Report No. 3312-HO FILE COPY Current Economic Memorandum on Honduras
Public Disclosure Authorized July 17, 1981 Latin America and the Caribbean Regional Office
FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized
Public Disclosure Authorized Document of the World Bank
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. CURRENCY EQUIVALENTS
US$1.00 = 2.00 Lempiras (L) L 1.00 = US$0.50
GLOSSARY OF ABBREVIATIONS
ANACH National Association of Honduran Peasants BANADESA National Agricultural Development Bank BANASUPRO National Development Bank Food Marketing Agency BNF National Development Bank CABEI Central American Bank for Economic Integration CACM Central American Common Market COHBANA Honduran Banana Corporation COHDEFOR National Forestry Corporation CONADI National Investment Corporation CORFINO Olancho Industrial Forestry Corporation CONSUPLANE National Planning Council DIMA Municipal Water Division of San Pedro Sula EACI Isletas Cooperative of Banana Growers ENEE National Electric Power Company ENP National Port Authority FAO U.N. Food and Agricultural Organization FECORAH Federation of Agrarian Reform Cooperatives FIAFSA Agua Fria Industrial Forestry Corporation FINAVI National Housing Financiera FNP National Railway Company FONDEI National Industrial Development Fund HONDUTEL Honduran Telecommunications Corporation IDB Inter-American Development Bank IHSS Social Security Institute IJPM National Retirement Fund for Teachers INA National Agrarian Institute INVA National Housing Institute JNBS National Social Welfare Board JUPEMP National Retirement Fund for Public Employees LNB National Lottery PANI National Child Welfare Institute PRODERO Western Rural Development Project SANAA National Water and Sewerage Service UNAH National University UNC National Union of Peasants USAID 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 ...... 1 B. Recent Developments ...... 2 C. Sectoral Developments ...... 2 D. Government Development Policy ...... 8 E. Monetary Developments ...... 11 F. The Balance of Payments ...... 12
III. COUNTRY PROSPECTS AND DEVELOPMENT PROGRAMS .13
A. Development Strategy and Main Issues .13 A. Economic Growth Prospects .13 B. The Public Investment Program .15 C. Public Finances Prospects .19 D. 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.
IThis 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 DENSITY 112,100 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 3,416 Crude Death Rate (per 1,000) 12.0 Population per hospital bed 7.3 Infant 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-790 Per capita protein intake 5b.0 % of population - urban 25.0
EDUCATION (1979) Adult literacy rate % 57.0 Primary 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.2 Gross Domestic Investment 615 29.8 5.3 11.0 9.7 Gross National Saving 423 20.5 4.7 -3.0 8.8 Current Account Balance 4/ -192 -9.3 Exports of Goods, NFS 840 40.8 5.3 4.1 11.2 Imports of Goods, NFS 932 45.2 4.8 9.9 10.0
OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1979 5/ Value Added Labor Forcer V. A. Per Worker U $Mln. % Mln. % uS$ %
Agriculture 599 27.7 .625 59.9 958 46.2 Industry 488 22.5 .175 16.8 2,789 134.4 Services 813 37.5 .244 23.3 3,331 160-5 Unallocated 6/ 266 12.i __ - Total/Average 2,166 100.0 1,044 100.0 2,075 109.0
GOVERNMENT FINANCE General Government Central Government tUs$_Mln.) 7. of GDP (US$ Mln.) % of GDP 1979 1979 i977-79 1979 19799
Current Receipts 388 17.9 18.7 316 14.6 15.1 Current Expenditure 330 15.3 15.9 288 13.3 13.9 Current Surplus 58 2.6 2.8 28 1.3 1.2 Capital Expenditures 135 b.2 7.0 126 5.8 6.0 External 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 available not 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 266 299 380 467 570 635 682 Bank 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) 136.4 147.4 154.7 167.9 177.5 193.1 229.4 Annual percentage changes in: General PriL±' Index 13.0 8.1 5.0 8.5 5.7 s8. 18.8 Bank credit to Public Sector 2.1 -4.7 -2.5 37.5 40.0 28.6 56.6 Bank 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 24.5 Exports of Goods, NFS 331.3 343.5 821.9 928.7 Beef 36.2 4.3 Imports 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 37.5 Workers' Remittances ...... Total 834.5 100.0 Other Factor Payments (net) -7.2 -18.2 -61.0 -g950 Net Transfers 32.5 17.7 18.5 21.5 EXTERNAL DEBT, DECEMBER 31. 1979 Balance on Current Account -105.7 -119.6 -183.1 -324.0 US $ H1n Direct Foreign Investment -1.2 10.4 10.0 5.0 Net 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 Debt Amortization (6.u) (6.4) (44.9) (40.3) Total outstanding & Disbursed Subtotal 36.4 103.2 176.1 197.9 Capital Grants .. .. ,. .. DEBT SERVICE RATIO for 2/297 Other Capital (net) 65.7 -0.6 20.0 6-75 Other 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 Debt Gross Reserves (end year) 51.7 108.3 230.0 Total outstanding & Disbursed Net 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 IDA US $ 1.00 = L 2.00 L 1.00 = US $0.50 Outstanding 6 Disbursed 156.9 69.9 Undisbursed 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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Honduras is a poor country, predominantly a land of small farmers. Per capita income was about US$565 in 1980. 