane, chile-tabasco, tobacco, milk and cattle. INA, however,needs to improve the efficiency of its operations since it depends on signif-icant Government transfers that cannot continue growing as rapid as in therecent past. Not included in the investment program is a sugar mill with atotal cost of over US$160 million (including land clearing and expensive floodcontrol works) under review by some agencies of the Honduran Government. AnINA cooperative of 4,000 families would own the mill and the Government isexpected to provide loan guarantees for the large external credits needed.The Government should thoroughly review this project; it could well be a poorone given its implications for the external debt service and creditworthinessof Honduras. The recent poor experience with sugar mills and state supportedbanana cooperatives indicate the likelihood that the Government will end upin charge of a losing operation and underline the need for a clear technical,economic, and financial justification for a proposal of this size. The statecoffee institute is promoting agricultural diversification among coffeefarmers as well as technical assistance combined with renovation of coffeetrees. Present expenditures are only for a pilot project for citrus andother crops, but this may provide the basis for an important export diversif-ication project in the future. COHBANA is involved in the expansion of bananaproduction, an expansion affected by the shortcomings noted earlier. TheMinistry of Agriculture is concerned with the development of some valleys,such as Guayape, Comayagua, and Choluteca. The Ministry of Public Works isworking in limited river and flood control in the Aguan and Sula Valleys.Financial investments in support of agricultural and rural development arealso expected to be substantial. This will require a rechanneling of creditaway from the Central Government, as noted in other sections of this report.Administrative improvements in the public sector agencies in charge of imple-menting agricultural and rural development projects is essential to carry outeffectively the Government's programs.

60. Social investments are largely for health (including water andsewerage) and education. Health investments will be concentrated on watersupply and medical facilities for Tegucigalpa, San Pedro Sula, and provincialtowns, as well as for expanded health services in rural areas. Educationinvestments are divided mostly between primary schools (three-fifths), theuniversity (one-fifth), and agricultural and vocational training institutes(one-eighth). Public housing and urban development are expected to receiveonly small allocations since the implementing and financial capacity of theagencies involved is quite limited. Given the foreseen population pressures,administrative and financial strengthening of public institutions in the socialsectors is also essential to enable them to run their programs efficiently andin a timely manner.

61. In view of the existing financial and absorptive capacity constraintsfor the execution of the project list contained in the investment program, theGovernment established investment ceilings in 1979. More recently, it hasissued new general guidelines which have been used for the inclusion ofprojects in the 1981 budget. These guidelines respond to financial constraints

- 19 -

and general priorities in support of productive and social sectors, and theagrarian reform program. First priority projects are those that: (i) haveexternal financing and are already under execution or are ready to begin;(ii) have domestic financing and are under execution or will be initiated soonto support productive and social sectors, and the agrarian reform program;(iii) will benefit priority areas, such as border zones, the western region,Santa Barbara, Yoro, and Amapala; and (iv) continue land redistribution(affecting land holdings, titling). Second priority projects are those that:(i) have external financing and are in the process of meeting the conditionsto initiate disbursements and will be included in an extraordinary budget;(ii) have domestic financing and support productive and social sectors or theagrarian reform but are located outside the priority areas; (iii) coverpreinvestments for FY82 projects; and (iv) provide for infrastructure invest-ments that do not support productive sectors and the agrarian reform. Thirdpriority projects are those that: (i) meet the criteria for a first or secondpriority qualification but require large investments and other complementaryinfrastructure, which cannot be provided under existing financial constraints;(ii) have long gestation periods; and (iii) require new irrigation schemes.

62. A realistic assessment of the likely 1981-85 investments indicatesthat actual investments will be lower in 1981-85 than those in the detailedproject list prepared by CONSUPLANE. Taking into account existing commitmentsand financial availabilities, an alternative possible investment programhas been prepared by the mission. The program assumes a postponement ofprojects without financing from 1981-83 to the 1984-85 period and that newprojects will be available in sectors where investment levels projected on thebasis of existing projects imply a substantial investment decline in the finalyear of the program. The modified investment program is presented in Tables 5(text) and 5.4 in the annex. Public investment, as a percentage of GDP, wouldpeak in 1981-82 because of the Cajon power project. The composition of publicinvestment could change significantly. The infrastructure share could declinefrom over two-thirds in 1980 to about one-half in 1985, reflecting the comple-tion of El Cajon and the main trunk highways while the productive sectors,mostly forestry and agriculture, would increase their share from one-sixth toover one-third. The social sector share would fluctuate around 15 percent.

D. Public Finance Prospects

63. Given the public sector's ambitious investment program, additionalefforts will be required in the next few years to increase public savingsto generate the funds needed for financing investments in a framework compatiblewith monetary and price stability. Recent tax measures are a significant stepto strengthen public finances after their deterioration in 1980. CentralGovernment savings, however, could decline again in the next few years ifcurrent expenditures are not tightly controlled. Similarly, public enterprisessavings would not increase much unless tariff action is taken. The portauthority, the telecommunications agency, and the water and sewerage companyhave increased or are in the process of increasing their tariffs, which willbe a significant step to improve their finances and avoid the need for CentralGovernment transfers.

- 20 -

64. The Central Government will need to generate adequate savings in thenext few years. In 1981, the loss of much of the incremental effect of the1979 tax reform 1/, the effect of the slowdown of economic activity on taxcollections, and the difficulties of enforcing some of the expenditures cutsintroduced in the 1981 budget forced the Government to double sales taxes oncigarettes, liquor, and beer and to raise import taxes by 5 percent for mostintermediate and capital goods and 10 percent for consumer goods 2/. Thesemeasures are expected to yield L/85 million in 1981 but over L/125 million in1982.

65. In addition, the Government plans to restrict, current expendituregrowth to 14 percent in 1981; restrict commercial external and domestic borrow-ings of the public sector; and raise rates and prices of public enterprises,particularly the water and sewerage company. Rates of the port authority andthe telecommunications agency were increased in June, 1981. The restrictionon domestic credit to the public sector together with freeing interest rateson savings deposits as well as on loans financed with commercial externalcredits should improve the availability of funds to the private sector fromthe banking system.

66. The financial program of the Government -- which is being supportedby the IMF through an EFF and by the Bank through a large lending program --is a significant step towards improving its finances. Strict control of theCentral Government's current and development expenditures in the next fewyears however, is still essential to avoid continuing fiscal crises requiringfrequent fiscal reforms. If GDP growth slows down, even the agreed currentexpenditure restraint would require another tax package or lower currentexpenditure growth in the next few years. Alternative projections of currentexpenditures illustrate the implications of a sound policy in this respect(see table 7). If these expenditures grow at rates over 14.5 percent a year,a second tax package will be needed by 1983 unless existing tax sourcesbecome more buoyant than projected. Given Honduras' poverty and needs, theimportance of a selective approach for the expansion of current and developmentexpenditures cannot be overemphasized. Similarly, much improved efficiencyshould be sought from agencies that are the recipients of significant Governmenttransfers, such as INA, to effectively satisfy the needs of the Honduran popula-tion within the country's resources. Operational costs of these agenciesshould be strictly controlled so that the money received is spent efficientlyand mostly for the benefit of their intended beneficiaries.

67. Furthermore, the Government and donors should carefully appraise thefull budgetary implications of its projects before carrying them out to avoida repetition of recent experiences with projects in education and health,which have been undertaken without considering their recurrent budgetaryimplications. This will ensure appropriate consideration of the recurrent

1/ The reform introduced the pay-as-you-go system for corporate income taxes.This meant that income tax collections in 1980 reflected business incomeof 1979 and advance payments on 1980 income.

2/ Budgeted levels reflect the 1980 initial budget plus wage increasesgranted during 1980.

- 21 -

Table 6: CENTRAL GOVERNMENT EXPENDITURES,/- 1979-81

(in thousand lempiras)

1981 (initial budget) /i2 1981 (after April1979 1980 Financing reform)

Total DomestIc External Total

I. Current Expenditures 549 726 822 757 65 815

1. Consumption Expenditures 425 459 499 491 6 519Wages 186 171 224 224 0.5 229Goods and Services 196 221 186 181 5 215Interest on Debt 42 59 89 89 - 74

2. Transfers 77 92 61 61 0.3 66

3. Development Expenditures 47 175/. 227- 168 59 183/Wages 18 84 T51 1f01 - 93Goods and Services 25 79 113 60 53 79Equipment 1 5 4 4 - 4Construction 3 8 9 3 6 7

i. Development Expenditures Transfer - - 35 35 - 47

II. Capital Expenditures 232 295 405 151 254 348

1. Real Investment 133 163 198 72 126 188Wages 4 5 6 6 - 5Goods and Services 2 2 2 2 - 1Equipment 13 14 10 3 7 8Construction and Other Works 114 142 180 61 119 141

2. Indirect Investment 85 124 207 79 128 94Of which: public sector (85) (124) (207) (79) (128)

3. Financial Investment 14 9 _ - - 66

III.Dbbt Amortization 88 108 124 124 - 110External 22 22 26 26 -

Domestic 66 86 98 98 - 84

TOTAL BUDGET 869 1,129 1,350 1,031 319 1,284

SourcesExternal 123 161 319 - 319 304Domestic 746 967 1,031 1,031 - 880

/1 As defined by the Ministry of Finance. It has differences with Central Bank figures on other tables.

/2 Estimates based on approved budget.

/3 Development expenditures increased significantly beginning in 1980 when about a fourth of the education budget andover 90 percent of the health budget, traditionally current expenditures, were classified as development expenditures.As a result, budgeted development expenditures almost quadrupled while current expenditures increased little.

Source: Mission estimates and Ministry of Finance.

- 22 -

cost impact of education, health, housing and other social projects and thetrade-offs involved (increased tax revenues, budget cuts in other areas, lackof counterpart funds for investment). Similarly, these projects should becarefully evaluated as to the availability of professional and para-professionalpersonnel and the strength of their future negotiating position for higherwages to avoid unforeseen future wage demands.

Table 7: CENTRAL GOVERNMENT CURRENT EXPENDITURE GROWTH, 1981-85

(in million current lempiras)

1981 1982 1983 1984 1985

A. Current Expend. Growth: 10 percent

I. Current Revenues 870 1,020 1,161 1,335 1,509II. Current Expenditures 840 924 1,016 1,118 1,230III. Current Savings 30 96 145 217 279

B. Current Expend. Growth: 14 percent

I. Current Revenues 870 1,020 1,161 1,335 1,509II. Current Expenditures 840 958 1,092 1,245 1,419

III. Current Savings 30 62 69 90 90

C. Current Expend. Growth: 20 percent

I. Current Revenues 870 1,020 1,161 1,335 1,509II. Current Expenditures 840 1,008 1,209 1,451 1,741

III. Current Savings 30 12 -48 -116 -232

D. Current Expend. Growth: 25 percent

I. Current Revenues 870 1,020 1,161 1,335 1,509II. Current Expenditures 840 1,050 1,313 1,641 2,051III. Current Savings 30 -30 -152 -306 -542

68. The budgetary process in Honduras has deteriorated in the lastfew years. First, there has been substantial overspending for current anddevelopment expenditures (see Table 8), which breaks the budgetary discipline;second, additional (unbudgeted) expenditures have not been matched by newsources of revenues; third, the recurrent expenditure needs of new programsand projects have not been carefully analyzed before carrying them out;fourth, loose controls over the public agencies dependent on Central Governmenttransfers to finance their expenditures have resulted in significant demandsfor additional transfers.

- 23 -

Table 8: CURRENT AND DEVELOPMENT EXPENDITURES, BUDGETED AND ACTUAL

(in million lempiras)

1977 1978 1979 1980

Budgeted 370 455 542 597Actual 446 507 582 742

Actual/Budgeted (X) 121 111 107 124

Source: Ministry of Finance and Central Bank.

69. Besides following its own budget, the Central Government needs tostrengthen its budgetary control over autonomous institutions, particularlythose that depend on its transfers, to ensure that they operate in accordancewith Government guidelines and follow hiring and salary policies compatiblewith those of the Central Government.l/ In particular, agrarian reform insti-tute expenditures must be carefully controlled. Similarly, the universityneeds to revise its tuition policies -- charging more to the affluent students --

to increase its own revenues and reduce its financial dependence on theCentral Government.

70. In this connection, the Government recently has taken measures tostrengthen its control over autonomous and decentralized institutions. The1981 budget created a superintendence to supervise autonomous and decentralizedinstitutions; resolution No. 342 of May 1981 restricted some categories ofexpenditures of the decentralized institutions and ordered the superintendenceto control their compliance. Further steps are being considered to strengthenthe superintendence to exercise additional control over their expenditures.

71. Public enterprises also need to increase their savings to be ableto finance soundly their investment programs rather than depend on CentralGovernment transfers. Timely pricing and tariff actions on the base ofrevalued assets are now needed. The Port Authority (ENP) failed to revalueits assets in 1980 and did not increase its tariffs accordingly, with adverseresults on its finances and liquidity, including difficulties in servicing itsexternal debts. It revised recently its tariffs effective June 1. This isexpected to improve its finances but strict control should be applied toits expenditures to avoid a recurrence of financial difficulties. SANAA'slimited service levels now benefit mostly middle-income and affluent families

1/ The agencies' salaries for senior executives increased inordinatelyrecently; far above the level paid by Government.

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so that Government subsidies to SANAA are regressive. Unless water chargesmake a greater contribution to the expansion of water and sewerage services,it will be difficult to continue expanding coverage levels. The Governmentfinancial program considers a revision of water rates, which will improveSANAA's finances and reduce the need for Central Government transfers.COHBANA needs to reduce its administrative costs or raise its revenues to endits losses; otherwise, this agency would be in serious trouble in a shortperiod of time. Financial difficulties of other public agencies have beennoted earlier. Table 9 shows selected financial indicators of some publicentities.

72. Public enterprises and autonomous agencies should also evaluatecarefully the profitability, the resource base, the transport facilities,and other necessary elements of new investments before they undertake themto avoid situations like those confronted by COHDEFOR with the FIAFSA sawmill,which does not have an adequate lumber supply in the area where it was built;by the port authority with the Cortes free zone, which is now a major losingoperation; by COHBANA with the Isletas losing banana operations; and by INAwith some new production projects. Otherwise, new burdens would be placedon their limited financial capacity.

73. Although not included in the non-financial public sector, CONADI'sfinancing policies also deserve close scrutiny. It has accumulated largeliabilities. In 1979, it had accumulated L/139 million in debts, mostlywith foreign banks; it had also contingent liabilities or banking guaranteesfor about L/213 million, of which L/175 million are related to corporationswhere CONADI had participations. About L/130 million of the guarantees andL/30 million of the accumulated debt were the result of 1979 operations.These practices continued in 1980. As a result, CONADI in 1981 faces aserious cash flow situation. Immediate remedial action is needed togetherwith improved and stricter investment criteria. CONADI has financed equityparticipation in investment projects, some with low or negative profitability,as well as has made loans with longer maturities than those of CONADI'sborrowings. New indebtedness or guarantees of CONADI should be strictlycontrolled or stopped to avoid additional difficulties in the future andsteps taken to remedy the present situation.

74. Similarly, the agricultural development bank 1/ has financialdifficulties. At the end of 1979, 32 percent of its portfolio was overdueand another 13 percent had been extended or refinanced. An analysis of theoverdue loans in 1977 showed that only 23 percent of them were owed by smallfarmers (loans up to L/2,000) while more than 35 percent were owed by medium-sized borrowers (L/5000 to 50,000), and 28 percent by 130 borrowers (L/50,000or more). Limited efforts have been made to collect,and the agricultural bankhas received credit from the Central Bank to continue operations. In October1980, BANADESA owed the Central Bank L/61 million. However, better collectionpractices are needed to ensure a more steady supply of agricultural credit,particularly to the small farmer.

1/ BANADESA since March 1980; BANAFOM earlier.

- 25 -

Table 9: SELECTED FINANCIAL INDICATORS OF SOME PUBLIC ENTERPRISESAND AUTONOMOUS AGENCIES, 1979-80

in thousands lempiras

1978 1979 1980

SANAANet Operating Revenue - 869 10 -2,380Net Income 401 -375 -2,882Net Income plus Depreciation 2,485 2,104 -482Overall Deficit (-) - -6,432 -5,604 10,611Overall Deficit (after Gov't transfers) 544 2,063 1,165

COHDEFORNet Operating Revenue 16,331 19,953 10,629Net Income 15,325 19,308 11,174Net Income plus Depreciation 16,754 20,897 12,774Overall Deficit (-) 10,141 19,254 4,135Overall Deficit (after transfers to Gov't)(-) 5,141 12,710 -5,870

COHBANANet Operating Revenue 1,109 -98 4,441Net Income -1,186 -2,511 -1,819Net Income plus Depreciation -1,036 -2,189 -1,419Overall Deficit (-) -1,308 -3,292 -3,086

HONDUTEL

Net Operating Revenue 11,085 8,919 17,701wIet Incoime q,996 6,782 14,37uNet Income plus Depreciation 10,665 8,874 14,570Overall Deficit (-) -22,204 -9,584 -1,477

ENPNet Operating Revenue 7,057 8,554 8,511Net Income 5,425 2,553 -1,838'"et Tncore plus nepreciation 7,0Q5 6,059 h,172

ENEENet Operating Revenue 26,085 35,445 43,691Net Income 13,307 20,923 27,031Net Income plus Depreciation 22,577 33,148 43,031

INANet Operating Revenue (before Gov't transf.) -17,263 -17,925 -22,962Net Income (before Gov't transf.) -17,263 -18,038 -22,962Net Income plus Depreciation (before Gov't transf.) -16,805 -17,430 -22,262Overall Deficit (before Gov't transf.) (-) -37,297 -32,103 -36,975Overall Deficit (after Gov't transf.) (-) 556 7,069 4,652

UNAHNet Operating Revenue (before Gov't transf.) -14,363 -18,938 -24,364Net Income (before Gov't transf.) -14,510 -18,805 -24,486Net Income plus Depreciation (before Gov't transf.) -14,510 -18,805 -24,486Overall Deficit (before Gov't transf.)(-) -16,314 -22,245 -33,501Overall Deficit (after Gov't transf.) (-) 3,536 739 - 4,759

1/ Net income equals net operating revenue minus interest paid.

2/ Overall deficit equals net income plus depreciation plus capital revenues minus capital expenditures

Source: Central Bank, ENP, ENEE.

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75. In summary, the consolidated financial position of the non-financialpublic sector has improved significantly with the new taxes. Only if currentexpenditure growth is controlled and public enterprises and autonomous agenciesincrease tariffs and prices to increase their savings capacity, will continuedhigh overall public investment levels be feasible, as shown in Table 10.

Table 10: CONSOLIDATED FINANCIAL POSITION OF THENON-FINANCIAL PUBLIC SECTOR

(in million lempiras)

Actual Estimate Projections1979 1980 1981 1982 1983 1984 1985

Central Government Savings 58 17 30 62 69 90 90Local Governments 6 -5 3 6 7 10 10Automous Agencies Savings 57 60 72 79 86 95 105Public Enterprises Savings 86 75 85 110 135 150 170

Public Sector Savings 207 147 190 257 297 345 375Fixed Public Investment 366 449 465 545 655 748 843Other Capital Expenditures 34 68 60 60 70 70 70Net Loans 39 72 50 30 35 40 45Overall Deficit (-) -232 -442 -385 -378 -463 -513 -583Financing 232 442 385 378 463 513 583External (net) 235 283 340 345 427 496 565Internal (net) -3 159 45 33 36 17 18

Source: Mission estimates.

E. Balance of Payments and Creditworthiness

76. During 1981-85, assuming that timely action is taken to strengthenpublic finances, the following main balance of payments developments can beexpected: a deceleration of export growth at constant prices from 12 percentduring 1976-80 to 9 percent during 1980-85, as noted earlier; higher importlevels partly fueled by rising public investment and by higher import priceswhich will result in increasing and large current account deficits of thebalance of payments; substantial inflows of foreign official capital insupport of the public investment program; and a deceleration of capitalinflows to the private sector, which, if not reversed, would be reflectedin a decline of foreign exchange reserves.

77. Honduras' public external debt repayable in foreign currency amountedto US$746 million at the end of 1979; US$1,186 million if undisbursed commit-ments are included. In the past, Honduras has managed to keep its externaldebt service ratio low because foreign loans were almost all on concessionaryterms. The debt service ratio in 1980 was about 11 percent. As the import

- 27 -

needs of the economy grow, larger capital inflows will be required. Thebulk of the external financing needed is expected to be met through publicborrowing. Honduras will require an estimated net capital inflow of aboutUS$1.5 billion during 1981-85, of which about US$1 billion will be disbursedfrom commitments made through the end of 1980. It is important that thecountry continue to borrow on reasonable soft average terms in view of itspoverty, the fact that it will continue to depend on exports of a few commodi-ties with sharp price fluctuations, and because, historically, natural disastershave sharply reduced the volume of exports every few years. Even if Hondurasis successful in obtaining about two-thirds of the financing it needs for itsinvestment program on terms similar to these offered by the internationallending agencies, the debt service ratio is likely to rise to about 14 percentby 1985. Continued maintenance of Honduras' creditworthiness will depend onthe efficiency with which it chooses and implements its major public investmentprojects; on careful, continued demand management including cautious use ofdomestic credit, and on its export promotion policies.

- 28 -ANNEX APage 1

SECTORAL INVESTMENT PROGRAMS

1. This annex describes the Government's 1981-85 public investmentprogram. In general terms, this program is fairly well defined for the period1981-83; however, the lack of specific projects for the later years in severalsectors indicates the need for greater attention to pre-investment activities.

