International Business Paper

Developing Country International Business Environment Paper (HONDURAS)

(6 pages, double-spaced): 

You will choose a developing country (GDP per capita less than $10,000)(HONDURAS) and do a SWOT analysis on its business environment. 

The paper should conclude with recommendations for improvement of the business environment. 

Attached is a powerpoint with some brief information on Honduras. Feel free to use it but still find research on the country and its “business environment”.

HONDURAS

Seminar In International Business

By Chris Valdes

BACKGROUND

Honduras is one of the poorest countries in Latin America and has one of the world’s highest murder rates. More than half of the population lives in poverty and per capita income is one of the lowest in the region.

Since the 2008-2009 global economic crisis, Honduras has experienced a moderate recovery, driven by public investments, exports and higher remittances. In 2017, the country’s economy grew by 4.8 percent and by 3.5 percent in 2018, and a 3.6 percent growth is expected for 2019.

Despite the positive economic outlook, the country faces the highest level of economic inequality in Latin America. Another major challenge is the rampant crime and violence. Although in recent years the number of homicides has declined, Honduras continues to have one of the highest rates in the world (43.6 murders per 100,000 inhabitants in 2017, according to the Observatory of Violence at the National Autonomous University of Honduras).

Honduras’s economic freedom score is 60.2, making its economy the 93rd freest in the 2019 Index. Its overall score has decreased by 0.4 point, with declines in scores for trade freedom, judicial effectiveness, and government integrity exceeding a significant increase in fiscal health. Honduras is ranked 20th among 32 countries in the Americas region, and its overall score is just above the regional average but below the world average.

STREGNTHS

The economic strengths of the country is currently the exporting of apparel and automobile wire harrnesing. Historically Honduras use to be dependent on the export of bananas and coffee.

Honduras’s economy depends heavily on US trade and remittances today.

Agricultural, mining and tourism resources

Dependence on the US economy (exports, FDI and expatriate remittances)

Dependence on imported fuels and cereals (maize is the staple food)

High crime and corruption in the context of poverty and drug trafficking

Significant informal economy: 70% of the working population is affected

WEAKNESSES

OPPORTUNITIES

Honduras is located in the center of Central America, meaning it is in close proximity to the U.S. market, unlike many countries. It is only a 2-3 hour flight from U.S. gateway cities and 48 to 72 hours away by sea. Because of this Honduras serves as a distribution platform for the rest of Central America due to some of the lowest logistical costs in the region.

Honduras has high prospect sectors even though it is a relatively small country. With large market shares for U.S. products and services. Among the most promising sectors for U.S. companies include: automotive aftermarket products; safety and security equipment; electrical power systems/renewable energy equipment; food processing and packaging equipment; hotel and restaurant equipment; education and training services; processed foods; and travel and tourism services.

The primary export sectors that lead U.S. export categories to Honduras in 2018 include: petroleum products; cotton, yarn, and textile fabrics; food manufacturers, electrical machinery; chemical products; manmade staple fibers; plastics and related articles; materials for the manufacturing of paper and paperboard.

the country is vulnerable to external shocks. It’s agricultural sector, for example, lost nearly one-third of its revenue over the past two decades, in part due to the declining prices of the country’s export crops, especially banana and coffee.

the country faces the highest level of economic inequality in Latin America.

Another major challenge is the rampant crime and violence. Although in recent years the number of homicides has declined, Honduras continues to have one of the highest rates in the world (43.6 murders per 100,000 inhabitants in 2017, according to the Observatory of Violence at the National Autonomous University of Honduras).

THREATS

RECOMENDATIONS

Honduras is susceptible to adverse natural events such as hurricanes and droughts. Measures to mitigate the impact of these shocks focus on strengthening the adaptation capacity of households, expanding market-based risk management mechanisms, and developing effective social safety nets will make a big difference for this country.

World banks studies, have also shown the importance of improving the quality of education and health. Most of the country’s poor population live in rural areas and depend on agriculture for their livelihoods. If we changed the quality of the education and health standards by diversifying sources of rural income.

Also targeted social programs can potentially reduce poverty.