1/ Population density is about 30 per square kilometer, but the population is growing rapidly at about 3.4 percent a year. A large number of Hondurans live in poverty, particularly in rural areas. The adult literacy rate is 57 percent. One-half of the population is without safe water and three-quarters of the households are without electricity. ii. In the last few years, Honduras' economic growth has quickened. During 1950-75, real GDP growth was inadequate to substantially raise living standards, but recently it has shown a remarkable growth rate -- 7.8 percent a year during 1976-79. The most important growth factors were exports and inve'twent. Export growth reflected partly the recovery of banana production from the 1974 hurricane. Both public and private investment were very dynamic. iii. Gross income (GDY), however, increased slowly after 1977 owing to a sharp decline of coffee prices and large price increases for imported goods, particularly oil. Imported inflation prevented a return to the traditional price stability of the Honduran economy and affected adversely real wages. Prices increased at 7.7 percent a year during 1976-79 compared to 3.4 percent in 1970-73 and 10.5 percent in 1973-75. iv. In 1980, however, the Honduran economy slowed down. Real GDP growth is estimated at 2.5 percent a year because real exports and investment lost their dynamism. Transitory difficulties with banana production, a slower expansion of coffee production, and a continued decline of lumber exports explain the deceleration of the growth rate. Private investment was adversely affected by political events in the area. Inflation accelerated in 1980. Prices rose at an annual rate of 20 percent compared to 8.8 percent in 1979, with striking increases for beans and corn, the basic foodstuff of the poor. v. The country's financial position deteriorated in 1980. Import growth exceeded significantly export growth and the balance of payments current account deficit was over US$300 million. The country suffered foreign exchange reserve losses of US$60 million in spite of large inflows of official capital. The financial position of the Central Government also deteriorated in spite of new revenues brought about by a 1979 fiscal reform. Current and development expenditures increased at about 30 percent, offsetting the revenue impact of the reform. Furthermore, some public enterprises are confronting increased financial difficulties or showing signs of future difficulties because they followed lax wage and expenditure policies, failed to take appropriate tariff or price actions, and/or became involved in improfit- able operations. Weak public finances brought about a large increase in the use of domestic credit. 1/ IBRD World Atlas basis; Honduras' per capita GNP places it among the IDA-eligible countries. Government Development Efforts vi. The public sector followed more active development policies in the 1970s, 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 enrollment and health services were expanded considerably. An agressive land reform program was begun. At the same time, public enterprises and decentralized institutions increased their role in the economy; the Central Government showed also a much higher level of operations; and public investment for infrastructure and social services showed remarkable growth as Government planning and executing capacity improved. vii. For the next few years, the Government's strategy is to support both industrial and agricultural growth with large infrastructure investments and expanded credit availabilities and accelerate the implementation of social projects, particularly for rural development, health, education, safe water and sewerage, and housing. This strategy entails possible conflicts. Their resolution will be closely related to success in: (i) maintaining prudent fiscal and financial policies in order to finance the ambitious development program in a noninflationary manner, and (ii) reactivating private investment by stepping up efforts to promote private activities, particularly exports. In addition, the Government should avoid further expansion in productive activities which so far have proven unprofitable. Growth Prospects viii. A favorable growth scenario is possible for the 1980s. The large Government investment program and the favorable prospects for increasing export volumes of lumber, sugar, coffee, beef, fruits, and even bananas, as well as diversification efforts, may yield significant results. Although the outlook 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. Private investment is the most uncertain growth factor, and the one least subject to government control. If it recovers significantly, GDP growth may be one percentage point higher. ix. While medium term growth prospects are fairly well established, longer-term prospects are less certain. Expected population growth makes evident the need for a longer-term strategy geared towards increasing production, employment, foreign exchange earnings, and improving social conditions. The country's population will be over 7 million by the year 2000 with one million concentrated in Tegucigalpa and over three-quarters of 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 carefully formulate its longer-term programs and policies for the development of rural areas and promote a dynamic private sector participation. Essential to the success of these efforts is also an effective and efficient agricultural - iii - public administration. Furthermore, rationalizing urban development has a high priority. Rapid population