A. Power

2. Honduras' most abundant known energy resource is hydropower, whoseuse has grown rapidly in the 1970's and will expand further with the recentlycompleted extension to the Rio Lindo plant and the Nispero and El Cajonprojects currently under construction. However, Honduras still dependsheavily on petroleum imports, and in view of increasing prices for theseimports and domestic demand for energy, the Government is trying to diversifyand increase the supply of domestically produced energy. Apart from hydropower,known domestic resources are wood, charcoal, bagasse and coal. Efforts areunderway to explore for coal in central and western Honduras and petroleumand gas in the Caribbean offshore area, with the Government undertaking minorinvestments to gather, synthesize and analyze existing seismic data to attractprivate investors to make the expensive, high risk exploratory drilling invest-ment. Furthermore, areas with geothermal potential are being evaluated andpelletyzing wastewood from the country's sawmills is under consideration tomake steam power plants economically feasible in rural areas, thereby providingearlier access to electricity than would otherwise be feasible. Finally, theGovernment is also investigating gasohol possibilities and, to a smaller extent,wind power and biogas prospects.

3. There is no central entity in Honduras to plan energy policy, andadequate statistics on energy use by sector are not available. Also, Govern-ment staff responsible for the sector need training. To handle these problems,the Government established in 1979 an Advisory Croup which has proposed twoalternative approaches to sector organization--creation of a National EnergyCommission or a Ministry of Energy--which are currently under review, plusfurther institutional measures to strengthen the sector. The Government willalso prepare an energy balance by sector to the year 2000; coordinate andcompare the costs and benefits of the various studies of energy alternativesbeing undertaken; do an evaluation of its existing petroleum pricing andtaxation policy in order to establish an adequate pricing system; and providetraining for sector officials.

4. Based on recent market studies, generation requirements in theNational Electrical Energy Company's (ENEE's) system, which serves allHonduras' major cities and towns, are expected to grow at 11.7 percent perannum during 1979-1988. Demand will thus grow from 137 MW in 1979 to 371 MWin 1988. ENEE will meet the increased demand through 1982 with the additionof a 30 MW diesel plant at Puerto Cortes and the 22.5 MW Nispero hydro plantby 1981, which will increase installed generating capacity to about 252.5 MW.Since the El Cajon plant will not be ready until 1985, ENEE will add necessarycomplementary generating capacity to meet demand during 1982-85; additional

- 29 -ANNEX APage 2

capacity needs would be defined when El Cajon's construction is more advancedand its scheduled operation more definite. From 1986 until about 1989, ElCajon's output (292 MW) would provide ample electricity for Honduras. For the1990's, sites aggregating about 650 GWh annual production have been studied.ENEE will update the existing inventory and prepare a prefeasibility study ofthe most promising site for development after El Cajon, currently assumed tobe the Piedras Amarillas site on the Patuca River. ENEE is also studyingpossible small hydro projects to expand the options available for supply toisolated areas.

5. Total power investments during 1981-85 are expected to reach L 1,150million (in current prices) or over 35 percent of total fixed public invest-ment. Because of El Cajon, power investments during this period represent agreater proportion of total investment than during the previous five years(21 percent). About three-quarters of this investment will be for El Cajon,whose total expected cost (excluding interest during construction and otherfinancial charges) is estimated at L 986 million.

6. Access to electricity is currently available to only 22 percent ofthe total population, mainly in urban centers in the more densely populatedparts of the country. ENEE has been involved in rural electrification since1971 when six priority markets near the interconnected system were selectedfor development. ENEE has built about 270 Km of 35 kV rural lines and relateddistribution facilities in these areas, and is now undertaking electrificationof the Aguan Valley and western rural areas. Including these efforts, ENEEexpects to make electricit- available to about 37 p.cL r of tile totai p_puiation by 1986. However, the dispersion and low level of production and incomeof rural population centers will continue to handicap their access to elec-tricity services.

7. ENEE sets its own tariffs. Since 1974, several tariff increaseshave been undertaken together with increases through a fuel adjustment clause.These tariff actions and an increasing use of hydro resources have helped ENEEoffset petroleum price increases and achieve sound financial performance.Tariffs for commercial and large industrial consumers, however, are low, andon the basis of a 1978 study based on long-term marginal cost criteria, ENEEhas prepared a program for tariff structure revision and ordered requiredmetering equipment.

B. Transport

8. During 1972-80, transport investments, mostly for highways and ports,represented 38 percent of total public fixed investment, reflecting the highpriority given to establishing a primary transportation network to supporteconomic growth. Highway and airport development are the responsibility ofthe Ministry of Communications, Public Works and Transport (SECOPT), portdevelopment of the National Port Company (ENP) and rail development of theNational Railway of Honduras (FNH).

- 30 -ANNEX APage 3

Roads

9. Distances in Honduras are relatively short and the terrain is rugged,thus accounting for the dominance of highways in transport investments. Asa result, the total length of the road network grew from 5,746 Kms (1,228paved) in 1972 to 8,543 Kms (1,609 paved) in 1979. There are road connectionsamong the main population centers and with the neighboring countries, althoughthe sparsely populated eastern area has few roads. The backbone of theexisting network is the north-south road which, from San Lorenzo on thePacific Ocean, passes through Tegucigalpa and San Pedro Sula, and reachesPuerto Cortes on the Caribbean. Several road projects are underway to crossthe mountains and further connect the southern and northern parts of thecountry. All major productive areas will then be linked by an all weatherroad system. A 1977 Highway Master Plan concluded that with the primarysystem practically completed, future emphasis should be on small-scaleimprovements, with special attention to maintenance and construction of newlow standard roads to serve agricultural areas. The Government's investmentprogram for 1981-85 reflects these recommendations, with a considerabledecline in new construction. Apart from maintenance and rural roads(discussed below), investments over this period will focus on completion ofthe Tegucigalpa-Jicaro Galan road to the south, the La Entrada-Copan Ruinasaccess road in the west and the Talanga-Catacamas road to the east; the AguanValley roads; and the Olancho forest area roads to link this zone with theBonito Oriental and La Union sawmills and Puerto Castilla in the north. Themassive investments, both infrastructure and productive, which are underwayand planned in this latter area will undoubtedly give rise to considerableimmigration of population and it seems that insufficient attention has beengiven to the complementary social investments which will be required. Thisshould be taken into account in the development of future programs and consider-ation given to the development of an integrated project for the area.

10. Highway maintenance under SECOPT's General Directorate of Maintenance(DGM) has so far not been adequate (only 50 percent of the highway networkwas in good condition in 1980). Since 1978, DGM has employed consultants toimprove maintenance planning and management, and will continue this technicalassistance, as well as providing training to its staff. The main problem isthe shortage of maintenance equipment, so that significant investment during1981-85 is being allocated to renewal and expansion of the maintenance vehiclefleet. It is expected that the portion of the road network in good conditionwould grow to 64 percent by 1984.

11. Continued development of secondary and feeder roads in rural areas isnecessary to support increased production and improve living conditions. TheGovernment is therefore embarking on a large feeder roads program (about 500 Kmper year) over the next few years to improve rural access in support ofongoing efforts in agricultural and rural development. This program willfocus on a number of valleys of high agricultural potential, such as Guayape,Yoro, La Masica, Comayagua and Jamastran, and on the western part of thecountry.

- 31 - ANNEX APage 4

12. The highway planning process has improved over the years. SECOPTstaff has a good understanding of how to conduct economic analysis, and theroad investment program (even rural roads) is increasingly well justified onthe basis of engineering and economic feasibility studies. SECOPT plans toimprove its planning capability by instituting systematic collection oftraffic data and updating its Master Plan. Careful analysis and selectionof road projects to be undertaken during the 1981-85 investment period isvery important in view of limited Government resources.

Ports

13. Ports receive a significant share of transport investment. Hondurashas four ports on the Atlantic coast--Puerto Cortes, Tela, La Ceiba andPuerto Castilla. On the Pacific side, there is a deepwater anchorage atAmapala on El Tigre Island and a mainland port at San Lorenzo. ENP plansand operates all ports in the country.

14. Puerto Cortes is the principal general cargo port, accounting formore than 70 percent of all seaborne traffic. Considerable investment inthe past has provided it with five berths, and it has quickly adapted to newtypes of traffic such as roll-on/roll-off, containers and lighter-aboardship.Since there is now no specialized terminal for solid bulk cargo and thefacilities for liquid bulk cargo are deteriorating, ENP has programmed someL 27 million investment for this purpose during 1981-85 and a preliminaryfeasibility study is underway. ENP also plans a sixth berth for bananas andten new buildings for its Free Zone at Puerto Cortes, but these are not nowincluded in its investment program. For the reasons noted in para. 17 below,all of these investments should be very carefully evaluated.

15. Other major port investment during the period will be at PuertoCastilla, including construction of a wharf, transit and lumber sheds, awarehouse and storage tanks for palm oil and petroleum, as well as provisionof general cargo, lumber handling and chip loading equipment. These facilitieswill serve the important developments undertaken by the Government in theAguan Valley and the Olancho forest area. Most immediately, the facilitiesare needed to export lumber and chips to be produced by the Bonito Orientalsawmill, scheduled to operate in March 1982. Although construction atPuerto Castilla began in 1978, the contractor stopped work in March 1980.This has seriously delayed the works and increased costs. ENP is currentlyseeking a new contractor and estimates that it will invest L 70 million atPuerto Castilla between 1981-85. It also has additional plans beyond thisinvestment period for developing a petroleum transfer terminal, a fishingport, aluminum smelting facilities and other industry.

16. Finally, ENP is considering investing in a freight terminal project,with centers in San Pedro Sula and Tegucigalpa, aimed at obtaining betteraverage load and equipment utilization for shipments with origin/destination atPuerto Cortes and at developing Honduran participation in the roll-on/roll-offCaribbean market. However, given ENP's limited financial resources and therevisions and political decisions needed to tie this project into a CentralAmerican system, the project would not appear advisable at this time.

- 32 -ANNEX APage 5

17. ENP generates some of its financial requirements through a systemof port charges, which are expected to allow ENP to earn an 8 percent rate ofreturn on revalued assets. However, ENP's financial position deterioratedsignificantly in 1980 and early 1981 because its current expenditures forwages expanded considerably while its tariffs were not increased since 1977.In addition, the large investment program carried out in recent years withborrowed funds means serious financial strains originating from ENP's debtservice. Moreover, some of these investments have not been profitable, suchas the free zone at Puerto Cortes. ENP has recently increased tariffs inorder to improve its debt service capability; further action may be needed inthe future to maintain ENP's financial viability and allow it to contributeto its investment program as well as service its relatively large debt service.Because of ENP's tight financial situation, it should also carefully reviewthe feasibility and timing of its new investments. In the past, some of itsinvestments have been over-programmed; for example, ex-post analysis showedthat investments at San Lorenzo could have been delayed for about 10 years,and traffic at Puerto Castilla may also prove lower than expected givenreduced estimates of the Olancho forest resources and consequent smallersawmill and pulp and paper investments. This is an additional reason forgreater attention to future investments.

Airports

18. Airport investments will be small until 1984 when construction maystart for a new Tegucigalpa airport. The San Pedro Sula airport has a goodrunway of 2,800 meters, but needs minor investments in a new terminal buildingwhich has already been contracted. Extensions are also planned for the Roatanairfield to support tourism, and work is underway at the Comayagua airport.The Toncontin airport at Tegucigalpa is not satisfactory, with a 1,930 meterrunway barely adequate for modern jets, and also with very difficult approaches.Nevertheless, some consideration is being given to a Toncontin expansion.However, studies and final designs are also underway for a new airport nearTalanga, estimated to cost about L 145 million. This investment represents amajor financial burden in view of the Government's fiscal constraints andshould not be undertaken at least before 1984.

Railroads

19. The rail system operated by FNH consists of three narrow gaugerailways in the north, with 992 Km serving primarily the banana plantationsin the Sula Valley and the northern coastal strip. It also transports sawntimber and agricultural imports and exports. With simple operation andcaptive banana traffic, basically better suited for railways than for highways,the railways should be profitable while keeping tariffs at a reasonable level.Although studies are underway for rail extensions to the El Cajon dam andthe Aguan Valley, as well as for urban transport in Tegucigalpa, the priorityof these investments seems low given the heavy investments in the road network.

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C. Telecommunications

20. The Honduran Telecommunications Company (HONDUTEL) has followedan aggressive policy since its creation in 1976. However, although investmentplans for the 1981-83 period seem well supported, little information isavailable for 1984-85. In addition, financing for several of its plannedprojects is not yet firm. HONDUTEL recently raised its tariff rates byan average 25 percent, so that its finances should improve significantlyin the near future.

21. Central American telecommunications traffic could grow by about20 percent a year and traffic to the rest of the world by about 30 percent.This means that the current international exchange facilities would handleservice only through 1983; international transmission facilities could alsobe saturated. HONDUTEL therefore plans to start transmission services throughGuatemala and also to construct an earth satellite station in Honduras toimprove significantly international telecommunications facilities, and increasetraffic and benefits. In addition, HONDUTEL programs a new internationalexchange in Tegucigalpa, adding 810 new international circuits to its current980, a digital telex center and a transmission tower.

22. With regard to domestic service, HONDUTEL will undertake a majorprogram to provide telephone service to rural areas such as Puerto Castilla,the Aguan Valley and Bonito Oriental. HONDUTEL's other major projects willbe establishing a microwave network for the northern region, with centersin Tegucigalpa and San Pedro Sula, expanding the national digital trans-mission system beginning in the north and providing a network for ruraltelecommunications, and expanding the exchanges for a number of cities. Apossible project for the later years is improvement of San Pedro Sula'sinternal system.

D. Housing, Urban and Community Development

23. The urban population of Honduras has grown from 329,000 (23 percentof the population) in 1961 to 1,323,000 (36 percent) in 1980, and is projectedto grow even faster for the remainder of the century. While total populationgrowth is slightly over 3 percent and urban population is expanding at around5 percent, the major urban centers are growing even faster. In addition tosizeable migration from rural areas, there has also been substantial movementbetween urban areas, principally to Tegucigalpa (445,000 people in 1980) andSan Pedro Sula (276,000). The migrants, mostly poor, are aggravating alreadydifficult conditions in these cities. While Tegucigalpa and San Pedro Sulaare growing at annual rates of 6.4 and 8.0 percent, respectively, their marginalpopulations are growing twice as fast. Excluded from even the lowest pricedunits produced by the public sector, an estimated seven to eight thousandlow-income households annually solve their housing needs through their ownefforts in the informal sector. This has led to large marginal concentrationswhich are characterized by lack of legal title and basic sanitation.

- 34 -ANNEX APage 7

24. The private Federation of Housing Cooperatives (FEHCOVIL), which

organizes housing cooperatives and develops projects for middle income families,

has recently moved into low income housing. The National Housing Financiera

(FINAVI) has also received a mandate from the Government to begin developing

low income programs. In addition, a private housing foundation (FUNVAMINH)

has recently been formed to provide housing to low income groups. In the

public sector, the main institution is the National Housing Institute (INVA).

INVA was set up as an autonomous public agency to produce and finance housing

projects. Its record has not been satisfactory. It has produced relatively

few houses and has serious financial problems requiring Government subsidies.

Managerial inadequacies, organizational problems and elaborate housing projects

benefitting priviledged groups which often do not honor their financial

obligations have contributed to INVA's problems. The municipal governments

of Tegucigalpa and San Pedro Sula have also been active in housing.

25. In the major cities, the public sector is seeking new initiatives to

resolve the growing housing and basic services problems of the urban poor, and

make maximum use of limited financial and technical resources in the housingsector. Given these limitations, the Government's programs should focus on

the poor, lowering standards, reducing subsidies and recovering costs, thus

ensuring a wider and more cost effective distribution of benefits frompublic expenditure. INVA should move from producing heavily subsidized and

relatively expensive housing for middle income groups to serviced lots which

are in accordance with overall city planning and which leave an important

role in housing construction to the beneficiaries themselves.

26. For 1981-83, INVA has a program which is unlikely to be within itsimplementation capacity, and may also include some housing for middle income

groups. However, a 3,000-unit sites-and-services project at Hato de Enmedio

has been identified. In addition, the municipalities of Tegucigalpa and

San Pedro Sula plan considerable investment in urban upgrading, and Tegucigalpa

may undertake a 2,500 unit sites-and-services project. In view of their

inexperience in dealing with low-income housing as well as financial limita-

tions, it is unlikely that investments will meet projected levels. As with

INVA, it is important to assure that these efforts make maximum use of limited

resources, reach the target groups and fully recover costs.

27. Considerable investment in urban infrastructure is also included

in the 1981-83 program, but is so far unfinanced. Honduras' municipalities,

most notably Tegucigalpa and San Pedro Sula, have had serious financial

difficulties and a number of ongoing infrastructure projects are stopped due

to lack of funds. As a result, considerable delays are foreseen for urban

investments.

E. Water Supply and Sewerage

28. Overall, only 52 percent of Honduras' population had access to safe

water in 1978. Urban areas were relatively better off with 9 percent lacking a

piped supply (52 percent had house connections and 39 percent other easy access),

compared to 70 percent in rural areas. The quality of service, with almost no

exceptions, is deficient. Waters are turbid and bacteriologically contaminated,

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ANNEX APage 8

and intermittent service or rationing are commonplace. This is due to theabsence of treatment (only in the largest cities is chlorination practiced)and inadequate operations and maintenance, partially explained by the lowtraining level of operators. Sewerage service levels are even lower than forwater. In 1978, only 15 percent of the total population, all in urban areas,had water borne sewerage; another 14 percent had either latrines or septictanks.

29. The National Water and Sewerage Service (SANAA) is the Governmentagency for water supply in communities above 200 inhabitants, for sanitarysewerage in towns with more than 20,000 people, and for stormwater drainage inthe largest cities. Its function includes planning, construction, operationand maintenance, and it is currently responsible for 21 urban and 81 rural watersystems. In practice, it only handles the sewerage system in Tegucigalpa.Municipalities also exercise authority in water supply, sewerage and drainage,sometimes with SANAA technical assistance and financial support from theMunicipal Development Bank, and currently handle some 457 water and 33 seweragesystems. In San Pedro Sula, this role is played by its Municipal Water Division(DIMA). The Ministry of Health has responsibility for supplying water toall communities below 200 inhabitants and building latrines in rural communitieswith more than 50 inhabitants and in marginal urban areas. it also sets andsupervises water quality norms. The Ministry has experienced difficulties infulfilling its role, but is now receiving foreign financial and managementassistance to increase its capacity to install wells and latrines. Overallcoordination in the water supply and sewerage sector is covered by a unit inCONSUPLANE which works with the planning offices of SANAA and the Ministry ofHealth. However, program responsibility between these two agencies, althoughdefined, is not always followed, and improved planning and management areneeded. A better trained supervision and management staff is also a must toinsure system durability. Long term management assistance will be provided toboth SANAA and the Ministry under a USAID project.

30. The Government has set both short-/medium-term and long-term targetsfor the sector. By 1983, it aims to increase the proportion of populationwith access to public water from 52 to 75 percent, largely by freezing theshare with house connections while expanding the segment with easy access,and to raise the proportion with access to some form of sanitation from29 to 46 percent. The longer-term goals correspond closely to those of theInternational Water Decade for 1990--complete coverage in urban areas, andwater and sewerage service to 90 and 75 percent, respectively, of the ruralpopulation.

31. Achieving these targets will necessitate investments significantlyabove past performance. Based on estimated average per capita investment costs,some US$ 257 million would be required between 1981-85 to meet the 1990 targets;about two-thirds of this would be for water supply and the rest for sewerage.Projected investment for which financing has been obtained comes nowhere nearthis level and its composition is biased in favor of rural sanitation andwater supply. A number of rural sanitation projects, executed by SANAA and

- 36 -ANNEX APage 9

the Ministry of Health, are underway or planned with USAID, IDB and otherfinancing sources. SANAA is undertaking water supply systems in El Progreso,Puerto Cortes and La Ceiba, as well as more minor works in other cities. InTegucigalpa, SANAA has prepared a Master Plan for Water Supply and Sewerage tomeet the city's needs through the year 2010. It plans major investments for adam on the Guacerique River, with interim well fields to be developed on theHondo River, and has already arranged for design studies. However, preliminaryestimates of the costs of these works are very high and most likely the costand size of the Tegucigalpa project will have to be reduced. In addition,SANAA's finances will be a serious bottleneck to any major expansion inTegucigalpa. In addition, DIMA has prepared the technical and financialanalysis of a project for water supply and sewerage in San Pedro Sula, closelytied to planned low-income housing programs in the city. If financing isforthcoming, there is potential for significant additional investment forwater supply in the coming years. Despite these prospects, there is verylittle project preparation or planned investment for sewerage in urban areas,and greater attention should be given to this area.

32. Tariff performance must be improved with a view to recuperatingcosts and generating revenues for the counterpart contribution to the sectorinvestment program. This is critical in view of limited Government financialresources, which could significantly cut back on new investments. Presenttariff levels do not allow for sufficient cash generation to provide fordebt servicing and investment expenditures. Without financial reform, SANAAwill have to rely on continuing Government funding, and DIMA will be unable togenerate sufficient internal resources to finance its expansions. It mustbe recognized that a failure to produce revenues will seriously limit futureprogress in this sector.

F. Health and Nutrition

33. In terms of health indicators, Honduras ranks near the bottom inCentral America. In 1980, 55 percent of Hondurans had no health services(beyond folk medicine), 28 percent had access to Ministry of Health profes-sionals, and the remaining 17 percent was covered by social security andprivate practitioners. In rural areas, knowledge of preventive measures isrudimentary due to lack of education and almost no contact with professionalhealth personnel. Primary causes of death are diseases of the digestive,respiratory and circulatory systems. Diarrheal disease is the single mostimportant cause of death, and Honduran mortality and morbidity rates forwater-related diseases are high in comparison to the other countries. Mal-nutrition is also serious, with protein, calorie and vitamin A deficiencies,anemia and goiter prevalent. (The analysis of Honduras' mortality and morbiditystatistics clearly indicates that lack of environmental sanitation is the mostserious health problem facing the country. The Government's programs in watersupply and sewerage are discussed in Section E above. This Section focuses onthe provision of other health services.)

34. Responsibility for health care lies mainly with the Ministry ofHealth, which delivers services through a six-tier system: the national levelwith three hospitals and central offices in Tegucigalpa; the regional levelwith eight sanitary offices and six hospitals; the area level with seven

- 37 -ANNEX APage 10

emergency hospitals; the sector level with 76 health centers staffed byphysicians; the subsector level with 379 rural health centers staffed byauxiliary nurses; and the community level represented by health promoters andlocal volunteers. The Ministry's program for expanding basic health serviceis centered around the rural centers which links the formal health system(hospitals and centers) with the informal system of community volunteers.These centers provide rural health care, health and basic sanitation education,vaccinations, family planning and mother and child care. The health promoteris key to initiating community participation in the delivery of health servicesand implementing water and sewerage programs.

35. Two other agencies--the Honduran Social Security Institute (IHSS)and the National Foundation for Infants (PANI)--play more minor roles in theprovision of health services. IHSS is essentially an insurance system providingrelatively high quality services to workers who can afford to make paymentsout of their salaries. The average unskilled worker's income is so low as topreclude participation in the system, which consequently covers only 5 to 7percent of the population. IHSS runs two hospitals, in Tegucigalpa and SanPedro Sula, as well as a number of peripheral clinics and medical serviceoffices. PANI is an autonomous institution for mothers and small childrensupported by the national lottery. Finally, in the area of nutrition, aNational Nutrition Planning and Evaluation System was created within CONSUPLANEto plan, execute and evaluate nutrition-related programs, in coordination withother ministry and agency programs: for example, water supply and environmentalsanitation with the Ministry of Health, and basic grains, soybean, sorghum,etc. production and consumption with the Ministry of Natural Resources.

36. The Government's plan for 1979-83 sets forth its intention toimprove health conditions, particularly in rural and marginal urban areas, byincreasing the health service coverage of these populations, especially formothers and children, and by concentrating on nutrition, environmental sanita-tion and communicable diseases. This is to be achieved through the village-based pyramidal system and community participation. The 1981-83 investmentprogram includes considerable expenditures to achieve these objectives.Projects for water and rural sanitation are discussed in Section E above.Significant programs, financed by IDB, USAID and other bilateral agencies,are also underway to expand health services. The IDB will finance additionalurban and rural health centers and community volunteers, with the number ofcenters expected to grow from 164 to 841 by 1983. USAID will finance improve-ments in health technologies (in areas such as malaria vector control, diarrhea,immunizations and excessive fertility), logistics and maintenance, planningand management, and human resources development and supervision. The latteris important to assure effective implementation of the Government's healthprograms. However, the USAID program is largely development expenditures, notfixed investment. Direct medical attention in hospitals is a second priorityin the Government's plan, and although a number of hospital projects are inthe 1981-83 program, they are less likely to materialize than locally-orientedprojects, largely due to lack of financing. In the area of nutrition, plannedinvestments are small, mainly because of poor project identification andpreparation.

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ANNEX APage 11

37. Although expenditures to improve health (including the USAIDdevelopment expenditures noted above) are expected to be large and activelysupported by external agencies, too little attention has been given to theirrecurrent expenditure implications--salaries for health personnel, purchaseof equipment and supplies, etc. This must be considered when formulatinghealth programs, especially in view of limited Government resources, in orderto assure continued sector progress and to avoid deterioration and incompleteuse of facilities.

G. Education

38. Honduras' formal education system consists of one to three years ofpre-primary education, six years of primary, six years of secondary (includinga common lower cycle and a diversified upper cycle) and three to six yearsof higher. The Ministry of Education administers most of the formal system upto university level; it is heavily centralized with poorly trained administra-tive personnel. The Ministry of Natural Resources handles training formiddle-level agricultural technicians, while higher-level agricultural andforestry personnel are trained at the private Pan American AgriculturalSchool and the National Forestry School. The National Training Instituteprovides apprentice and affiliated training for skilled and semi-skilledindustrial, agricultural and service workers. In addition, several Governmentand private agencies carry out relatively small non-formal training programs.

39. The last ten years have seen considerable expansion in Honduras'formal education system, with a doubling in overall matriculation. Of allstudents, 81.5 percent are primary, 15.5 percent secondary and 3 percenthigher. Due to the priority attention given to primary education in the past,92 percent of all primary school age children matriculate; however, only23 percent of first grade entrants complete the six-year cycle. To improvethe situation in rural areas, the Government has developed a nuclearizationsystem of school construction and organization. As regards secondary educa-tion, approximately 90 percent of primary school graduates go on to the commonlower middle cycle, 90 percent of these then advancing to the diversifiedupper middle cycle and 50 percent graduating. Finally, 70 percent of secondaryschool graduates proceed to university training. If past trends continue, thedecade from 1980 to 1990 will see a doubling and tripling in the number ofprimary and secondary graduates, respectively. This indicates the need togive greater attention to the higher levels of education and to developing andrationalizing education planning. More investment will be needed in secondaryeducation, an area in which the private sector participates and must play anincreasing role in view of limited Government resources. Also, universityexpansion might be deferred, since its prospective levels are incompatiblewith both public financial capacity and the employment prospects of itsgraduates.

40. Although important advances have been made during the last ten years,the quality of education services continues to be low with many unqualifiedand poorly trained teachers, limited supervision and insufficient textbooksat the primary and secondary levels, and poor admissions criteria, inadequatepreparation of students and poor student/teacher ratios at the university level.

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ANNEX APage 12

41. It is important for Honduran education to meet the needs of thecountry's labor market, and this has been a priority since 1974. Facilitiesfor agricultural, technical/industrial and commercial/secretarial educationappear to be sufficient now, but should be reviewed further in the light oflong-term needs. Primary and secondary school teacher education must beimproved and amplified to meet the increasing neer. for teachers which, begin-ning in 1983, will surpass annual production.

42. The 1981-83 investment program includes considerable investment forthe construction of rural primary schools under projects already financed bythe Bank and USAID. In fact, the Ministry of Education limited executioncapacity may slow its completion of these projects on schedule. The otherlarge area of investment is for university education, whose priority seemsless pressing, as noted above, as does increased investment in technicaleducation. There seems to be little projected investment, however, forsecondary education, or for such areas as educational administrative reformand extension and improvement of teacher education. This imbalance in theinvestment program should be reviewed.

43. In analyzing the Government's investment program, it is importantto consider the Government's ability to finance the growing recurrent expendi-tures it will create. In 1981, current expenditures in education are aboutone-quarter of the Government's current budget; UNESCO estimates that thisfigure could rise to 33 and 38 percent in 1985 and 1990, respectively, inorder to accommodate the fast growing school population. An inability tomaintain schools, pay teachers, buy supplies, etc. could negate some of theadvances expected from increased physical facilities. In Honduras, consider-able success has been achieved in the area of educational credit, which is agood instrument to reduce public education expenditures, allow poor studentsto get an education and stimulate personal responsibility for education, andwhose expansion should be considered at a time of limited Government resources.

H. Agriculture

44. Honduras is divided into five geographical regions. In central andwestern Honduras, the terrain is mountainous and used mainly for timber, cattleand coffee. The northeastern coastal plain, with a humid tropical climate,poor soils and low population density, is used mostly for extensive cattleraising. The southern coastal plain has a long dry season and limited waterresources. The central valleys are relatively fertile and have moderatesupplies of water. The northwestern valleys and coastal plain have the mostproductive soils and important banana plantaions; the major limitations toproduction are flooding and inadequate soil drainage. Apart from the valleys,soils are generally shallow and have serious deficiencies of nitrogen andphosphorous.

45. Although Honduras' natural resources are limited and difficultto exploit, the technical possibilities for raising agricultural output aresubstantial. Available technology is not widely disseminated and croppingpractices are often traditional with little use of modern inputs, especiallyamong subsistence farmers who also lack adequate market incentives and

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ANNEX APage 13

facilities. Export-oriented industrial crops such as bananas, tobacco, sugarcane, citrus, cotton and coffee employ comparatively high technology productionsystems and have better facilities for production and marketing. The develop-ment of adequate reliable water sources is also important to increase agri-cultural production. Although irrigation is used for bananas, sugar cane andto a lesser degree tobacco, cotton and vegetables, its utilization is farbelow its potential. Studies for future irrigation projects are underway fora number of valleys, for example Guayape and Aguan, but before specificproject implementation is undertaken, there is a need for better coordinationof Government agencies and a comprehensive water law. Another importantmeans of raising agricultural output would be through shifting land from lowerto higher value farm enterprises such as from grassland to sugar cane andrice. It is estimated that only 28 percent of land suitable for annual cropsis now used for these purposes; the comparable figure for perennial crops is18 percent.

46. The large numbers of landless rural families living in extremepoverty gave rise to agrarian unrest and invasion of private land during theearly 1970's, creating concern among private farmers and disrupting theproduction process. The Government, therefore, gave land reform and redis-tribution considerable attention.

47. Estimates suggest that nearly 80 percent of small-scale farmersdepend on private money lenders who charge usurious rates of interest.However, the National Agricultural Development Bank (BANADESA) provides amajor portion of Honduras' institutional financing for agriculture and has thelargest participation in small-scale farmer credit, both within and outsidethe land reform sector. The Government has established a fund in the CentralBank to channel credit to Honduras' farmers through BANADESA and the commercialbanking system.

48. Duplication of effort by different agencies, excessive centralizationand shortage of trained professionals are also constraints in the sector.However, better administration techniques are being considered and projectsare underway to improve sector organization and provide training facilities.The Ministry of Natural Resources, BANADESA and the National Agrarian Institute(INA) have primary responsibility in the sector. The Ministry handles animalhealth, plant quarantine, research, extension, some input services and projectpreparation. Although the Ministry has been reorganized, it is still weak inextension, research and seed production, but is receiving foreign assistancein these areas. INA is responsible for implementing the land reform program,settling land disputes, granting titles and providing guidance to agrarianreform farmers until they achieve full cooperative status and gain title totheir land. It is also receiving technical assistance. In addition, a numberof specialized agencies deal with specific areas. The Honduran BananaCorporation (COHBANA) promotes the development of bananas and increasingnational participation in their production, marketing and transport. Itsproduction expansion program is being coordinated with the agrarian reformprogram. The Honduran Forestry Development Corporation (COHDEFOR) is mandatedto generate funds for the nation through sound economic forest development and

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ANNEX APage 14

is also responsible for organizing a Social Forestry System to offer the ruralpoor employment alternatives, for example through cooperatives engaged inresin refining. The Honduran Coffee Institute (IHCAFE) supports coffee farmersand more recently has instituted a program of diversification. The HonduranMarketing Institute (IHMA) establishes support prices, storage facilities andmarketing arrangements for farmers.

49. In its five-year agricultural program, one of the Government's maingoals is to attain production levels of basic grains (corn and beans) thatwould allow self-sufficiency and even small surpluses for export. Land titling,assistance to help farmers manage ongoing settlements, strengthening of theregional offices of all institutions, the provision of grain silos, otheron-farm storage and market structures, and COHDEFOR's Social Forestry Systemwill receive priority. These efforts are to be achieved by a number ofindividual agency programs, as well as through integrated rural developmentprojects in key valleys. The Government's 1981-1983 investment program isdesigned to support these objectives, as well as increases in banana andtimber production. During this period, MNR will promote artisan fish produc-tion and undertake agricultural research and extension, mechanization, controland eradication of cattle and plantain diseases, small irrigation projects,and rural development projects in the Guayape Valley, Santa Barbara and thewestern region (PRODERO), as well as a number of studies to develop furtherrural development projects, for example, in the Aguan and Guayape Valleys.Unfortunately, these studies have experienced delays and problems, and theidentification and preparation of other projects is deficient. More attentionmust be given to these activities in order to assure the timely availabilityof projects suitable for external financing. In this regard, it would beuseful for the Government to participate in the Central American RegionalOffice for Preparation of Agricultural And Rural Development Projects in SanJose. In developing integrated rural development projects, the Government mayconsider including social programs such as rural housing, rural women employmentand nutrition. Finally, it is important to note that a substantial portion ofMNR's investment program is designated for a sectoral program which willprovide assistance in the areas of planning, information and provision ofinputs. However, these are development or current expenditures, not fixedinvestment, and should be carefully reviewed and justified, and not allowed toover project the amount of resources dedicated to the sector.

50. INA has several settlement and development projects for agrarianreform beneficiaries, for example in La Masica, San Bernardo, Guaymas, PuertoArturo, Ola Monjaras, San Manuel and Jamastran. Its largest effort isa colonization project in the lower Aguan Valley, which is ultimately intendedto settle 6,200 families on some 70,000 hectares and provide them with credit,technical assistance and social services. This and other INA projects willfocus not only on basic grains, but also on diversifying exports and improvingrural incomes through production of crops like african oil palm, citrus,sesame, melon, cacao and cashews. While INA has received some externalfinancing, many of its projects are financed with Government resources, and anumber are not included in its investment program due to lack of financing.

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ANNEX APage 15

These projects should be reviewed taking into account INA's execution capacityand their relative importance to Honduras' agricultural development.

51. BANADESA's plans emphasize the provision of credit to agrarianreform groups, for which it has access to a number of externally financedprograms. BANADESA feels a strong obligation to provide special terms to thepoorest farmers, but while such programs are commendable, they should becarefully thought out to ensure continuing wide coverage and low arrears.BANADESA also plans significant investment to expand its physical facilitiesin order to compete more effectively with commercial institutions. In view ofHonduras' development priorities and lack of resources, such investmentsshould be well justified before being undertaken.

52. IHCAFE provides technical assistance, distribution of inputs, creditand infrastructure to coffee farmers. It handles road construction in coffeeareas, which are mountainous, while SECOPT's feeder roads programs haveconcentrated in valleys of high agricultural potential. Its activity inroad construction is limited by available financing. In addition, IHCAFEis considering programs to control the coffee rust disease, improve coffeeyields, and encourage crop diversification among its farmers. Rubber, citrus,macademia, cardamom, pimienta and honey are currently under study. Thisdiversification program is now beginning to get underway, but IHCAFE willhave to obtain additional financing for it as well as for its other programs.

53. IHMA's program includes investments for rural silos and storagecenters, as well as a teaching center and quality control laboratory. Furtherexpansion of IHMA's program, which provides valuable support to Honduras'agricultural development, is limited by lack of resources.

54. COHBANA plans considerable investment for banana rehabilitation andplantation during 1981-85, hoping to plant some 12,000 new acres of bananasand bring the country up to pre-Hurricane Fifi levels of production. Thisprogram would require over L 100 million. Although areas for this developmenthave been identified, little attention has been given to flood control anddrainage requirements or land tenure, and this, coupled with COHBANA's financialdifficulties, is likely to restrict the program significantly in the comingyears.

55. Reforestation is critical to the maintenance of one of Honduras'most valuable resources and to slow the rate of soil erosion, and CORDEFOR hasprogrammed a number of initiatives during the 1981-83 investment period. Itwill undertake a major reforestation project in the Comayagua area, where thesoil is suitable for forestry, access is easy without requiring major newinfrastructure, there is considerable available labor, and the El Cajonreservoir would benefit from forest cover. This project would also permit theformation of groups of rural poor for the orderly harvesting of timber andresins within COHDEFOR's Social Forestry System, and provision of assistanceto ensure technical and efficient exploitation of these products. COHDEFORwill also undertake a natural resource management project in the Cholutecaarea, including preparation of a land use classification system and theintroduction of modified agricultural and forestry practices to improve theCholuteca River Basin watershed area. In addition, COHDEFOR will prepare an

- 43 -

ANNEX APage 16

inventory of resources in the central mountain range area and provide camps,towers and fire control equipment. It also has plans for reforestation inwestern Honduras and the Mosquitia area. It seems, however, that COHDEFOR'sreforestation efforts should be intensified, particularly in the Olancho areawhere extensive use of the resource is expected. Furthermore, it will beimportant for COHDEFOR to strengthen its capacity to deal with so many dif-ferent efforts at the same time and to prioritize which areas to focuson in the future.

I. Industry and Credit

56. The Government has a number of large industrial projects, mostly inthe forestry sector. As part of the Olancho forest development, the IndustrialForest Corporation of Olancho (CORFINO) is building two sawmills at BonitoOriental and La Union, which are to be ready by 1982 and 1984, as well as apulp and paper mill to use the chips produced by the sawmills and to be onboard in 1986. As noted earlier, considerable investment is being undertakenin roads to support these mills, and completion of works at Puerto Castillawill be critical to their success. An important related area will be thefuture requirements for integrated development of the area, where many migrantfamilies are expected to work at the mills. COHDEFOR is considering thedevelopment of sawmills at Ranchos Grandes and Las Lajas in the Comayagua areaand of a lumber and plywood plant at Corocito. These possibilities have beenreviewed, and the Corocito plant's scope reduced based on its study. Onemajor constraint will be COHDEFOR's limited current surplus after transfers tothe Central Government. Furthermore, while development of Honduras' forestindustry is important, it should be accompanied by timely reforestation and anappropriate pricing policy, neither of which has been adequately treated. Asregards the Olancho development, there is an indefinition of responsibilityfor these areas between CORFINO and COHDEFOR.

57. Two other major industrial investments are the industrialization ofafrican oil palm in the Aguan Valley and a cement plant, both already underwayunder CONADI. Other projects being considered include the production ofcalaguala (a pharmaceutical), and the construction of a sugar mill to producegasohol. The latter would be developed for an agrarian reform settlement inthe Aguan Valley. This project represents a major undertaking which shouldbe carefully reviewed, and, in view of the Government's limited financialresources, would be difficult to justify over the next few years.

58. During 1981-85, the Government's objectives for industry includeincreases in industrial value added, contribution to GDP and manufacturedexports, and more rapid development of labor-intensive small- and medium-sizedindustries (SMI's). Achievement of these objectives will require a moreselective import-substitution strategy focusing on efficient industriesin the intermediate goods and metal working fields, promotion of industriesin which Honduras has a comparative advantage, in particular those which useraw materials from forestry and agriculture, and provision of increased creditand technical assistance to SMI's.

- 44 -ANNEX APage 17

59. Apart from COHDEFOR and CORFINO, several institutions createdduring the 1970's will play key roles in carrying out this strategy. TheNational Industrial Development Corporation (CONADI) is promoting, financingand implementing large industrial projects. The National Industrial Develop-ment Fund (FONDEI) operates within the Central Bank as a second-tier financialinstitution, rediscounting part of the term loans made by financial inter-mediaries for industrial investment projects, focusing on SMI's. Finally,in order to promote the development of SMI's, the Industrial DevelopmentCenter (CDI) was recently upgraded to provide technical assistance, andeven financing, to these enterprises.

60. The availability of long-term financing is critical to the Govern-ment's ability to reach its industrial development targets. The Governmentwill therefore continue to support lending through FONDEI, whose program hasbeen accepted by commercial banks and industrialists. Although the CentralAmerican political situation is uncertain, Honduran stability and movementtowards democratic change may help create a positive investment climate. CDIis expanding its role and the Government will give it expanded technicalassistance in the coming years. The project pipeline of commercial banksis extensive and growing. CONADI has recently undergone changes in managementand policies and is expected to give greater attention to the agro-industrialsector. However, CONADI has financing problems (see main text), which willrequire a financial and operational reorganization. A review of CONADI'sinvolvement in each subproject in its portfolio may be useful before any newproject is undertaken.

61. The main area of industrial credit which appears weak is that ofwood industries financing. Because the bulk of COHDEFOR's demand forfinancing has been for working capital and of an apparent lack of interestby its management in promotion of wood industry projects, very few have beenfinanced through FONDEI. In view of the economic importance of forestindustries to Honduras, more active participation by COHDEFOR is desirable.

J. Tourism

62. Honduras has considerable potential for the development of inter-national tourism in view of its attractive scenery, beaches and archaeologicalruins, as well as its proximity to the North American market. Internationaltourism is still in its infancy, however, since the Government has onlyrecently accorded priority to the sector, in recognition of its potentialfor employment generation and foreign exchange earnings. Government tourismpolicy, however, has been weak and lacked coordination. On one hand, theGovernment has adopted a gradual and pragmatic scenario for developing thecountry's tourism potential, including (a) selective hotel development on themainland in places where major infrastructure is not required or is alreadyplanned for other purposes, and (b) dispersed development on Roatan and otherBay Islands, with small hotels on suitable sites providing their own infra-structure. Development of the tourism sector can thus be achieved withoutmajor public sector investments. This approach is supported by a line ofcredit through FONDEI for onward lending to hotel and other tourism enterprises,

- 45 -

ANNEX APage 18

as well as the minimum complementary investment required for improved airfacilities at Roatan and San Pedro Sula, Copan archaeological park developmentand technical assistance for hotel training, tourism marketing and otherrelated activities. On the other hand, CONADI has supported hotel developmentin the mainland with a less prudent scheme. With borrowed funds and guaranteescontracted at maturities that were too short for this type of projects, hotelshave been built or reconditioned with a heavy debt burden. Moreover, some ofthese hotels have low occupancy rates because of the slowdown of tourism inCentral America, or are adversely affected by project shortcomings. This hascreated a serious financial pressure for some of the private investors as wellas for CONADI, which supported the hotels with loans for US$7.4 million,equity investments for US$3.5 million, and guarantees for US$10.0 million.

- 46 -

STATISTICAL APPENDIX

Table Number

1.1 Population Projections, 1975-19851.2 Economically Active Population by Sex and Age, 1970-1985

2.1 Gross Domestic Product by Expenditure, 1970-1979(Millions of current Lempiras)

2.2 Gross Domestic Product by Expenditure, 1970-1979(Millions of 1966 Lempiras)

2.3 Gross Domestic Product, 1970-19792.4 Gross Domestic Product, Constant Prices, 1970-19792.5 Distribution of National Income, 1970-19792.6 GDP Projections

3.1 Balance of Payments, 1970-19793.2 Value, Volume and Unit Value of Principal Exports, 1970-19793.3 Summary of Merchandise Imports, 1970-19793.4 Balance of Payments Projections, 1981-853.5 Export Projections3.6 Import Projections

4.1 Debt Repayable in Foreign Currency and Goods4.2 Debt Repayable in Local Currency

5.1 Public Sector Operations, 1970-19795.2 Central Government Current Revenue, 1970-19795.3 Central Government Expenditure by Economic Classification, 1970-19795.4 Public Investment by Sectors, 1978-19855.5 Proposed Fixed Public Investment Plan by Project, 1981-855.6 Central Government Budget, 1980-815.7 Public Employment and Salaries, 1972-80

6.1 Summary Accounts of the Banking System, 1970-19796.2 Distribution of Bank Credit to the Private Sector, 1970-1979

7.1 Agricultural Production, 1960-79

8.1 Indicators of Industrial Production8.2 Selected Indicators of the Manufacturing Sector, 19758.3 Employment in Manufacturing8.4 Import Dependence of the Manufacturing Sector8.5 Nominal and Effective Protection

9.1 General Price Index by Groups, 1970-1979

Table 1.1: HONDURAS - POPULATION PROJECTIONS 1975-1985

Departments 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Total 3,093,299 3,202,324 3,318,040 3,439,017 3,563,823 3,691,027 3,820,951 3,955,116 4,092,175 4,231,567 4,372,487

Atl6ntida 173,332 181,219 189,039 197,080 205,464 214,102 223,023 232,325 241,934 251,814 261,972Col6n 91,555 95,821 100,136 104,567 109,154 113,864 118,674 123,661 128,785 134,023 139,369Comayagua 159,118 164,997 171,140 177,626 184,309 191,111 198,044 205,180 212,456 219,830 227,299Copgn 175,152 179,906 184,933 190,279 195,718 201,172 206,653 212,213 217,770 223,309 228,828Cortes 436,118 454,356 475,450 496,940 519,384 542,693 566.937 592,209 618,463 645,798 673,535Choluteca 224,165 231,517 239,241 247,465 255,878 264,328 272,888 281,636 290,460 299,341 308,215El Paraiso 162,966 167,900 172,990 178,312 183,766 189,265 194,840 200,564 206,383 212,214 218,058Francisco Morazin 531,879 554,998 578,970 604,o46 629,914 656,269 683,138 710,844 739,180 767,784 796,772Gracias a Dios 24,513 25,760 27,026 28,333 29,688 31,084 32,519 34,oo4 35,531 37,088 38,683Intibucg 93,822 95,838 97,950 100,203 102,476 104,728 106,963 109,223 111,468 113,677 115,836Islas de la Bania 15.271 15,708 16,139 16,564 17,004 17,452 17,910 18,382 18,862 19,352 19,845La Paz 75,494 76,885 78,288 79,814 81,338 82,836 84,308 85,767 87,203 88,598 89,929Lampira 146,648 149,874 153,259 156,840 160,478 164,087 167,690 171,363 175,025 178,671 182,282Ocotepeque 58,021 58,749 59,553 60,442 61,321 62,153 62,943 63,720 64,454 65,135 65,764Olanc 175,761 181,546 187,511 193,753 200,189 206,775 213,525 220,613 227,309 235,139 242,593Santa Birbara 216,325 224,031 232,321 241,319 250,524 259,769 269,054 278,543 283,061 297,613 307,109Valle 105,441 107,733 110,138 112,713 115,317 117,909 120,498 123,136 125,769 128,382 130,963Yoro 227,217 235,486 243,956 252,721 261,901 271,430 281,344 291,733 302,562 313,799 325,435

Source: CONSUPLANE.

Page 1 of 3

Table 1.2: 88DUIAS - 8OW43CAlL1 hCS1V POPFltATIOS 8Y SEX 671 ACE

1970-1985

1970 1971 1972 1973 1974 1975

Total Men Women Total men Irsee Total Ien lo_4 Total Koo wo_en Total Men Womn Total Men, toew.

TOTAL 7 7',916 666,314 111,602 800,234 683,905 116,329 823.240 702,508 120,732 848.053 772,387 125,666 674,845 743,854 130,991 904,742 767,875 136,867

10- 14 52,974 48,820 4,154 54,498 50,179 4.319 56,164 51,667 4,497 57,931 53,244 4.687 59.772 54.684 4,888 61,761 56,630 5.131

15- 19 120,414 102.013 18.401 123,947 105,205 18,744 128,000 10,376 19,624 132.222 111.652 20,570 136,770 115,183 21.587 141,888 119,153 22,735

20 - 24 116.566 96.320 20.246 120,846 99.591 21,235 125,942 103,521 22.421 131,614 107,885 23.729 137.584 112.461 25.123 144.150 117,563 26.587

25 - 29 102.957 85,937 17.020 104.976 67,433 17,543 106,940 88,465 18.075 109,193 90,514 18,679 112,060 92.669 19,391 115,889 95,617 20,272

30 - 34 88,164 74,407 13,757 89,880 7S,713 14,167 91,582 76,994 14,588 93.396 78,349 15,047 95.427 79,881 15,546 97,794 81,689 16,105

35 - 39 73,404 63,193 10.211 75,912 64.449 11,463 77.562 65.749 11,813 79.309 67,117 12,192 81.169 68.575 12,594 83,171 70.148 13,023 1

40 - 44 61,549 53,146 8,403 63,025 54,275 8,750 64,335 55,424 8,911 65.816 56,624 9,192 67,395 57,906 9,489 69,110 59,304 9,806 .1

45 - 49 50,261 43.727 6,534 51,574 44,835 6.739 52,941 45.985 6.956 54.369 47.180 7,189 55,845 48,413 7,432 57.376 49,692 7,684

50 - 54 39,457 34,580 4,877 40,631 35,594 5.037 41.857 36,651 5.206 43,134 37.748 5.386 44,458 38,882 S,576 45.827 40.052 5.775 1

55 - 59 29,750 26.154 3.596 30,756 2 ,033 3.723 31.20 27,965 3.855 32.939 28.942 3.997 34.098 29,953 4,145 35,293 30,993 4,300

60 - 64 20,121 17.892 2,229 20.875 18,557 2.318 21,685 19.273 2.412 22.541 20.029 2.512 23.437 20.821 2,616 24,366 21,641 2,725

65 - 69 12,451 11,218 1.233 12,968 1,.683 1.285 13,528 12.188 1,340 14,125 12,725 1,400 14.751 13,268 1,463 15,397 13,870 1.527

70 - 14 6.446 5,825 621 6,749 6,100 649 7,078 6,400 678 7,428 6,719 709 7.799 7,056 743 8,183 7,406 777

75 and -re 3,402 3,082 320 3.595 3,258 337 3,806 3,450 356 4,036 3.659 377 4.280 3,882 398 4,537 4,117 420

15 - 64

Y28RS 702.643 597.369 105.274 722,424 i5_,685 109,739 742.664 628,803 113.861 764,533 646.040 118.493 788.243 664,744 123.499 814,864 685.852 129.012

Page 2 of 3

Table 1.2: WnUDtAS - EC0Ul4ICALLY ACTIVE POPULAT1ON BY SEX AND ACF

1970-1985

1976 1977 1978 1979 1980Total Men Women Total san Women Total Hen Woas Total Han Women Total H" o oun

TOTAL 936.505 793,248 143.257 970.508 820.415 150.093 1.006,761 849,391 157,370 1.044,433 879,353 165.080 1.083,520 910,303 173.217

10 - 14 63,804 58,443 5,361 65.969 60.365 5,604 68,458 62,602 5,856 70.560 64,446 6,114 72,597 66,221 6.376is - 19 147,435 123,491 23,944 153,457 128.179 25,278 159.825 133.111 26.714 166.407 138,178 28.229 173.071 143.270 29.80120 - 24 150.102 122.012 28,090 156.137 126.473 29.664 162.389 131,065 31.324 169.004 135,922 33.082 176.116 141.162 34,95425 - 29 120,949 99.568 21.381 127,004 104,338 22,666 133,671 109,596 24.075 140,569 115,014 25,555 147,315 120.265 27.050 230 - 34 100.362 83.657 16.705 103,053 85,721 17,332 106,073 88.049 18.024 109.631 90,812 18.819 113,936 94,180 19,75635 - 39 85,361 71,824 13,537 87.613 73,590 14,023 89,966 75,459 14,507 92,463 77,447 15.016 95,146 79,569 15.57740 - 44 70,988 60,839 10,149 73,002 62.488 10,514 75.118 64.220 10,898 77,299 66,002 11,297 79.505 67.798 11,70745 - 49 58,955 51,009 7,946 60,583 52.363 8,220 62,266 53,762 8.504 64,032 55.232 8,800 65,834 56,725 9.10950 - 54 47.249 41.265 5,984 48.731 42.525 6,206 50,250 43.816 6,434 51,825 45,154 6,671 53,361 46,448 6.91355 - s9 36,501 32.037 4,464 i7,741 33,107 4,634 39,016 34.203 4.813 40,326 35.328 4.998 41,674 36.485 5.18960 - 64 25,334 22,496 2,838 26.345 23.391 2,954 27,389 24.314 3.075 28,454 25,253 3.201 29,528 26.196 3,33265 - 69 16,069 14,474 1.595 16.767 15,102 1.665 17,493 15.754 1,739 18,243 16.428 1.815 19.016 17.123 1.89370 - 74 8.585 7,770 815 9,005 8,150 855 9,442 8,545 897 9.896 8,955 941 10.364 9.378 98675 and ners 4,811 4,363 448 5401 4,623 478 5.405 4,895 S10 5,724 5,182 542 6,057 5,483 574

15 - 64

YEARS 843.236 708.198 135.0 8 8732A6 732,175 141.491 905,963 757.595 148,368 940,010 784.342 155.668 975,486 812.098 163.388

Page 3 of 3

Table 1.2: HONDURAS - ECONMICALLY ACTIVE POPULATION BY SEX AND AGE

1970-1985

1981 1982 1983 !984 1985Total Men Women Total Men Women Total Hen Women Total Man Women Total Ken gUen

TOTAL 1.124,216 942,467 181.749 1.166,506 975.830 190,676 1.210.510 1 010.455 200,005 1.256.349 1.046.415 209.934 1.304.137 1.083,776 220,361

10 - 14 74,683 68,043 6,640 76,720 69,815 6,905 78,755 71,577 7,178. 80,835 73,375 7,460 83.003 75,249 7,75415- 19 179.866 148.427 31,439 186.876 153,721 33,155 194,034 159,094 34,940 201.271 164,487 36.784 208.515 169,843 38,67220- 24 183.771 146.a37 36.934 191.882 152.858 39,014 200.371 159,171 41,200 209,158 165.662 43,496 218,162 172,257 45,90525 - 29 153,86 125.246 28.540 160.235 130,176 30,059 166.852 135.209 31,643 173.820 140.495 33.325 181.327 146,188 35.13930 34 119,188 98,326 20,862 125,250 103,138 22,112 131,818 108,354 23,464 138,595 113,715 24,880 145.278 118,960 26,31835 - 39 97,838 81,679 16,159 100,5 14 83.771 16,743 103.436 86.059 17,377 106.864 88.758 18,106 111,063 92,086 18,97740 44 81,697 69.5 74 12.123 83.901 71,356 12,545 86.176 73.191 12,985 88,582 75,132 13,450 91,182 77,230 13.952 045 49 67.734 58,302 9.432 69,711 59.943 9,768 71,750 61,633 10,117 73.842 63,366 10,476 75.979 65,130 10,849 l50 - 54 54.919 47,761 7,158 56.885 49.077 7,408 58.079 50,415 7,664 59.732 51,800 7.932 61.464 53,252 8.21255 - 59 43.068 37.682 5,386 44,506 38.916 5,590 45.977 40.177 5,800 47,467 41,451 6,016 48,965 42.727 6.23860 - 69 30,604 27,137 3,467 31.690 28,082 3,608 32,795 29.042 3,753 33.932 30.028 3,904 35,107 31,048 4,05965 - 69 19,814 17,840 1,974 20.636 18,580 2,056 21,482 19,340 2.142 22.348 20,117 2,231 23.231 20,908 2,32370 - 74 10,846 9,814 1,032 11,343 10,262 1,081 11,857 10.725 1.132 12.386 11.203 1,183 12.935 11,698 1,23775 and wre 6,402 5.799 603 6.757 6.125 632 7,128 6.468 660 7.517 6,826 691 7.926 7,200 726

15 - 64

YEARS 1.012,471 840.971 171,50C 1.051230 871,048 180.182 1.091,288 902.345 188,943 1.133.263 934,894 198,369 1.177,042 968,721 208,321

TABLE 2.1: HONDURAS: GROSS OOMESTIC PRODUCT BY EXPENDITURE. 1970-80(MILLION- OF CURRENT LEMPIRAS)

ITEM 1970 1971 1977 1973 1974 1975 1976 1977 1978 1979 1980

CONSUMPTION 1233.6 1312.3 1416.4 1533.6 1803.3 2019.8 2265.8 2486.6 2819.0 3318.0 4076.0

PRIVATE 1067.4 1137.7 1223.4 1347.0 1561.3 1741.5 19t8.8 2069.6 2358.0 2788.0 3424.0GENERAL GOV'T 166.2 174.6 193.0 186.6 242.0 278.3 347.0 417.0 461.0 530.0 652.0

GROSS DOMESTIC INVESTMENT 302.0 249.9 255.8 348.0 5t9.3 410.0 449.0 750.0 1008.0 1229.0 i443.0

FIXED 268.0 253.0 248.8 325.0 410.3 485.0 550.0 703.0 941.0 1112.0 1290.0CHANGE IN STOCKS 34.0 -3.0 7.0 23.0 109.0 -75.0 -101.0 47.0 67.0 117.0 153.0

RESOURCE BALANCE -89.6 -11.2 16.8 -16.6 -249.6 -217.8 -137.8 -147.6 -189.0 -215.0 -411.0

EXPORT OF GOODS & NFS 403.6 434.4 470.0 587.6 662.6 687.0 891.6 1163.4 1366.0 1648.0 1840.0IMPORT OF GOODS & NFS 493.2 445.6 453.2 604.2 912.2 904.8 1029.4 i311.0 1555.0 1863.0 2251.0

GDP AT MARKET PRICES 1446.0 1551.0 1689.0 1865.0 2073.0 2212.0 2577.0 3089.0 3638.0 4332.0 5108.0

NET FACTOR INCOME -40.0 -45.0 -50.0 -62.0 -22.7 -51.0 -102.0 -124.0 -157.0 -210.0 -279.0 U

GNP AT MARKET PRICES 1406.0 1506.0 1639.0 1803.0 2050.3 2161.0 2475.0 2965.0 3481.0 4122.0 4829.0SOUCE CE= ======= ....... = ... =.... =.=AN= =K== .... ........ . ... .. .. s o ......

SOURCE: CENTRAL BANK

TABLE 2.2: HONDURAS: GROSS DOMESTIC PRODUCT BY EXPENDITURE. 1970-80(MILLIONS OF 1966 LEMPIRAS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

CONSUMPTION 1147.0 1191.0 1192.0 1220.0 1259.0 1309.0 1419.0 1502.0 1592.0 1687.0 1767.0

PRIVATE 987.0 1026.0 1016.0 1058.0 1071.6 1111.0 1182.0 1241.0 1319.0 1405.0 1467.0GENERAL GOV'T 160.0 165.0 176.0 162.0 187.4 198.0 237.0 261.0 273.0 282.0 300.0

GROSS DOMESTIC INVESTMENT 237.0 206.0 206.0 271.0 328.0 247.0 257.0 370.0 464.0 509.0 514.0

FIXED 210.0 208.0 197.0 253.0 259.0 292.0 315.0 345.0 430.0 456.0 454.0

CHANGE IN STOCKS 27.0 -2.0 9.0 18.0 69.0 -45.0 -58.0 25.0 34.0 53.0 60.0

RESOURCE BALANCE -64.0 -5.0 37.0 -2.0 -102.0 -96.0 -93.0 -151.0 -214.0 -230.0 -267.0

EXPORT OF GOODS & NFS 391.0 408.0 421.0 460.0 410.0 386.0 438.0 505.0 525.0 586.0 606.0IMPORT OF GOODS & NFS 455.0 413.0 384.0 462.0 512.0 482.0 531.0 656.0 73'9.0 816.0 873.0

GDP AT MARKET PRICES 1320.0 1392.0 1435.0 1489.0 1485.0 1460.0 1583.0 1721.0 1842.0 1966.0 2014.0

NET FACTOR INCOME -36.0 -42.2 -42.0 -47.0 -12.9 -26.0 -54.0 -64.0 -79.0 -94.0 -109.0

GNP AT MARKET PRICES 1284.0 1349.8 1393.0 1442.0 1472.1 1434.0 1529.0 1657.0 1763.0 1872.0 1905.0SOURCE= = e = = = = = = = = = = = = = = = * =

SOURCE CENTRAL BANK

TABLE 2.3: HONDURAS: GROSS DOMESTIC PRODUCT. 1970-80(MILLIONS OF CURRENT LEMPIRAS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

PRIMARY PRODUCTION 454.1 481.7 526.0 603.0 637.0 624.5 748.0 922.0 1062.0 1264.0 1464.0

AGRICULTURE 425.0 454.0 496.0 560.0 573.0 571.3 698.0 867.0 1002.0 1197.0 1384.0MINING 29.1 27.7 30.0 43.0 64.0 53.2 50.0 55.0 60.0 67.0 80.0

SECONDARY PRODUCTION 262.8 280.3 307.0 344.9 402.1 458.0 518.0 620.0 760.0 908.0 1071.0

MANUFACTURING 180.5 197.5 218.0 244.7 279.4 314.0 361.0 435.0 540.0 648.0 778.0CONSTRUCTION 64.6 63.0 66.0 73.0 95.6 108.0 118.0 140.0 169.0 200.0 220.0PUBLIC UTILITIES 17.7 19.8 23.0 27.2 27.1 36.0 39.0 45.0 51.0 60.0 73.0

SERVICES 589.7 645.7 705.0 748.1 834.9 910.0 1025.0 1129.0 1356.0 1625.0 1953.0

TRANSPORTATION 102.0 117.0 125.0 133.0 149.0 166.0 185.0 206.0 . 256.0 316.0 386.0COMMERCE 171.1 183.0 189.0 196.7 216.8 242.0 280.0 300.0 390.0 477.0 582.0BANKING. INSURANCE,ETC. 40.0 42.0 50.0 59.0 73.0 81.0 96.0 123.0 138.0 159.0 188.0HOUSING 93.6 101.0 109.0 118.4 127.4 137.0 148.0 160.0 177.0 203.0 240.0PUBLIC ADMIN. AND DEFENSE 44.0 49.7 62.0 58.0 61.7 68.0 84.0 100.0 115.0 134.0 159.0PERSONAL SERVICES 139.0 153.0 170.0 183.0 207.0 216.0 232.0 240.0 280.0 336.0 398.0

GOP AT FACTOR COST 1306.6 1407.7 1538.0 1696.0 1874.0 1992.5 2291.0 2671.0 3178.0 3797.0 4488.0

NET INDIRECT TAXES 139.4 143.3 151.0 169.0 199.0 219.5 286.0 418.0 460.0 535.0 620.0

GOP AT MARKET PRICES 1446.0 1551.0 1689.0 1865.0 2073.0 2212.0 2577.0 3089.0 3638.0 4332.0 5108.0========- -=======-- -- - - -- -========-=…======- =-====- == ==-- - - -====----- ---- ==== r======= ==== ====

SOURCF: CENTRAL BANK

TABLE 2.4' HONDURAS: GROSS DOMESTIC PRODUCT, CONSTANT PRICES. 1970-80(MILLIONS OF 1966 LEMPIRAS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

PRIMARY PRODUCTION 431.0 462 0 472.0 496.0 462.0 411.0 444.0 473.0 497.0 534.0 521.0AGR CUL UR ___ _ ___ _______ ___ _ _ _ ___ --------

AGRICULTURE 405.0 438.0 446.0 462.0 417.0 378.0 416.0 446.0 469.0 505.0 491.0MINING 26.0 24.0 26.0 34.0 45.0 33.0 28.0 27.0 28.0 29.0 30.0

SECONDARY PRODUCTION 227.0 234.0 245.0 257.0 256.0 264.0 287.0 312.0 343.0 370.0 385.0

MANUFACTURING 170.0 178.0 185.0 192.0 190.'0 195.0 215.0 236.0 260.0 281.0 297.0CONSTRUCTION 44.0 43.0 46.0 50.0 50.0 52.0 54.0 57.0 63.0 68.0 66.0PUBLIC UTILITIES 13.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0

SERVICES 535.0 568.0 590.0 601.0 624.0 640.0 676.0 704.0 766.0 812.0 838.0

TRANSPORTATION 94.0 105.0 108.0 111.0 120.0 125.0 132.0 137.0 151.0 163.0 169.0COMMERCE 153.0 158.0 147.0 147.0 145.0 147.0 155.0 158.0 179.0 194.0 201.0BANKING, INSURANCE, ETC. 30.0 32.0 36.0 39.0 44.0 46.0 50.0 55.0 60.0 64.0 66.0HOUSING 83.0 87.0 91.0 96.0 100.0 105.0 111.0 116.0 122.0 127.0 131.0 uPUBLIC ADMIN. AND DEFENSE 42.0 46 0 57.0 51.0 48.0 49.0 57.0 63.0 67.0 71.0 74.0 4

PERSONAL SERVICES 133.0 140.0 151.0 157.0 167.0 168.0 171.0 175.0 187.0 193.0 197.0

GDP AT FACTOR COST 1193.0 1264.0 1307.0 1354.0 1342.0 1315.0 1407.0 1489.0 1606.0 1716.0 1744.0

NET INDIRECT TAXES 127.0 128.0 128.0 135.0 143.0 145.0 176.0 232.0 236.0 250.0 270.0

GDP AT MARKET PRICES 1320.0 1392.0 1435.0 1489.0 1485.0 1460.0 1583.0 1721.0 1842.0 1966.0 2014.0=S====== ======== ======== =======_ ==,===== ==_===== ======== =====,== ======== ======== .. ======

SOURCE- CENTRAL BANK

Table 2.5: HONDURAS: DISTRISUTION OF NATIONAL INCOME. 1970- 1978(MILLIONS OF CURRENT LEMPIRAS)

----------------------------------------------------------------- __----------__-------------------------------------------

D I S T R I 8 U T I O NITEM --------------------------------------------------------------------------------------------

1970 1971 1972 1973 1974 1975 1976 1977 1978______-_ - ______ ------------ ________________________________________________-___

NATIONAL INCOME 1 207.8 1 298.8 1 390.5 1 521.0 1 680.0 1 791.0 2 036.0 2 433.0 2 768.0nm-===;= 8====== ts====== as"======= =bu====X= nu=s====== ntb=fl=~-=b=8=-u==Q= ==s====-af

WAGES AND SALARIES 572.0 640.0 688.0 754.0 851.0 956.0 1 093.0 1 267.0 1 441.0

PROFITS OF NONCORP. ENTERP. 454.9 472.7 484.2 546.0 566.0 590.0 667.0 866.0 985.0

CORPORATE SAVINGS 61.5 63.0 87.0 87.0 61.0 40.0 52.0 60.0 65.0

CORPORATE rNCOME TAX 21.0 17.0 17.0 17.0 37.0 38.0 39.0 44.0 51.0

PRIVATE PROPERTY INCOME 103.5 113.2 124.4 122.0 153.0 158.0 177.0 195.0 222.0

GOV'T PROPERTY INCOME 7.0 8.0 9.0 15.0 32.0 36.0 38.0 42.0 50.0

LESS: INT. ON PUBL.DEBT 7.6 10.4 13.3 14.0 13.0 20.0 22.0 32.0 35.0LESS: INT. ON PRIV. DEBT 4.5 4.7 5.8 6.0 7.0 7.0 8.0 9.0 11.0

…-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _ - - - _, - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SOURCE: CENTRAL BANK OF HONDURAS

Table 2.6: HONDURAS - GDP PROJECTIONS

(millions of constant 1975 lempiras)

ACTUAL PROJECTIONS1979 1980 P 1981 1982 1983 1984 1985

Gross Domestic Product 2,978 3,038 3,086 3,240 3,402 3,606 3,823Terms of Trade Adjustment -10 -80 -157 -203 -259 -296 -301Gross Domestic Income 2,968 2,958 2,929 3,037 3,143 3,310 3,522

Imports of Goods and Services 1,233 1,273 1,291 1,338 1,377 1,440 1,528Exports (terms of trade adjusted) 1,122 1,058 1,112 1,156 1.269 1.358 1,436

LAConsumption 2,234 2,314 2,336 2,441 2,469 2,599 2,735Investment 845 859 772 778 783 794 879

P Preliminary

Source: Mission estimates.

TABLE 3.1 HONDURAS BALANCE OF PAYMENTS, 1970-80

(MILLIONS OF US DOLLARS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 (p)

CURRENT ACCOUNT

EXPORTS (GOODS & NFS) 201.8 217 2 235.0 293.8 331.3 343.5 445.8 581.7 690.1 839.5 928.7

MERCHANDISE (FOB) 183.4 t96.4 212.1 266.6 298.9 307.9 406.2 529.9 627.6 756.5 834.5NON-FACTOR SERVICES 18.4 20.8 22.9 27.2 32.4 35.6 39.6 51.8 62.5 83.0 94.3

IMPORTS (GOODS & NFS) 246.6 222.8 226.f 302.1 456.0 452.4 514.7 655.5 777.6 931.6 1126.4

MERCHANDISE (FOB) 203 4 177.1 176.5 243.6 387.8 377.6 414.3 550.1 654.5 783.4 955.9NON-FACTOR SERVICES 43.2 45.7 50.1 58.5 68.3 74.8 100.4 105.4 123.1 148 2 170.5

RESOURCE BALANCE -44.8 -5.6 8.4 -8.3 -124.7 -108.9 -68.9 -73.8 -87.5 -92.1 -197.7

FACTOR SERVICE INCOME (NET) -22.6 -24.7 -27.5 -33.2 -13.4 -28.3 -56.1 -69.0 -85.6 -120.4 -147.9

RECEIPTS 2.3 2.3 2.4 3.9 4 1 5.8 8.8 12.1 17.9 20.9 25.6PAYMENTS 24.9 27.0 29.9 37.1 17.5 34.1 64.9 81.1 103.5 141.3 173.5

NET TRANSFERS 6.6 6.8 6.5 7.0 32.5 17.7 13.3 W4 1 7.3 20.5 21.5

CURRENT ACCOUNT BALANCE -60.8 -23.6 -12.6 -34 6 -105.7 -119.6 -111.7 -128.7 -155.8 -192.0 -324.0

CAPITAL ACCOUNT

PRIVATE SECTOR (NET) 17.6 2.8 -1.7 14.5 36.9 15.1 43.9 52.8 31.8 39.4 66.5

DIRECT INVESTMENT 8.4 7.4 3.0 6.6 -1.2 10.4 7.6 8.9 8.4 28.2 5.0LONG TERM LOANS, ETC. 4 2 4.5 5.4 7.8 8.0 10.0 12.0 14.0 20.7 14.2 49.4

SHORT TERM 5.0 -9.1 -10.1 0 1 30 t -5 3 24.3 29.9 2.7 -3.0 72.1

PUBLIC SECTOR 28.0 19.5 11.0 9 0 35 t 103.0 80.7 710.0 140.9 153.9 200.9

LONG TERM 25.6 12.2 16.3 12.5 37 6 92.6 80.0 173.5 137.9 147.6 192.9

DISBURSEMENTS 28 7 15.9 20.2 18.1 43 5 99.0 93.4 133 3 166.0 211.0 233.2AMORTIZATION 3.1 3 7 3.9 5.6 5.9 6.4 13.4 19.8 28.1 63.4 40.3

OTHER CAPITAL 2.4 7.3 -5.3 -3.5 -2.5 10.4 0.6 -3.5 3.0 6.3 8.0

BANKING SYSTEM (NET) 0.1 4.7 8.9 12.5 2.6 2.2 6.5 14.8 4.5 -8.0 7.0

ALLOCATION OF SOR'S 3.2 1.6 3.4 1 1 0 0 0.0 0.0 0 0 0.0 4.9 4.9

CAP'L N.E.I.&ERRORS&OMISS. -2.1 0.6 2.9 0.9 33 0 16.1 3.6 -9.5 0.8 -15.2 -16.3

CHANGE IN RESERVES (INC. -) 14 0 -5.6 -12.0 -3.4 -1.9 -16.9 -23.0 -39.4 -22.2 17.0 61.0

CAPITAL ACCOUNT BALANCE 60.8 23 6 12.5 34.6 105 7 119 5 111.7 128.7 155.8 192.0 324.0

(P) PRELIMINARYSOURCE CENTRAL BANK OF HONDURAS AND MISSION ESTIMATES

TABLE 3.2: HONDURAS: VALUE, VOLUME & UNIT VALUE OF PRINCIPAL EXPORTS, 1970-80(VALUE IN MILLIONS OF US DOLLARS, VOLUME IN METRIC TONS AND UNIT VALUE

IN US DOLLARS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

BANANASVALUE 75.3 95.7 90.7 94.0 79.7 61.5 106.7 130.2 141.2 200.4 220.6VOLUME 738.5 970.8 847.7 825.6 651.6 368.4 609.8 719.5 723.0 908.4 876.6UNIT VALUE 102.0 98.6 107.0 113.9 122.3 166.9 175.0 181.0 195.3 220.6 251.7

COFFEEVALUE 25.9 23.3 27.3 47.8 43 9 56.9 100.3 168.2 211.0 196.9 204.1VOLUME 26.0 25.1 32.7 39.8 30.8 48.5 43.1 35.9 57.5 66.1 56.8UNIT VALUE 996.2 928.3 834.9 1201.0 1425.3 1173.2 2327.1 4685.2 3669.6 2978.8 3593.3

LUMBERVALUE 16.2 19.2 27.1 39.1 40.7 38.8 40.8 47.2 42.3 42.1 36.2VOLUME 356.0 402.0 491.0 591.0 479.0 396.0 364.0 545.0 358.0 336.0 269.0UNIT VALUE 45.5 47,8 55.2 66 2 85.0 98.0 112.1 86t6 118.2 125.3 134.6

BEEF LAVALUE 9.7 12.5 16,1 21.9 16.8 18.3 25.6 21.7 38.8 60.8 60.8VOLUME (CUBIC METERS) 12.4 15.3 18.1 19.8 13.1 16.7 20.7 17.6 22.6 30.0 28.6UNIT VALUE 782.3 817.0 889.5 1106.1 1282.4 1095.8 1236.7 1233.0 1716.8 2025.0 2125.9

SUGARVALUE 1.2 1.6 2.0 0.0 4.5 7.0 2.2 3.8 5.5 13.3 29.4VOLUME 9.8 10.0 12.1 0.0 7.5 10.1 6.7 19.7 22.6 55.2 81.5UNIT VALUE 122.4 160.0 165.3 0.0 600.0 693.1 328.4 192.9 243.4 240.9 360.7

PETROLEUM DERIVATIVESVALUE 6.2 3.0 3.4 4.1 14.5 12.3 1.1 0.6 0.0 0.0 0.0VOLUME 356.7 212.5 216.6 222.1 214 0 180.9 16.3 8.0 0.0 0.0 0.0UNIT VALUE 17.4 14.1 15.7 18.5 67.8 68.0 67.5 75.0 0.0 0.0 0.0

ALL OTHERSVALUE 43.6 41.1 45.5 59.7 98.8 113.1 129.6 158.2 188.8 243.0 283.4

TOTAL MERCHANDISE EXPORT 178.1 196.4 212.1 266.6 298.9 307.9 406.2 529.9 627.6 756.5 834.5VALUE (FOB) = =

SOURCE: CENTRAL BANK

TABLE 3.3: HONDURAS: SUMMARY OF MERCHANDISE IMPORTS. 1970-80(MILLIONS OF US DOLLARS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980(p)

FOOD 14.3 7.8 9.6 21.5 31.1 45.0 37.3 41.5 51.1 56.7 86.7

OTHER CONSUMER GOODS 53.9 41.2 40.4 42.9 45.7 49.8 69.3 115.5 144.9 163.2 173.0

PETROLEUM. OIL & LUBRIC. 14.7 17.4 19.1 25.5 63.5 68.5 53.9 71.0 76.3 112.6 171.2

OTHER INTERMEDIATE GOODS 73.1 76.5 76.7 100.2 170.7 135.9 159.6 187.0 230.0 254.1 302.4

CAPITAL GOODS 66.8 51.6 51.6 79.5 108.0 110.8 138.7 184.0 211.9 245.3 285.0

TOTAL MERCHANDISE IMPORT, CIF 222.8 134.5 197.4 269.6 419.0 410.0 458.8 599.0 714.2 831.9 1018.3

_ _ _ _ _ __-- -----_ _ _ _ __-- --- - -_ _-- - - -_ _-- - -_ _ _ __-- - - -_ _-- - - - - - - - - - _- - - _ _ _ - --__ _ _- - - - --__ _ _ _ _ _- - - - --__ _ _ _ _ _ _- - - - -

(P) PRELIMINARY

SOURCE: CENTRAL BANK AND MISSION ESTIMATES

Table 3.4: HONDURAS - BALANCE OF PAYMENTS PROJECTIONS, 1981-85!/

(in million US dollars)

1981 1982 1983 1984 1985

Exports of Goods (FOB) 944 1,054 1,254 1,446 1,639Non-factor Services 110 127 147 169 193

Exports Goods and NFS 1,054 1,181 1,401 1,615 1,832

Imports of Goods (CIF) 1,128 1,259 1,399 1,574 1,793Non-factor Services 97 108 122 139 157

Imports of Goods and NFS 1,225 1,367 1,521 1,713 1,950

Factor Services (net) -166 -183 -203 -214 -224 0Current Transfers 24 26 28 30 32

Current Account Balance -313 -343 -295 -282 -310

Direct Foreign Investment 10 15 20 20 30

Official and Private Capital (long-term) 163 270 299 302 298Disbursements 209 329 368 428 416Amortization -46 -59 -69 -126 -118

Other 100 60 50 20 40

Change in Reserves (- increase) 40 -2 -74 -60 -58

1/ The balance of payments projection assumes that public finances will continue to be strengthened through revenue raisingactions relieving pressures on the balance of payments and that the private sector recovers its confidence. Otherwise,higher import levels and lower inflows of private capital would result in a decline of foreign exchange reserves.

Table 3.5: HONDURAS - EXPORT PROJECTIONS(in millions of US$)

Actual Projections1979 1980 1981 1982 1983 1984 1985

Exports (constant 1975 prices)

G. Bananas 152 136 153 156 159 162 167Coffee 77 67 84 87 91 96 102Lumber 33 29 28 35 65 69 73Beef 33 31 33 34 37 40 43Sugar 38 57 69 81 106 130 130Lead 8 6 6 7 7 8 8Zinc 9 12 14 15 16 17 18Silver, Fish Products 28 34 35 37 39 40 42Manufactures and others 133 143 151 160 173 189_ 204

Total 511 515 573 614 693 752 788

Exports (current prices)

Bananas 200 206 258 283 304 325 352Coffee 197 204 180 188 213 248 287Lumber 42 39 42 57 118 138 162Beef 60 60 65 66 70 80 92Sugar 13 29 58 64 91 122 133Lead 15 10 12 16 18 21 23Zinc 11 15 18 25 31 38 45Silver, Fish Products 48 61 68 77 86 96 106Manufactures and others 173 214 242 277 323 379 438

Total 761 839 944 1,054 1,254 1,446 1,639

Source: Mission estimates.

Table 3.6: HONDURAS - IMPORT PROJECTIONS

(in millions of US$)

Actual Projections

1979 1980 1981 1982 1983 1984 1985

Imports (constant 1975 prices)

Food 48 60 62 63 65 68 65

Other Consumer Goods 115 106 106 109 110 115 121

Oil and Lubricants 57 59 62 64 66 70 73

Intermediate 171 180 190 200 213 226 242

Capital Goods 175 178 171 175 176 178 196

Total 566 583 591 611 630 657 697

Imports (current prices) O

Food 57 86 92 99 108 120 122

Other Consumer Goods 170 176 188 208 225 254 286

Oil and Lubricants 113 176 207 239 271 309 353

Intermediate 2 5 4 300 337 380 435 498 570

Capital Goods 258 295 304 333 360 393 462

Total 852 1,033 1,128 1,259 1,399 1,574 1,793

Source: Mission estimates.

Table 4.1: - HONDURAS page 1 of 5

SERVICE PAYMENTS. COMMITMENTS. DISBURSEMENTS AND OUTSIANDING AMOUNTS OF EXTERNAL PUBLIC OfBI

PROJECTIONS BASEO ON OEBT OUTSTANDING INCLUDING UNOISBURSED AS OF DEC. 31. 1979DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS

(IN THOUSANDS OF U.S. DOLLARS)TOTAL

YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 0 OlIIFR (:IIAFU.rS

: BEGINNING OF PERIOD

DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEI- AD,IUJSI

: ONLY UNDISBURSED MENTS MENTS ----------- ----------- ----------- IATIONIS MEN]

PRINCIPAL INTEREST TOTAL

: (I) : (2) (3) (4) (5) (6) (7) (8a )93

1975 171.224 275.845 179.876 99.229 6.447 10.150 16.597 511 9

1976 264.012 448.772 153.712 93.406 13,365 15.445 28.810 159 1 , 604

1977 343.997 587.356 241.847 133.284 19.765 21.870 41.635 1.466 548

1978 457.511 807.424 147.995 166.003 28,118 31.386 59.504 i.9B9 bII

1919 595.135 924.801 321.828 210.990 63.410 44.911 108.321 900 3.631

1980 745.898 1.185.950

* THE FOLLOWING FIGURES ARE PROJECTED * * * * *

1980 745.898 1.185.950 - 117,329 40,386 52.824 93.210 - 1,632

1981 821.209 1.143.932 - 91.897 39.038 57.261 96.299 -4

1982 874.063 1.104.890 - 75.301 51.973 57.566 109.539 --

1983 897.397 1.052,917 - 64.685 51,903 54.470 106.373 5

1984 910.182 1.001.019 - 42.882 99,673 50.959 150.632 - 4

1985 853.398 901.350 - 22.235 61.i06 43.265 104.371 -3

1986 814.523 840.241 - 14.631 68.684 38.054 106.738 - 4 0%

1987 760.473 771.561 - 9.040 54.318 32.150 86.468 - n1988 715.203 717.251 - 1.928 54.190 28.184 82.374 --

1989 662.941 663.061 - 100 47.732 24.309 72,041 - 3

1990 615.312 615.332 - 19 40.848 22.017 62.865 - 4

1991 574.487 574.488 - I 38.189 19.839 58.028 - 5

1992 536.304 536.304 - - 36.484 17.849 54.333 - -2

1993 499.818 499.818 - - 35,479 15.943 51.422 - 7

1994 464.346 464.346 - - 34.134 14,148 48,282 - 5

NOTE: PRINCIPAL PAYMENTS DURING 1979 INCLUDE A PREPAYMENT OF APPROXIMATELY $24 MILLION.

THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN IHE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM OUIJ

YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS

FROM ONE CATEGORY TO ANOTHER IN THE TABLE.

EXTERNAL DEBT DIVISIONECONOMIC ANALYSIS AND PROJECTIONS DEPARTMENT

Table 4.1: - HONnURAS page 2 of 5

SERVICE PAYMENIS, COMMITMENTS. DISBURSEMENTS AND OUTSTANDING AMOUNrS OF EXTERNAL PUBLIC DEBT

PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNOISBURSED AS OF DEC. 31, 1979

DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS(IN TIIOUSANDS OF U.S. DOLLARS)

TYPE OF CREDITOR MULrILATERAL LDANSTOlAL

YEAR DEBT OUTSTANDING AT . T R A N S A C J I 0 N S D U R I N G P E R I 0 D 0111R CIIAtW(;FS

BEGINNING OF PERIOD

DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL ADJIISI-

ONLY UNDISBURSED MENTS MENTS -------- :-----------:----------- LATIONS MUtLr

PRINCIPAt INTEREST TOTAL

* (1) : (2) (3) - (4) (5) (6) (7) (¶11 I'1l

1975 109,680 18t.800 121.083 56,943 3,860 6,934 10,794 115 3

1976 162,764 298,911 82.943 38,457 9.858 9,828 19,686 34 1.549

1977 191.362 370,413 144.002 59.852 12.803 12.032 24,835 1.1:'2 -1i1

1978 238,409 500.312 76,259 88.594 14,992 16,309 31,301 804 2

1979 312,015 560.777 154.861 68,375 16,120 22,914 39,034 900 4

1980 364,274 698.622

* .* * THE FOLLOWING FIGURES ARE PROJECTED * # *

1980 364.274 698.622 - 64,816 16.628 18,020 34,648 -41

1981 412,416 681,947 - 67,390 12.911 20.393 33.304 4 )

1982 466.899 669.040 - 59,787 15,809 23,065 38,874 - 2

1983 510,875 653,229 - 56,424 18,099 24,164 42,263 8 -

1984 549,206 635,138 - 38,6t0 23,610 24,666 48,276 I

1985 564,206 611.527 - 21,897 29.081 24.184 53.2G5 -i

1986 557,020 582,445 - 14,456 29,704 22,622 52,326 4

1987 541.775 552.745 - 8,922 32.264 21.351 53.615 -

1988 518.433 520.481 - 1,928 32,998 19,692 52,690 - -I

19S9 487,362 487,482 - 0oo 32.951 17,792 50.743 - 3

1990 454,514 454,534 - 19 31.988 16,281 48,269 - 3

1991 422,548 422,549 - I 29.563 14,514 44,077 - I

1992 392,987 392,987 - - 27.842 12,936 40.778 -3

1993 365.t42 365.142 - - 26.820 11,441 38,261 5

1994 338,327 338,327 - - 25,459 10,059 35,518 - 2

THIS COLUMN SHOWS THE AMOUNT OF ARITIHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UND1SBURSED FROM ONF

YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND IRANSFER OF DrI'[,

FROM ONE CATEGORY TO ANOTHER IN THE TABLE.

Table 4. 1: - HONDURASpage 3 of 5

SERVICE PAYMENTS, COMMITMENTS. OISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBI

PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDIS8URSED AS OF DEC. 31, 1979.

DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS(IN THOUSANDS OF U.S. DOLLARS)

TYPE OF CREDITOR BILATERAL LOANSTOTAL

YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 0 OTHrR (IIANGF'

BEGINNING OF PERIOD

DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADUJIJSt-

: ONLY UNDISBURSED MENTS MENTS ----------- ----------- -----------: LATIONSr MFNT

: : . : : PRINCIPAL INTEREST TOTAL

: (I) : (2) (3) (4) (5) : (6) (7) (8) : )

1975 46,851 72,282 53.183 34 742 209 1.506 1,715 329 3

1976 81,386 124.930 31.878 28 274 264 3.347 3,611 125 -46

1977 109.350 156.373 59.538 25 227 1,128 4,899 6.027 337 409

1978 133.433 214.037 28,142 38 059 2,212 6.883 9.095 518 -1.05'

1979 168.997 238.390 38.486 20 432 1,502 7.278 8.780 485

1980 188,133 275.859

* * * * * THE FOLLOWING FIGUR:S ARE PROJECTED * * . * *

1980 188,133 275.859 - 38,795 3.913 8.714 12,627 -

1981 223,015 271.947 - 21,636 4.115 10,032 14,147 -3

1982 240.582 267.829 - 14.8al 5,885 10.702 16,587 - :1

1983 249.581 261,947 - 7.755 7,275 10.835 18,110 - -2

1984 250.059 254.670 - 3,979 51,046 10.639 61,685 - 5

1985 202,998 203.629 - 338 8,193 7,115 15.308 -I In

1986 195.142 195,435 - 175 8,709 6.827 15,536 1

1987 186.609 t86,727 - 118 8,855 6.544 15.399 - 5

1988 177,877 177.877 - 9.119 6.160 15,279 - I

1989 t68,759 168,759 - - 8,961 5,926 14.887 - -

1990 159,798 159,798 - - 8.780 5,687 14,467 -

1991 151.0t9 151.019 - - 8,546 5.280 13,826 - 4

1992 t42.477 142,477 - - 8.562 4.872 13,434 -

1993 133.916 133,916 - - 8,579 4.465 13.044 2

1994 125.339 125.339 - - 8.595 4.056 12.651 - 7

* THIS COLUMN SHOWS THE AMOUNT OF ARITHIMEIIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM O111

YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALAJCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DLBIS

FROM ONE CATEGORY TO ANOTHER IN THE TABLE.

Table 4.1:- HONDURAS page 4 of 5

SERVICE PAYMENTS, COMMITMENTS. DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBIIC DEBT

PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1979

DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS(IN THOUSANDS OF U.S. DOILARS)

TYPE OF CREDITOR FINANCIAL INSTITUTIONSTOTAL

YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OnlilFR C8IANGL5

BEGINNING OF PERIOD

DISBURSED INCLUDING COMMIT- OISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADJLUSt-

: ONLY UNDISBURSED MENTS MENTS ----------------------------------- LATIONS MINI

PRINCIPAL INTERESr TOTAL

: (1) : (2) (3) (4) (5) (6) (7) (8) Ii)

1975 8,998 9.260 5,610 1,695 1.432 790 2.222 C7 -

1976 9.261 13,371 27,510 23,283 2,290 1,386 3,676

1977 30.254 38,591 37,278 40,078 4,373 3,929 8,302 - -2

1978 65,959 71.494 43,594 37,81t 8,375 6.349 14,724 3:15 529

1979 95,396 106,907 126.000 122.183 42,620 13,186 55,806 - '2.931

1980 177.904 193.218

* * * * * . THE FOLLOWING FIGURES ARE PROJECTED t * * * * *

1980 177.904 193,218 - 13.185 15,933 24,810 40,743 - 1.588

1981 173.569 175.697 - 2,128 18.935 25,837 44.772 - -3

1982 156.759 156.759 - - 27,656 23.017 50,673 - -2

1983 129.101 129,10i - - 24,249 18,889 43.138 - -1

1984 104.851 104.851 - - 23,063 15,214 38,277 - I

1985 81,789 81.789 - - 21.918 11,664 33,582 - -2

1986 59,869 59.869 - - 29,245 8.429 37,674 - -1

1987 30,623 30,623 - - 12,222 4.159 16,381 - 3

1988 18.404 18,404 - - 11,584 2.313 13.897

1989 6.820 6,820 - - 5,820 591 6.411

1990 1,000 1,000 - - 80 49 129 -

1991 920 920 - - 80 45 125 -

1992 840 840 - - 80 41 121 -

1993 760 760 - - 80 37 117

1994 680 680 - 80 33 113 -

t THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE

YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS

FROM ONE CATEGORY TO ANOTHER IN THE TABLE.

Table 4. 1: - HONDURAS page 5 of 5

SERVICE PAYMENTS. COMMITMENTS. DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUMI IC ODFI

PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNOISBURSED AS OF DEC. 31, 1979DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS

(IN TIIOUSANDS OF U.S. DOLLARS)TYPE OF CREDITOR SUPPLIERS CREDITS

TOTALYEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S O tJ R I N G P E R I 0 D OTIIFR CIIANGF S

: BEGINNING OF PERIOD

DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A r M E N T S CANCFL AOIU1sI-

: ONLY UNDISBURSED MENTS MENTS ----------- ----------- ----------- LATIONS MUNIPRINCIPAL INTEREST TOTAL

: () } : (2) . (3) (4) (5) (6) (7) (8) 9)

1975 5.695 12,503 - 5.849 946 920 1.866 - 3

1976 10.601 11,560 11.381 3,392 953 884 1.837 - -9

1977 13.031 21.979 1,029 8.127 1,461 1.010 2.471 - 34

1978 19.710 21.581 - 1.539 2.539 1.845 4.384 332 t7

1979 18.727 18.727 2.481 - 3.168 1.533 4.701 211

1980 15.587 18.251

* * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * *

1980 15.587 18,251 - 533 3.912 1.280 5,192 - 2

1981 12.209 14.341 - 693 3.077 999 4.076 - -2

1982 9.823 11.262 - 639 2.623 782 3.405 - 1

1983 7.840 8.640 - 506 2.280 582 2.862 - °

1984 6.066 6.360 - 293 1.954 440 2.394 -

1985 4.405 4.405 - - 1.914 302 2.216 - I I

1986 2.492 2.492 - - 1.026 176 1.202

1987 1.466 1.466 - - 977 96 1.073

1988 489 489 - - 489 I9 508

* THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUlSTANDING INCLUDING UNDISBURSEI) FROM ONE

YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND 1RANSFER OF DEBIS

FROM ONE CATEGORY TO ANOTHER IN THE TABLE.

Table 4.2: - HONDURAS p3ge 1 of 3

SERVICE PAYMENTS. COMMITMENTS. DISBURSFMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBI

PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1979

DEBT REPAYABLE IN LOCAL CURRENCY(IN THOUSANDS OF U.S. DOLLARS)

TOTAL

YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OTIIER CHANGES

BEGINNING OF PERIOD

DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- ADjuJS[-

: ONLY UNDISBURSED MENTS MENTS ----------- :----------------------- LATIONS MiNI

PRINCIPAL INTEREST TOTAL

(1) . (2) (3) (4) (5) (6) (7) (8) (9)

1975 56,462 90,263 2,169 16,196 2,549 2,340 4,889 129 -

1976 70,110 89,754 12,217 10,326 2,755 2.442 5,197 - 1,557

1977 77,682 100,773 6,288 9,662 3.875 2.773 6,648 449 173

1978 83,473 102,910 4,821 11,564 4,514 2,607 7,121 280 -2

1979 90,522 102,935 5,674 8,688 4,834 2,741 7,575 313 8

1980 94,382 103.470

* * * * * THE FOLLOWING FIGURES ARE PROJECTED * * *

1980 94.382 103,470 - 2,243 4.923 3.400 8,323 - -1

1981 91.701 98.546 - 1,781 5,032 3,260 8.292 - 4

1982 88,456 93,518 - 1,614 5.252 3,098 8,350 - 2

1983 84,820 88,268 - 1,549 5.840 2,956 8.796 - 3

1984 80,532 82,431 - 955 6,236 2,772 9,008 - -4

1985 75,247 76,191 - 402 6.200 2,555 8,755 - 5 0

1986 69.453 69,996 - 301 6.284 2,307 8,591 - 2

1987 63.473 63,714 - 211 5,997 2,093 8,090 - -2

1988 57,685 57.715 - 30 5,997 1.854 7.851 - 4

1989 51.722 51,722 - - 5,726 1,597 7.323 - -1

1990 45.995 45,995 - - 5,757 1,379 7,136 - 4

1991 40.242 40,242 - - 4,785 1,130 5.915 - 3

1992 35.454 35,454 - - 4.518 929 5,447 - -1

1993 30,935 30,935 - - 3,638 745 4,383 - 3

1994 27.300 27,300 - - 3,048 625 3,673 - -2

* THIS COLUMN SHOWS THE AMOUNI OF ARITHMETIC IMBALANCE IN THE AMOUJNT OUTSTANDING INCLUDING tJNDISBURSFD FROM ONE

YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATCS AND IRANSFER 0F- DEBIS

FROM ONE CATEGORY TO ANorHER IN THE TABLE.

EXTERNAL DEBT DIVISION

ECONOMIC ANALYSIS AND PROJECTIONS DEPARTMENT

Table 4.2: - HONDURAS page 2 of 3

SERVICE PAYMENTS. COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT

PROJECTIONS BASED ON DFBT OUTSIANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1979DEBT REPAYABLE IN LCCAL CURRENCY

(IN THOUSANDS OF U.S. DOLLARS)TYPE OF CREDITOR MULTILATERAL LOANS

TOTALYEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OTHER CHANG(ES

: BEGINNING OF PERIOD

DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL- . AOJUJST: ONLY UNDISBURSED MENTS MENTS ----------- ----------- ----------- LATIONS MENi +

PRINCIPAL INTEREST TOTAL

* (1) : (2) (3) (4) (5) (6) (7) (8) (9)

1975 52,084 85.885 2.169 16,196 1.886 2.192 4,078 129 -1

1976 66,394 86.038 12.217 10.326 2.072 2.312 4.384 - 1.558

1977 74,650 97.741 6.288 9.662 3.167 2.673 5.840 449 173

1978 81,149 100.586 4,821 11.564 3.784 2.529 6,313 280 -1

1979 88,929 101.342 5.674 8,688 4.502 2,689 7,19l 313 7

1980 93.120 102.208

* * * 4 * THE FOLLOWING F;GURES ARE PROJECTED * * 4 4 * 4

1980 93.120 102.208 - 2.243 4.755 3.357 8,112 - -1

1981 90.607 97.452 - 1.781 4.864 3.223 8,087 - 5

1982 87,531 92.593 - 1,614 5,084 3,067 8,151 - 2

1983 84.063 87.511 - 1.549 5.672 2.931 8,603 - 3

1984 79.943 81.842 - 955 6.068 2.753 8.821 - 4

1985 74.826 75.770 - 402 6.032 2.542 8.574 - 6

1986 69.201 69.744 - 301 6.116 2.300 8.416 - 2

1987 63.389 63.630 - 211 5.913 2,092 8.005 - -2

1988 57.685 57.715 - 30 5.997 1,854 7.851 - 4

1989 51.722 51.722 - - 5.726 1.597 7,323 - -

1990 45.995 45.995 - - 5,757 1.379 7,136 - 4

1991 40.242 40.242 - - 4.785 1,130 5.915 - 3

1992 35.454 35.454 - - 4.518 929 5,447 - -1

1993 10.935 30.935 - - 3,638 745 4.383 - 1

1994 27,300 27.300 - - 3.048 625 3.673 -2

* THIS COLUMN SH1OWS THE AMOUNT OF ARITHMETIC IMBALokNCE IN THE AMOUNT OUTSTANOING INCLUDING UND)ISBURSED FROM ONE

YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBIS

FROM ONE CATEGORY TO ANOTHER IN THE TABLE.

Table 4.2: - HONDURAS page 3 of 3

SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL l'UBLIC DEBT

PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1979DEBT REPAYABLE IN LOCAL CURRENCY

(IN THOUSANDS OF U.S. DOLLARS)TYPE OF CREDITOR BILATERAL LOANS

TOTALYEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 D OTHER CIIAN(;ES

BEGINNING OF PERIOD

DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A Y M E N T S CANCEL ADJUSI

ONLY UNDISBURSED MENTS MENTS ---------- :-----------:----------- LATIONS MFNrPRINCIPAL INTEREST TOTAL

: () (2) (3) (4) (5) (6) (7) (8) : 9)

1975 4,378 4,378 - - 663 148 8t -1

1976 3,716 3.716 - - 683 130 813 - -1

1977 3,032 3,032 - - 708 100 808 -

1978 2.324 2.324 - - 730 78 808 -

1979 1,593 1,593 - - 332 52 384 -

1980 1,262 1,262

* * * * THE FOLLOWING FIGURES ARE PROJECTED * * , * * *

1980 1.262 1,262 - - 168 43 211

1981 1,094 1,094 - - 168 37 205 - -l

1982 925 925 - - 168 31 199 - -

1983 757 757 - - 168 25 193 -

1984 589 589 - - 168 19 187 - - *

1985 421 421 - - 168 13 181 - -I

1986 252 252 - - 168 7 175 - -

1987 84 84 - - 84 1 85 -

* THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM OtNF

YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTS

FROM ONE CATEGORY TO ANOTHER IN THE TABLE.

Table 5.1: HONDURAS - PUBLIC SECTOR OPERATIONS, 1970-1979

(millions of current lempiras) page 1 of 2

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

I. Central GovernmentCurrent Revenue 190.1 184.0 200.2 227.0 273.2 303.9 376.4 488.4 543.5 633.7Current Expenditures 158.1 164.2 192.8 188.6 224.6 288.3 372.8 447.0 507.1 582.0

Current Savings (+) 32.0 19.8 7.4 38.4 48.6 15.6 13.6 41.4 36.4 51.7

Capital Receipts - - - - - - 8.1 0.8 - 1.5Capital Expenditures 65.6 61.5 50.4 62.6 100.0 135.0 124.4 183.6 239.4 245.3

Overall Deficit (-) -33.6 -41.7 --3.0 -24.2 -51.4 -119.4 -112.7 -141.4 -203.0 -192.1External Financing (net) 13.3 34.4 19.4 18.8 46.0 86.8 70.9 85.6 163.0 143.0Domestic Financing (net) 20.3 7.3 23.6 5.4 5.4 32.6 42.7 55.8 40.0 49.1

II. MunicipalitiesCurrent Revenues 13.4 14.4 13.5 16.1 24.3 21.0 25.2 38.0 37.8 47.6Current Expenditures 11.6 12.0 11.6 12.0 18.9 15.6 19.7 28.3 34.6 41.7

Current Savings (+) 1.8 2.4 1.9 4.1 5.4 5.4 5.4 9.7 3.2 5.8Capital Receipts 2.8 1.8 1.0 1.0 4.3 8.3 2.4 2.3 1.3 2.4Capital Expenditures 3.5 5.0 4.0 4.6 11.0 9.7 16.4 20.9 20.1 43.1

Overall Deficit (-) 1.1 -0.8 -1.1 0.5 -6.1 0.8 -8.6 -8.9 -15.6 -34.9External Financing (net) - - - - 0.8 0.6 7.7 2.6 5.2 _Domestic Financing (net) -1.1 0.8 1.1 -0.5 5.3 -1.4 0.9 6.3 10.4 34.9

III. Autonomous InstitutionsCurrent Revenues 17.4 15.8 33.5 43.1 59.0 77.5 103.2 117.0 159.4 177.7Current Expenditures 15.6 19.2 35.1 42.5 44.8 60.4 71.4 81.6 96.4 120.6

Current Savings (+) 1.8 -3.4 -1.6 0.6 19.4 17.2 32.1 36.7 60.8 57.1Capital Receipts 1.5 5.2 8.6 10.4 6.5 8.8 5.8 20.3 15.5 18.1Capital Expenditures 5.9 4.6 2.1 4.4 8.6 12.1 10.6 24.6 34.8 30.4

Overall Deficit (-) -2.6 -2.8 4.9 6.6 17.3 13.9 27.3 32.4 41.5 44.8External Financing (net) 2.4 3.0 1.2 1.4 0.5 0.7 0.2 -0.5 -0.5 -0.5Domestic Financing (net) 0.2 -0.2 -6.1 -8.0 -17.8 -14.6 -27.5 -31.9 -40.0 -44.3

Page 2 of 2

Table_5.1__HONDURAS - PUBLIC SECTOR OPERATIONS, 1970-79(million of current lempiras)

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

IV. Public EnterprisesCurrent Revenues 44.0 50.0 37.8 40.6 68.3 92.0 104.3 160.0 178.9 225.4

Current Expenditures 31.8 34.3 26.4 31.1 39.4 55.9 72.7 104.9 129.7 159.0Current Savings (+) 22.2 15.7 11.4 9.5 28.9 36.1 31.6 55.1 49.2 66.5

Capital Receipts 7.3 3.3 3.2 6.6 17.1 18.5 16.0 15.1 32.4 40.8

Capital Expenditures 38.9 16.7 17.7 38.0 65.0 54.5 87.7 125.9 136.2 160.6Overall Deficit (-) -19.4 2.3 -3.1 -21.9 -19.0 0.1 -40.1 -55.7 -54.6 -53.4External Financing (net) 18.4 7.0 5.4 10.8 14.4 23.1 34.4 65.3 67.5 70.6Domestic Financing (net) 1.0 -9.3 -2.3 11.1 4.6 -23.2 5.7 -9.6 -12.9 -17.2

N-J

V. Consolidated Public SectorCurrent Revenues 248.1 249.4 265.4 313.1 394.7 450.5 556.2 736.0 830.1 981.6Current Expenditures 202.3 214.9 246.3 254.3 300.3 375.6 483.4 592.2 680.1 800.0Current Savings (+) 45.8 34.5 19.1 58.8 94.4 74.9 72.8 143.8 150.0 181.6

Capital Receipts 5.2 3.4 3.4 4.9 - 5.3 3.7 3.9 8.8 13.1

Capital Expenditures 107.5 80.9 64.8 94.9 161.6 193.8 226.1 350.8 424.3 472.6Overall Deficit (-) -56.5 -43.0 -42.3 -31.2 -67.2 -113.6 -149.6 -203.1 -265.5 -277.9External Financing (net) 34.4 44.4 26.o 32.2 61.4 111.1 125.6 153.0 235.2 213.1Domestic Financing (net) 22.1 -1.4 16.3 -1.0 5.8 2.5 24.o 50.1 -30.3 64.8

Source: Central Bank.

TABLE 5.2: HONDURAS: CENTRAL GOVERNMENT CURRENT REVENUE. 1970-80(MILLIONS OF CURRENT LEMPIRAS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

TAX REVENUE 158.5 161.t 168.3 194.7 228.3 247.3 312.6 434.2 502.6 573.4 696.5

ON INCOME AND PROPERTY 46.5 43.7 41.6 50.0 67.6 77.3 76.3 94.5 127.6 152.8 236.0

BANANA COMPANIES 11.3 5.6 2.6 6.6 6.9 0.0 0.0 0.0 0.0 0.0 0.0

OTHER COMPANIES 23.8 28.0 27.9 29.6 41.4 54.2 52.1 51.4 68.1 78.9} 226.3

PERSONAL INCOME 6.9 7.9 9.1 11.2 t7.1 20.1 21.4 39.3 55.1 68.3 2

INHERITANCE & GIFT 1.1 0.7 0.7 0.7 0.6 1.0 0.9 0.9 1.1 1.1 1.1

PROPERTY 0.9 1.2 1.3 1.6 1.5 1.9 1.8 2.8 3.2 4.4 6.0

OTHER 2.5 0.3 0.0 0.3 0.1 0.1 0.1 0.1 0.1 0.1 0.1

ON DOMESTIC TRANSACTIONS 61.5 62.8 68.9 77.0 80.9 85.7 105.9 128.9 144.6 163.3 182.1

SALES 11.0 11.7 12.1 15.0 16.7 17.9 25.4 32.5 37.9 43.3 49.5

BEER 12.7 14.6 16.4 17.2 15.9 16.8 17.5 23.2 26.5 30.7 35.9

ALCOHOL 9.6 10.1 9.9 11.4 12.2 13.7 18.2 20.3 20.7 21.9 23.9

CIGARETTES 5.5 5.5 5.7 6.2 6.9 7.4 10.7 13.3 14.5 16.8 21.4 t

PETROLEUM PRODUCTS 8.7 9.8 12.1 12.9 12.3 13.0 14.1 12.9 15.3 15.8 12.5

NEW VEHICLES 1.8 1.8 1.7 2.2 2.8 2.1 2.5 6.1 7.0 8.6 9.3

VEHICLE LICENCES 1.1 1.2 1.3 1.3 1.5. 1.8 1.8 2.0 2.1 2.1 2.3

CONSUMPTION 4.4 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

SUGAR 1.3 2.0 2.2 2.1 2.1 2.5 2.7 0.7 3.2 3.4 3.3

OTHER 5.4 6.0 7.5 8.7 10.5 10.5 13.0 17.9 17.4 20.7 24.0

ON INTERNATIONAL TRADE 50.4 54.5 57.7 67.6 79.7 84.1 130.2 210.7 230.2 257.0 278.1

IMPORT TAXES 44.6 48.2 51.7 56.2 64.9 61.8 80.2 115.4 128.7 146.3 149.7

EXPORT TAXES 5.8 6.3 6.0 11.4 14.8 22.3 50.0 95.3 101.5 110.7 128.4

COFFEE 3.7 4.0 3.6 6.6 4.6 8.4 26.1 58.5 62.8 59.0 64.6

BANANA 0.6 0.8 0.7 0.7 8.2 12.0 22.2 34.4 36.4 48.4 50.1

OTHER 1.5 1.5 1.7 4.1 2.0 1.9 1.7 2.4 2.3 3.3 13.7

MISCELLANEOUS TAXES 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.3 0.3

NON-TAX REVENUE 31.6 23.0 31.9 32.6 45.0 56.6 63.8 54.2 40.9 58.8 62.5

PUBLIC SECTOR TRANSFERS 3.9 4.3 8.5 4.7 0.1 7.1 6.4 11.4 10.9 15.8 20.0

OTHER 27.7 18.7 23.4 27.9 44.9 49.5 57.4 42.8 30.1 43.0 42.5

CURRENT REVENUE 190.1 184.1 200.2 227.3 273.3 303.9 376.4 488.4 543.5 632.2 759.0

=S====== ======== ==== ==== == ====== =======M OF FINNC E m . = . . ........ ........

SOURCE: MINISTRY OF FINANCE

TABLE 5.3 [IONDURAS CENTRAL GOVERNMENT EXPENDITURE BY ECONOMIC CLASSIFICATION. 1970-80

(MILLIONS OF LEMPIRAS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

CURRENT EXPENDITURE 158.1 164.2 192.8 188.6 224.7 288.3 372.8 446.9 507.0 574.3 742.2

WAGES AND SALARIES 122.7 141.9 162.3 159.4 134.7 164.1 178.2 212.0 260.6 276.8 545.2GOODS AND SERVICES 0.0 0.0 0.0 0.0 44.3 49.3 114.3 126.1 106.4 122 .3 INTEREST 7.4 10.3 12.6 14.2 15.1 22.3 21.7 30.3 34.3 42.2 50.3DOMESTIC DEBT 3.7 7.4 5.2 5.8 6.5 7.6 9.9 13.5 14.3 18.3 20.6EXTERNAL DEBT 3.7 2.9 7.4 8.4 8.6 14.7 11.8 16.8 20.0 23.9 29.7

TRANSFERS 19.5 12.0 17.9 15.0 30.6 39.7 42.7 47.5 70.7 85.9 91.7TO PRIVATE SECTOR 7.2 0.0 5.3 5.0 10.6 2.8 8.4 6.5 9.4 9.8 8.6To PUEL.ENTERPRISES 0.0 0.9 1.4 0.0 0.0 2.8 0.0 0.3 0.0 0.0 0.0TO AUTON.INSTITUTIONS 10.4 8.8 9.5 9.0 17 6 32.0 32.3 37.2 56.6 71.4 78.1To MUNICIPALITIES 0.5 0.8 0.2 0.0 0.1 0.0 0.0 0.0 0.1 0.1 0.1ABROAD 1.4 1.5 1.5 1.0 2.3 2.1 2.0 3.5 4.6 4.6 4.9 1

EMERGENCY EXPENDITURE 8.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 _DEVELOPMENT EXPENDITURES 0.0 0.0 0.0 0.0 0.0 12.9 15.9 31.0 35.0 47.2 55.0 4'

INVESTMENT EXPENDITURE 65.6 61.7 50.4 62.6 100.0 135.0 124.4 182.5 264.1 251.7 402.3

FIXED CAPITAL 50.0 46.3 37.6 40.9 61.8 80.1 87.2 120.9 173.9 158.3 172.0FINANCIAL (1) 0.4 0.2 0.3 0.2 3.7 0.0 0.5 1.0 26.2 28.6 135.9(2)TRANSFERS 15.2 15.2 12.5 21.5 34.5 54.9 36.7 60.6 64.0 64.8 94.4

TO PRIVATE SECTOR 0.4 0.5 0.2 0.2 0.0 0.3 0.3 1.1 0.6 0.1 0.4To PUBL ENTERPRISES &

AUTON.INSTITUTIONS 5.6 6.6 8.4 12.6 17.8 25.2 21.8 36.0 40.2 38.2 49.910 MUNICIPALITIES 0.9 0.3 1.0 0.5 0.5 5.1 2.4 2.1 1.3 1.8 4.1TO STATE BANKS 8.3 7. 8 2.9 8.2 16.2 24.3 12.2 21.4 21.9 24.7 40.0

TOTAL EXPENDITURE 223.7 225.9 243.2 251.2 324.6 423.3 497.2 629.4 771.1 826.0 1144.5

(1) INCLUDES NET LENDING.(2) INCLUDES LOANS RECEIVED BY THE CENTRAL GOVERNMENT FOR THE POWER COMPANY.

SOURCE MINISTRY OF FINANCE

Table 5.4: HONDURAS - PUBLIC FIXED INVESTMENT BY SECTORS -/(in million lempiras)

ACTUAL PROJECTIONS1978 1979 1980 1981 1982 1983 1984 1985

I. Infrastructure 270 261 312 319 374 464 4.88 407Transport 173 160 127 115 145 156 i3 149Telecommunications 29 10 8 12 22 38 4o 45Energy 47 66 162 185 200 263 297 205Urban Development 21 25 15 7 7 7 8 8

II, Productive Sectors 31 42 73 79 100 94 138 302Agriculture 20 21 25 25 35 40 50 -Forestry 6 16 44 52 63 52 86 235COHDEFOR (6) (6) (9) (17) (20) (32) (30) (30)CORFINO (_) (10) (35) (35) (43) (20) C56) (205)Tourism and others 5 4 4 2 2 2 2 2

III. Social Sectors 60 63 64 67 71 97 122 114Education 11 12 17 20 25 28 30 35Health 27 34 37 38 35 57 78 82Housing 5 4 5 5 8 9 10 12Social Welfareand other 16 13 5 4 3 3 4 5

IV. Total 361 366 449 465 545 655 748 843

V. GDP 3,638 4,332 5,108 5,772 6,522 7,435 8,550 9,833Public FixedInvestment/GDP (%) 9.9 8.4 8.8 8.1 8.4 8*9 8.7 8 6

1/ Includes only the non-financial public sector.

Source: Mission estimates.

- 76 -

PAGE I OF

TABLE S S HOCEURAS PROPOSED FIXE0 PUBLIC INVESTMENT PLAN BY PROJECT. 1981-1985(MILLIONS OF CURRENT LERPIRASI

PROJECT IONS

-981-5 1901 "98 198; 1984 1985PROJECT FOREIGN T.IAL TOTAL TOTAL TOTAL TOTAL TOTAL

FINANCING FOREIGN FOREIGN FOREIGN FOREIGN FORTIGN FAREIGNAGENCY /1 LOCAL LOCAL LOCAL LOCAL LOCAL LOCAL

INFRASTRUCTURE 2052 319 37A 360 488 407.............. 165~~~~~~~lAB 230 27R 339 4 R

567 03 9 125 143 120

POWER 1(50 lS 200 263 297 205859 (Al 150 300 220 140

291 44 50 63 77 57

I EL CAJON .2,S.8 872 103 125 I8R 267 (939,10.11 648 8A 90 (37 199 l41

224 22 35 97 68 52

2 NISPERO * 2 12 - - - -7 7 _ -

3 INTERIM THERMAL 63 38 25 - --54 32 22 - - -

9 A 32

4 AGUA0 VALLET RURAL 3 I7 IA 3 - - -ELCTRIFICATION IA 9 I

7 5 2 - - -

5 OTHER TRANSMTSSION 4 142 9 39 71 21 2(INCLUDING EL CAJON) II? 9 33 5 IN

25 I 6 12 5 I

6 DISTRIRUTION 5 30 S 6 8 9 1022 3 4 4 S 6

7 OTHER 6 4 2 - -

S 3 2 - - -

TRANSPORT ITOTALI 708 15 145 ISA 143 149. ...... ~~~~ ~ ~~~~~~~~~498 RN III (03 99

2I0 29 34 47 S0 50

A ROADS 481 91 95 95 100 10032 09 a8 59 00 07152 22 27 36 34 33

1 TALANGA-CATACAMAS 1 12 1O 2 - - -

* 7 1 _

2 TEGUCIGALPA-JICARO GALAN 5 8 a - - - -9 6 - _

3 LA ENTRADA-COPAN RUINMS S 4 4

4 AGUAN6 VALLEY ROADS A2 6 6 - -3 3 - - . -

S OLANCHO PRIMARY ROADS 2 56 32 24 - - -49 27 22

7 5 2 - - -

6 OLANCHO SECONUARY ROADS 1,2 33 5 12 10 6 -26 A (0 8 4 -

7 I 2 2 2

O RURAL ROADS 1,2,3 61 12 1 12 IO 123S 8 10 7 6 723 4 5 5 4 5

8 MAINTENANCE 1.3 38 a 13 5 6 620 3 8 6(2 5 S 2 - -

9 OTHER CONSTRUCTION 163 2 13 39 52 57lIT I 10 20 30 4244 1 3 II '4 IS

10 IMPROVEMENT AND 97 I 16 29 26 25REHARILITAT'ON 45 7 163 12 12

52 - 9 60 I 13

1/ FOREIGN FINANCING AGENCIES 1RRO. 2C1=ID 3 USAIO .-CIDUA 5CABEI E6GECRAN GDVERN.ENT 7EXUIM 80A0 OF JAPAN8.0ECF 9 SUPPLIERS CREDITS l0.OPEC, I ICIC 12.CARE 13=YNICTF S140ISS GOVERNMENT C SAEEC IN-IFAD17*iAO 18'EOC 19.0E1W 84AN. IN SAME CASES INDICATED AGENCY MAY FINANCE ONLY PART OF A PROJECT OR PROGRAM

SOURCE CONSUPLANE. AGENCY AND l8RD ESTIMATES

a n. . i D o S S * . 3 - - o - D . o 4 f - .4 zo°f, -F

A 1. A. - -

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*0 .4 , S .0 4 . -.

u u . u4 q . .o + J@ u; @ wSwvo u b ux 00 oo oou u X u' II°-

SelIe N JP8. O I5INd Nl1016 .N A110 111 se/ N t 161361 511151051 5]w I 311135 16 N W I Y0R 1361 ±05.a1 OJLO J; 19 133N1 C. 33_I3AW 56 16'.', 53351101.1 BOee.CI 535'1 5363-01 $ lOSeS 6NN15661161.3 S530.NNNo.r JO IN;t M1001 ±13. 110001.AO sytcesi-, I 3t5.N 1015*I 011611.6 tOl.t 03160 * 63161.35t11Xt1 t1Itl1I I.31.3e6 /1

N I C C - - C0It 30 1±N' J Ie JS~~~~~~~~~~~~~~~~~~~~~~~00

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S S t .. .N__I

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C I S S ee 0IS003S N

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-~~~~~~~~~~~~~~~~~~~~~~~~~~OWI - 1 Z 1

-~ ~ t 1 1.81 NI1

~* -1, 1 I N101

- 0 1 I S

* N S N N ~g 01.603 A10005

-~ ~ , oI N SueztS 510016$SO

s,* -It Is, leesI 0o11500

O NI NI -I N N

NS ,, 51 IC 0I 0111 1 ^

~~~~1C 0, 1SDX 1 1 I

SC GC , 91 3c ,,3;z

* $103~~~~~~~~~~~~~~~~~~~~~~OI11NN01/80 IN t

- . N N 6.~~~~~~~~~~~~~~~~~~~~~t1135361 ,3e

t t t C C I 5.513 50W NI10] 10±NI N2H

C C , C OC6

- ±° 5-A *t* -l6 IIat 1160 0 6 11

.~~~~~~ . . ... ..

NI~~~~~i* 01A^ ± )P3dA 313,jU AI311 X1 1

5 1 SI I I 161. seeNe~~ SC Ce I ICI eels- eoool_ sNC±

PAGE A OF 5

TAILS 5 5 HCCIAs rARotsiO riotS PALIC INVIST(NIEN PLN BY PROAiSCT. g9I7. 0X9luuxmS 1f C'0RE'S tl FE1I SI

4111LI IWAS OF tUROtmi Lj"pjo&SW; t ON

------------ ~~~~~~~~~~~~~... .. ..... . ......... ................... --------------------

POOjECTIOUS

essI-St *S98 912 1902 i99A 7905ISaAC? jaSM~~~~~~~roine TOTAL 'OVAkL ITOTL ITOTAL TOTAL TOTALPIWA&CSIft Pt0EtOft FOaftI0O FORaION rtineI FOrEISg roSMiosAGENCY fs LOCAL LOCAL LoCal LOCAL LOCAL LOCAL

.................... ....... . ............... - - ... .... -- -- -- -- I- -- ------- - ......... - - -..... ....... ..

PRODLCTIVE SECTOS ' 772 7') too 04 739 302- - - - - - - - - - - - - - j~~~~~~40 4a Be S 79 f rZ300 33 42 *O 59 120

ORAICULTURE - 219 2s 25 40 so e5- - -- 600 173 IT II 25 33- 109 72 1i 21 25 33

1 w INtSTlAT,ION a - 2 - ' ' 2EtlEF1510"~~ ~ ~ ~ ~~~~ 4 3 -

2 COIFTROL Ao E0AOICaTIOpd - 2 - 7 7-CATTLE DISEASE

CA?L aegseEEst - ,2jt - '^ - -3. SISAl. otvtLopWEW - 1,,1 Id 1 2 4

eU%APE-StA. RAIARA - - 2 7 1 4 4SETsYgN ItOION (IPRODEROI - - I - 1 -

* SI"OKA CONIQOL 5 -

- 7 I - - - -.

o MECHIANIZATION 2 A t 2 3 2

- ~ ~ ~~- 9 7 2 2 2

S. SMALL IRRIOAPTIO. WAS - - 0 7 7 3 2 2

- S 1 1 1 2 2t AI'ItAN fISgiwfC 2,11 - 2 2 - -

-22 ii-* ~ ~ ~ ~ ~~ * 7 I

9. AOlAIlAN REfOfs p,O.J(CS I,

- - 2 e 4

2 2 4 t

*o0 I RaOATgs AI t rD FLOQ -- 2 £COhITROL

t 2 5

AREA$ *S

II 1t5(0gR RaE0I 7T carpet - 30

3 , S5

^~~~~~~~~~~~~~~~~~ ~ 2Ua 9TaHuE S 9 - j3

23 2

t^BDFtATOtY~~ ~ ~ ~ ~~ 1. 4 , -

A4. RIRAL STORIIOUSES * - - 2

- 22 - 1

I S. T IE AC H I N G C N E A. .LASOSATORN o - -

-WRCe 34NSUPtf*tE -ztiENCf -D tl7RD esT s12 22- II - - ~~ ~~~~~2 9

iF%OREIGN FINANJCIPU AGENC,ES. fBO .O tAO .IA SCR! 6GRB OEMOT lEESRWO AAAOC~. 'OSU9EDC ER IM C6OANk0OPC IPCt 2-AE' 1

3.IJNICAEr. 'ER"'gS OOVERIaENy 7-E*ii gofAWG, JPNti-tao ~~E~~. 70'Egu RAIa: N SOME CASES- 1"OICATI5a A0ENCv NAOVERNMENTY AW O d RJC O EOA

SOURCE COAISIIPLANE AOEIA(y SIC (RIo flfl1AMf DOLy ARrOF ;SgEC ArIfA

- ao -

PAGF 5 OFS

TABLE 5 5 HONDURAS- PROPOSED FIXED PUBLIC INVESTMENT PLAN BY PBOJFCT. 1981-198b(MILLIONS OF CURRtNT LEMPIRASI

PROJECTIONS

PROJECT FOREIGN ~~~~~~~ATOTAL I"O'Al TOTAL TO0TAL TOTAL 90TOTALFINANCING OREIGN FOR EIGN FOREIGN FO REIGN FOREIGN Fo REIGN

AGENCY /I LOCAL LOCAL LOCAL LOC AL LOCAL LOCAL

POBESIBY 488 52 63 52 BA 235

....... 3~~~ ~~~ ~~~ ~~~~~~~~04 31 40 35 S4 144

R84 21 23 17 32 SI

I COMAYAGUA REFORESTATION 2 21 3 5 5 4 4FR 2 4 4 3 3

2 CHOLUT ECA RESOURCE 3 5 F I F

MOANAGEMENT S I F F

3 MACIZO CENTRAL INVENTORY 4 2 2 - --

2 2 - -

4. EOUIPMENT AND MACHINERY 4 5 2 2 F --

5 2 2 --

5 OLANCYAO FEEOFR ROADS 2 45 to( 10 10 10

10 2 2 2 2 2

6 OTHER REFORESTATION 1 3 1 2 - -

3 F 2--

7 SAWMILL AND LUMBER/PLYWOOD 45 - - is IS IS

DEVELOPMENT - COHOEFOR 27 9 q

FRa 6 6 A

A BONJITO ORIENTAL SAWMILL 2,IA.19 Al 26 to 5 - -20 12 5 3--21 4 5 2--

9. LA UNION SAWMILL 2 47 9 27 7 -

25 6 IA 4 2 -

19 3 II 3 2-

10 PULP AND PAPER MILL 271 - 6 B1 52 20S163 - 4 5 3I 123

FOR 2 3 21 52

TOURISM 1o 2 2 2 2 23 2 I

7 F 2 2 2

I INFRASTUCTURE/ARCHED- F (0 2 2 2 2 2

LOGICAL/CULTURAL 3 2 F - --DCEVELOPMENT 7 - F 2 2 2

TOTAL FIXED AND FINANCIAL 3256 465 545 655 746 542

PULCIVESTMENT 2075 35 372 449 498 4,1.. ......... ~~~~~~~~~~~10SF 1S0 (73 206 250 302

F! FOREIGN FINANCING AGENCIES 11IBRDO, 211IOP 3ClUSAO 4=CInA SCA8ET" 6-GERMANVGOVERN ENT., 7,EXIM BA NK OF JAPAN

B.OECF. 9.SUPPL IE6S CREDTS" 0.PC F O. 2CAR FUICEF. _F'SWISS GOVERNMENT -SEC 6IFAO17.FA0. IR.EDC, 19-.RIM RANK. IN SOUP CA'SES.'IND'ICATED AGEN3CY NAY FINANFWL ONLY PART OF A PROJE'CTC'OR P6ROGRADM

SOURCE CONSUPLANE. AGENCY AND 155D ESTIMATES

- 81 -

Table 5.6: HONDURAS - CENTRAL GOVERNMENT BUDGET, 1980-81

(in million lempiras)

Initial Modified Approved Increase1980 1980 1981 over initial

1980 budget

Legislative - 4.8 11.7 3.17Judiciary 10.5 10.5 10.9 o.4Electoral Tribunal 4.0 7.4 14.0 10.0Presidency 30.9 43.6 27.1 _3. Interior 15.0 15.4 18.8 3.8Foreign Affairs 10.3 11.0 11.0 0.7Defense 90.3 118.1 90.3 -Economy 13.1 13.2 13.7 0.6Finance 34.8 49.3 33.8 -1.0Attorney General 0.4 0.4 0.5 -0.1Education 176.2 181.1 214.9 38-7'Health 124.6 146.9 149.2 24.6Culture and Tourism 10.0 11.0 8.7 -1.3Labor 26.4 26.5 26.6 0.2Public Works 213.1 234.8 297.0 83.9(El Cajon) (3.1) (106.7) (103.6)Natural Resources 160.5 179.0 151.9 -8.6Public Debt 168.6 174.6 212.7 44.1Central Services 48.0 42.0 57.3 9.3

TOTAL 1,136.7 1,269.8 1,350.0 213.3

Source: Ministry of Finance

Table 5.7: PUBLIC EMPLOYMENT AND SALARIES, 1972-80

1972 1973 1974 1975 1976 1977 1978 1979 1980 Annual Annual AnnualIncrease Increase Increas1975/72 1978/75 1980/78

Permanent Employees (number)

Higher levels 61 48 52 54 25 25 25 25 26 N.R N.R N.RExecutive personnel 139 151 152 151 237 240 208 229 218 N.R N.R N.RUniversity level prof,-,sionals 965 1,061 1,263 1,378 1,997 2,184 2,362 2,533 2,729 12.6 19.7 7.5Technicians 2,786 2,605 3,093 3,359 2,177 2,321 2,913 3,101 3,401 6.4 -4.6 4.7Teaching personnel 10,999 11,076 12,385 12,685 14,680 15,429 16,550 17,358 7,226 4.9 9.4 -0.4Administrative personnel 3,862 4,132 4,466 4,586 5,694 5,882 6,581 7,602 8,100 5.9 12.8 3.2Police 696 696 545 619 539 530 561 694 701 N.R N.R 0.5Laborers 1,044 1,175 1,324 1,424 1,208 1,239 1,331 1,370 1,372 10.9 -2.3 0.1Service personnel 5,648 5,595 6,617 6,849 6,333 6,690 ,,452 8,089 8,385 6.6 2.9 6.0 ,

Total (number) 1/ 26,205 26,544 29,897 31,105 32,890 34,549 38,050 41,001 42,158 5.9 6.9 5.3

Average salary (Lempiras) 2,829 2,951 2,992 3,283 3,961 3,889 4,434 4,774 4,810 5.1 9.3 4.2Real average salary (Lempiras of 1972) 2,829 2,821 2,531 2,571 2,954 2,671 2,906 2,854 2,430 -3.1 3.0 -8.6Total Wage Bill (million Lempiras) 74.1 78.3 89.5 102.1 130.3 134.3 168.7 195.7 202.8 11.3 16.9 9.6

Consumer Price Index (1972=100) 100.0 104.6 118.2 127.7 134.1 145.6 152.6 167.3 197.9 8.5 4.5 13.9

1/ Figures do not include Jefatura de Gobierno. Judiciary, and Defense.

Table 6.1: HONDURAS: SUMMARY ACCOUNTS OF THE BANKING SYSTEM. 1970-1979(MILLIONS OF LEMPIRAS)

D I S T R I B U T I O NI T E M - - - - - - - - - -- - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

INTERNATIONAL RESERVES. NET 18.0 29.3 53.2 60.0 22.5 57.6 105.0 197.2 267.6 233.8

FOREIGN ASSETS 47.4 54.2 80.2 79.3 103.4 216.6 289.7 396.8 408.7 . 458.9NET IMF POSITION - - - 15.1 -41.2 -39.4 -38.6 -10.0 15.3 15.4SHORT-TERM LIABILITIES -29.4 -24.9 -27.0 -34.4 -39.7 -119.6 -146.1 -189.6 -156.4 -240.5

DOMFSIIC ASSETS 419.5 447.2 502 0 611.3 699.5 861.4 1.013.0 1,211.6 1,428.8 1.677.0

CREDIO TO CENTRAL GOVT, NET 49.2 64.2 73.4 77.0 76.3 86.6 103.8 110.1 164.1 185.5CRED. TO REST or PUB. SECT. 4.6 5.9 6.7 10.5 9.4 -5.8 -24.2 0.8 -11.3 11.6OFFICIAL CAPITAL & RESERVES -63.9 -71.3 -82.1 -90.7 -107.0 -123.5 -145.0 -163.6 -186.1 -222.2CREDIT TO DEV. FUND. NET - -3.4 -6.1 -4.1 2.6 6.2 - - - -CRED. ro NONBANK FIN. INTS. - 0.2 0.1 - 1.2 0.5 1.4 1.9 2.4 3.6CREDIl TO PRIVATE SECTOR 347.3 369.0 413.4 507.5 581.1 697.0 837.2 1.036.1 1,198.7 1,356.2SUBSCRIPTIONS TO INT'L

AGENCIES. NET 13.0 10.8 11.6 13.5 22.8 27.6 25.2 25.7 23.4 32.4UNCLASSIFIED ASSETS. NET 69.1 71.4 82.2 95.2 101.8 159.2 207.2 189.8 213.8 280.7 1INTERBANK FLOAT 0.2 0.4 2.8 2.4 11.3 13.6 7.4 10.8 23.8 29.2 0

TOTAL ASSETS 437.5 476.5 555.2 671.3 722.0 919.0 1,118.0 1,408.8 1,696.4 1,910.8

ALLOCATION OF SDR'S 6.4 11.7 18.5 20.5 20.5 20.5 19.6 19.8 20.9 30.7

LIABILITIES TO NONBANKFINANCIAL INTERMEDTARIES - - 2.5 4.8 7.2 7.7 8.2 8.2 8.6 9.0

FOREIGN LIABILITIES (M&LT) 48.0 45.4 58.6 73.7 89.0 205.9 233.1 330.1 386-7 433.4

LIABILITIES TO PRIVATE SECTOR 383.1 419.4 475.6 572.3 605.3 684.9 857.1 1,050.7 1.280.2 1,438.7

MONEY 161.3 171.6 195.7 242.0 244.7 266.1 359.5. 410.7 474.7 545.5CURRENCY IN CIRCULATION ;i5.1 78.4 88.1 110.0 106.3 113.1 169.1 188.9 209.6 263.7SIGHt DEPOSITS 86.2 93.2 107.6 132.0 138.4 153.0 190.4 221.8 265.1 281.8

OUASI-MONEY 167.4 192.7 219.8 265.5 287.1 331.0 398.5 522.7 663.6 724.9TIME AND SAVINGS DEPOSITS 126.7 146.5 164.1 199.4 209.6 233.2 285.8 371.1 463.4 501.2SPECIALIZED SAVINGS 17.5 17.5 18.6 19.8 22.5 25.9 30.3 34.7 39.1 42.5DEPOSITS IN FOREIGN EX. 10.6 13.7 18.8 19.0 20.6 27.5 33.9 42.4 56.9 53.6BONDS 7.0 7.7 12.4 20.3 25.2 28.2 32.1 54.3 78.1 102.0OTHER OBLIGATIONS 5.6 7.3 5.9 7.0 9.2 16.2 16.4 20.2 26.1 25.6

CAPITAL AND RESERVES 54.4 55.1 60.1 64.8 73.5 87.8 99.1 117.3 141.9 168.3

TOTAL LIABILITIES 437.5 476.5 555.2 671.3 722.0 919.0 1,118.0 1,408.8 1,696.4 1,810.8............................................... .f..f fa . .....

-- o'r C-rrNTPAI BANK AND MiSSION FSTIMATES.

TABLE 6.2: HONDURAS: DISTRIBUTION OF BANK CREDITTO THE PRIVATE SECTORS, 1970-79

OUTSTANDING AT THE END OF THE PERIOD(MILLIONS OF LEMPIRAS)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

AGRICULTURE 106.2 116 8 129.2 149.7 176.2 208.9 236.0 276.8 305.3 342.6

BANANAS I 1 0.8 1.3 0.9 1.7 0.0 0.0 0.0 0.0 0.0COFFEE 15.7 19.1 16.0 14.4 21 9 23.8 40.9 60.8 61.7 87.7TOBACCO 5.4 5.0 5.8 6.0 7.4 0.0 0.0 0.0 0.0 0.0COTTON 8.6 8.6 10.4 10.1 13.0 10.4 10.6 16.8 18.9 21.2SUGARCANE 5.2 6.1 5.7 7.5 7.4 0.0 0.0 0.0 0.0 0.0GRAINS 9.2 10.7 11.5 13.7 18.5 31.5 33.0 31.2 38.0 41.6OTHER 8.5 8.9 8.9 12.1 13.3 45.2 54.9 68.3 82.1 87.6CATTLE 42 0 47.7 56.3 68.6 76 3 79.6 76.8 74.0 74.8 78.8FISH 10.5 9.9 13.3 16.4 16 7 18.4 19.8 25.7 29.8 25.7

INDUSTRY 77.9 87 0 84.3 102.8 119 7 137.8 167.9 2Q2.5 234.5 246.4

MANUFACTURING 76.5 85.1 82.7 101.3 118.6 136.6 166.9 201.4 233.6 243.7MINING 1.4 1.9 1.6 1.5 1.1 1.2 1.0 1.1 0.9 2.7

SERVICES 23.3 26.2 22.7 28.7 46 4 63.6 66.7 96.5 106.4 156.3

TRANSPORT.& COMMUNIC. 10.1 11.3 7 8 9.0 i1 2 14.3 16.5 22.8 26.1 45.8OTHER 13 2 14.9 14.9 19.7 35.2 49 3 50.2 73.7 80.3 110.5

REAL ESIATE 54.6 60.1 73.3 89.0 105.9 124.3 138.2 170.5 187.5 228.8

CONSTRUCTION 43.1 48 0 58.3 62.1 78.2 91.1 101.7 127.1 134.1 165.4TRANSFERS 10.8 11 7 14.4 26.7 27.3 32.9 36.3 43.2 53.0 63.0OTHER 0.7 0.4 0.5 0.2 0.4 0.3 0.2 0.2 0.4 0.4

COMMERCE 52.8 45.5 65.3 92.3 83.2 104.8 146.5 176.8 219.2 204.9

CONSUMPTION 18.3 17.3 23.3 25.3 21.4 25.2 29.8 35.3 41.0 46.8

OTHER 2.3 1.9 1.8 1 8 3.4 3.8 13.9 15.0 15.0 15.5

TOTAL 335.4 354.8 399.8 489.6 556.2 668.4 799.0 973.4 1108.9 1241.3

I/ INCLUDES ONLY LOANS AND DISCOUNTS

SOURCE CENTRAL BANK

Table 7.1: HONDURAS - AGRICULTURAL PRODUCTION, 1960-79(in million qq)

Sugar AfricanCorn Sorghum Rice Beans Coffee Bananas Plantain Cane Cotton Palm Tobacco

1960 5,360 1,062 281 869 488 11,569 1,149 7,238 108 355 581961 5,351 1,026 284 949 453 13,032 1,235 9,300 78 375 761962 6,296 1,112 318 1,005 5..,* 11,986 1,303 14,275 231 381 821963 6,127 1,142 298 1,060 617 11,764 1,349 14,518 292 421 621964 7,013 1,184 313 1,134 602 12,400 1,367 14,664 432 474 821965 7,564 1,208 329 1,281 722 19,010 1,521 16,202 708 520 851966 7,423 1,193 213 1,162 701 24,265 1,578 19,764 688 511 661967 7,263 1,179 268 1,207 666 26,551 1,640 20,232 630 500 951968 8,006 1,242 292 1,351 857 28,804 1,817 21,858 531 626 901969 7,416 1,273 223 1,203 717 26,711 2,012 23,180 489 666 921970 7,772 1,292 217 1,057 784 27,469 1,827 24,338 196 717 871971 7,918 1,321 421 1,204 848 33,645 1,930 26,088 126 944 651972 7,979 1,341 522 1,097 890 30,729 2,081 28,650 142 1,042 671973 7,726 1,340 423 923 1,111 30,207 2,254 26,860 268 1,123 791974 7,902 1,401 438 1,141 1,083 25,029 2,108 30,782 328 1,092 1021975 7,563 1,333 487 1,048 1,199 17,329 1,830 32,738 321 1,087 1141976 8,332 1,519 502 948 1,176 23,867 2,094 33,517 193 1,036 1291977 7,327 1,346 385 950 1,127 26,902 2,066 41,107 437 1,180 1491978 7,632 1,351 501 980 1,483 27,153 2,023 44,464 699 1,281 1501979 8,217 1,357 534 968 1,599 32,235 2,061 53,833 466 1,390 1771980 1,650

Table 8.1: HONDURAS - INDICATORS OF INDUSTRIAL PRODUCTION(In thousand units)

Sugar Wheat Cloth Cigarettes Matches Cement Soft Beer Firewater Liquor

(qq) Flour (yards) (packs (box of (42.5 Drinks (12 (12 oz. (liters) (liters)(qq) of 20) 40) kgs.) oz. bottle) bottle)

1960 406 146 2,475 53,233 27,650 861 37,241 39,164 1,7231961 494 176 2,676 53,364 21,325 980 46,736 39,162 1,711 -1962 468 240 2,660 56,161 27,029 1,308 51,599 42,322 1,784 -1963 575 326 1,608 60,175 24,490 1,415 56,641 42,282 1,836 -1964 601 404 3,719 59,759 27,717 1,428 66,197 49,228 2,326 -1965 664 442 3,688 57,795 34,542 2,218 75,519 53,586 2,559 -1966 810 438 5,292 54,497 42,547 2,327 81,832 52,232 2,847 -1967 995 510 7,792 60,877 41,062 2,613 91,969 51,997 2,967 -1968 1,075 585 8,378 67,276 42,861 3,042 103,463 56,470 3,375 -1969 1,140 621 10,841 61,003 37,691 3,099 113,945 63,806 1,006 2,518 11970 1,197 721 12,102 63,320 35,962 3,794 137,988 73,200 992 3,076 X

1971 1,283 744 13,446 74,523 45,159 3,808 163,592 81,895 1,001 3,237 '

1972 1,409 796 15,288 76,844 48,213 4,589 178,910 86,062 1,011 3,2311973 1,321 791 17,801 83,574 52,060 5,542 207,496 96,850 1,148 3,5601974 1,640 766 15,933 90,535 50,632 5,059 246,238 89,276 1,134 4,3341975 1,745 810 16,596 90,211 51,021 6,377 294,719 90,709 1,070 4,5131976 1,877 836 15,010 98,235 51,592 5,501 319,441 69,890 1,301 5,0061977 2,302 1,053 15,194 107,568 59,234 5,805 439,039 92,598 1,561 5,6361978 2,490 1,143 15,556 108,508 72,005 6,455 477,788 105,568 1,613 5,8611979 2,616 1,166 8,177 115,576 53,187 6,785 515,899 124,584 1,708 6,203

Source: Central Bank

Table 8.2: HONDURAS - SELECTED INDICATORS OF THE MANUFACTURING SECTOR, 1975

A. ALL HANUFACTURING FIRMS

Gross Inputs Plus Gross Gross FixedValue of Value -Added Indirect Input/ Fixed Value-Added Investment Capital CaDital

Number of Number of Employ- Production Factor Cost Taxes Output Investment Per Worker Per Firm Output ierEmployees Firms ment ('000 L.) (1000 L.) (1000 L.) Ratio ('000 L.) (L.) (L.) Ratio Worker

(%) (L,)

TOTAL 849 36,975 986,088 240,420 745,668 75.6 558,46o 6,485 657,786 2.32 15104

5-19 478 4,606 60,473 17,166 43,307 71.6 32,492 3,727 67,975 1.89 705420-49 197 6,298 124,356 31,339 93,017 74.8 62,958 4,945 319,584 2.00 999750-99 94 6,714 273,040 48,430 224,610 82.3 120,596 7,154 1,282,936 2.49 17962

100 or more 81 19,357 528,219 1143,485 384,734 72.8 342,414 7,412 4,227,333 2.39 17689

B. FIRMS RECEIVING BENEFITS UNDER THE INDUSTRIAL INCENTIVES LAWS

Gross Gross Gross FixedValue of Value-Added Input/ Fixed Value-Added Investment Capital Taxes Average

Number of Number of Employ- Production Factor Cost Inputs Output Investment Per Worker Per Firm Output Paid Exempteda' ExemptionEmployees Firms ment ('000 L.) ('000 L.) ('000 L.) Ratio ('000 L.) (L.) (L.) Ratio '----1000 L.---- ('060 L.)

TOTAL 261 21,244 605,381 148,353 437,785 72.3 371,779 6,983 1,424,406 2.50 1,829 37,213 142,579

5-19 54 668 16,749 3,842 12,807 76.4 10,706 5,751 198,259 2.79 168 850 15,74120-49 95 3,151 80,929 20,551 53,794 66.4 41,423 6,522 436,031 2.02 261 2,923 30,76850-99 51 3,532 92,490 23,203 68,917 74.5 51,720 6,569 1,014,117 2.23 253 4,505 88,333

100 or more 61 13,893 415,213 100,757 302,267 72.8 267,930 7,252 4,392,295 2.66 1,147 28,935 474,344

l/ 10% of the exemptions have been allocated to CONADI.

Source: CONSUPIANE

Table 8p3: HOVDTTTAS - FMPLOYMENT IN MANUFACTURING

EmDlovment Percentage of TotalIndustry 1960 1965 1969 1971 1975 1960 1965 1969 1971 1975

Consumer Goods 9,679 lo,643 13,651 17,493 22,389 65.0 54.7 59.5 61.i 60.9

Food Products 4,736 4,439 5,886 6,710 8,575 31.8 22.8 25.7 23.4 23.3Beverages 1,332 1,211 1,337 1,715 2,272 9.0 6.2 5.8 6.o 6.2Tobacco 296 290 897 1,646 2,039 2.0 1.5 3.9 5.8 5.6Textiles 325 1,239 1,215 1,802 2,379 2.2 6.4 5.3 6.3 6.5Apparel 1,184 1,317 1,854 2,220 2,616 8.0 6.8 8.1 7.8 7.1Footwear 592 500 301 570 651 4.0 2.6 1.3 2.0 1.8Furniture 444 403 468 690 1,387 3.0 2.1 2.0 2.4 3.8Printing 740 1,211 1,148 1,428 1,447 5.0 6.2 5.0 5.0 4.0Other 30 33 545 712 1,023 0.2 0.2 2.4 2.5 2.8

Intermediate Goods 4,729 7,757 8.136 9,635 12,387 31.8 39.9 35.5 33.7 33.7Lumber products 2,664 5,146 4,218 5,089 6,415 17.9 26.5 18.4 17.8 17.5 4Paper products 95 403 473 742 649 o.6 2.1 2.1 2.6 1.8Leather 104 130 233 275 500 0.7 0.7 1.0 1.0 1.4Rubber and Plastic Products 296 202 689 873 1,381 2.0 1.0 3.0 3.1 3.8Chemicals and Pharmaceuticals 978 1,069 1,258 1,185 1,550 6.6 5.5 5.5 4.1 4.2Non-metallic Minerals 592 807 1,265 1,471 1,892 4.0 4.2 5.5 5.1 5.2

Capital Goods 474 1,029 1,47 1,490 1,957 3.2 5.3 5.0 5.2 5.3

Total Factory Employment 1/ i4,882 19,429 22,934 28,618 36,733 100.0 100.0 100.0 100.0 100.0

1/ Establishments with 5 or more workers.

Source: Investigaci6n Industrial 1965, 1969, 1971 and 1975; CONSUPLANE

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Table 8.4: HONDURAS - IMPORT DEPENDENCE OF THE MANUFACTURING SECTOR

(percentages)

1962 1965 1971 1975

Consumer Goods 39.7 45.9 33.2 32.5

Food products - 30.5 21.8 23.4Beverages 57.7 58.3 55.7Tobacco - 37.9 29.8 17.4Textiles - 49.9 48.4 57.7Apparel - 96.8 95.9 77.1Footwear - 65.2 30.4 32.3Furniture - 45.0 42.2 36.6Printing - 91.7 98.8 97.7Other - 92.5 64.2 72.7

Intermediate Goods 42.3 67.8 73.6 89.9Lumber products - 3.0 3.6 3.7Paper products - 99.9 99.7 99.4Leather 1 43.3 59.7 79.1Rubber Products - 79.3 82.5 91.1Chemicals - 80.2 94.3 79.1Non-metallic Minerals _ 56.o 22.3 24.5Petroleum Derivatives - - 100.0 100.0

Capital Goods 97.6 98.8 95.3 89.6

Total 42.0 56.o 52.5 53.0

1/ Percent of imported raw materials used.

Source: Investigacion Industrial 1965, 1971 and 1975. Direccion General de Estad'sticay Censos and CONSUPLANE.

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Table 8.5: RONDURAS - NOMINAL AND EFFECTIVE PROTECTION

CIIU Nominal Tariff Effective Tariff

(%) (%).~~~~~~~~ M

I. Very High Effective Protection(200g or more

Processing of Fruits and Vegetables 3113 57.8 449.1Seafood products 3114 53.8 304.2 1/Soaps and detergents 3523 54.2 303.6 1/

II. Medium and Higi Effective Protection(35% to 200%)

Liquor 3131 159.3 173.5 2/Cocoa products 3119 54.9 175.2Knitwear 3213 54.4 162.2Meat packing and processing 3111 30.8 159.0 1/Tobacco products 3140 94.o 136.2 1/ 2/Wood products 3319 39.8 125.1 1/Wines 3132 105.8 122.2Baking products 3117 35.0 116.7Textile products,excluding apparel 3212 35.6 84.2Plastics 3560 27.2 79.0 1/Paper products 3412 5.3 59.2

III .Low Effective Protection (O to 30%)

Non-metallic minerals 3699 7.4 16.4Animal and vegetable oils 3115 1.4 6.4Non-alcoholic beverages 3134 12.7 6.4Machinery and equipment for industry 3824 1.6 5.2Agricultural machinery and equipment 3822 3.8 3.3Pulp and paper, cardboard 3411 1.0 -Leather 3232 46.0 -Pulp and Paperproducts, n.i.e. 3419 17.3 -Synthetic resines, plastics 3513 1.2 -Petroleum refineries 3530Petroleum products 3540 9.0 -Glass products 3620 14,7 -Metallic products 3710 5.4 -Non-ferrous metal products 3720 3.7 -Motors and turbines 3821 5.7 -

3823 1.5 -3825 23.6 -

Other machinery and equipmentexceot electrical 3829 8.9 _

Electrical machineryand equipment 3831 3,9 _Radios, TV and other electricalconsumer goods 3833 28.9 -

3841 6.9 -

3842 .1 -Vehicles 3843 4,5 -

3845 4.8 -Other transport equipment 3849 14.9 -

3851 5.4 -3853 33.o4 -

Jewels and related products 3901 42.2 -Other manufactures 3909 17.0 -

IV. Negative Effective Protection

Apparel 3220 15.3 -27.3Industrial chemicals 3511 2,6 -33.9Wood containers 3312 1.8 -29.8Fertilizers 3512 0.7 - 8.6Pharmaceuticals 3522 0.3 -13.7Lumber products 3311 5.2 - 2.1Tires 3551 4.5 - 2.1

Average Tariff 3/ 21.9 86.4

1/ Includes products that are exported.2/ Domestic production is also heavily taxed.3/ On the basis of weighted averaged using the gross value of production.

courcee STr&

TABLE 9.1: HONDURAS: GENERAL PRICE INDEX BY GROUPS. 1970-80(1966 = 100)

ITEM 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980

FOOD 110.2 113.7 119.1 125.3 146.7 160.5 166.8 185.7 197.1 212.8 253.6

HOUSING 108.4 109.3 111.9 116.5 131.1 140.5 148.8 160.2 168.7 185.3 212.1

CLOTHING 109.6 111.5 115.0 124.7 134.6 140.6 147.2 158.8 165.7 184.6 235.3

HEALTH 106.9 115.0 115.6 116.0 118.1 132.2 138.0 143.5 154.7 169.6 190.7

PERSONAL CARE 111.2 116.7 122.2 126.6 139.7 151.9 162.5 169.7 177.2 195.2 228.7

BEVERAGES AND TOBACCO 112.7 i12.8 116.3 119.3 123.1 129.3 144.7 146.4 162.3 177.9 230.6

MISCELLANEOUS 104.5 104.9 105.8 106.4 119.1 129.8 136.4 140.7 147.0 156.3 176.8

GENERAL INDEX 109.1 iil 6 115.4 120.7 136.4 147.4 154.7 167.9 177.5 193.1 229.4

SOURCE CENTRAL BANK