movements to the towns would create serious pressures for urban services and housing for the poor. Already service levels in the towns are low and the financial capacity of the municipalities and water agencies is weak. Undoubtedly, higher property taxes and rates for water services 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 includes large 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 limitations in administrative capacity to prepare and implement projects, particularly in the rural and social sectors. Nevertheless, the public sector's overall administrative capacity has shown a marked improvement in the past few years, and it should be feasible to go forward with the major components of the program. Public investment would be close to 10 percent of GDP in the next few years. Power investments will be the largest, mostly because of the lumpy investment required for the Cajon hydroelectric project. To soundly finance this investment program and to avoid excessive balance of payments and price pressures, it is essential to defer any new large, public project to 1984 and beyond, and to have sound demand-management policies. Furthermore, given the ambitious public investment program, special efforts will be required in the next few years to increase public savings in order to finance the program in a framework compatible with monetary and price stability. xi. New revenues were urgently needed in 1981 after the deterioration of public finances in 1980, and the Government had to increase some sales and import taxes. These measures are expected to yield L/85 million in 1981 and L/125 million in 1982 (1.5 percent and 2.0 percent of GDP respectively). In addition, the Government's intention is to restrict current expenditure growth to less than 14 percent in 1981 and 1982; raise rates and prices of public enterprises; and restrict domestic and foreign borrowings of the public sector. The Government's financial program has the support of an EFF with the IMF and represents a significant step towards improving public sector finances and avoiding future fiscal crises. xii. Sound management of the economy in the next few years will require continued strengthening of the financial position of the public sector to avoid excessive use of domestic credit, which, given the high level of external financing for projects and the availability of official resources in support of the implementation of the public investment program and the balance of payments, should be allocated mostly to the private sector. In this regard, in addition to the recent tax package, tight current public expenditure control is essential together with timely and appropriate tariff and price actions by public enterprises and autonomous agencies to increase their savings capacity; this will ensure sound financing of the public investment program, a significant factor for renewed economic growth in the next few years. If excessive current expenditure growth is not properly contained, new tax measures as well as additional price increases in public enterprises will be 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 as import growth exceeds export growth, partly fueled by rising public investment and by higher prices for imports but also showing the impact of deficit spending by the public sector. Private sector uncertainties, partly related to Central American events, a new phenomenon over the last 18 months, are also adversely affecting the capital account of the balance of payments. xiv. The balance of payments should strengthen substantially in the mid-1980s as a result of the development programs now underway which will generate increased exports, particularly lumber and wood products, and reduce significantly the fuel import requirements of the economy. Real export growth may reach 9 percent a year. In the interim, substantial inflows of foreign exchange in support of the public investment program are needed. The bulk of these external financing needs is expected to be met through public borrow- ing from official sources. In addition, the Extended Fund Facility arrangement with the IMF will provide balance of payments support. Private capital inflows are the uncertain element; if the recent deceleration of private inflows and commercial credits is reversed, the balance of payments position should improve significantly. xv. In the past, Honduras has managed to keep its external debt service ratio low because foreign loans were almost all on concessionary terms. The debt service ratio in 1980 was about 11 percent. Honduras' balance of payments needs to finance its current account deficit during 1981-85 are about US$1.5 billion, of which close to US$1.0 billion will be disbursed from commitments made through the end of 1980. The country will need to borrow on reasonable soft average terms in view of its poverty, its dependence on exports of a few commodities 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 offered by the international lending agencies, the debt service ratio could rise to about 14 percent by 1985, still a low ratio. Continued maintenance of Honduras creditworthiness will depend mostly on the efficiency with which it chooses and implements its major public investment projects, a careful, continued demand management, and on its export promotion policies. I. INTRODUCTION 1. This current Economic Memorandum updates and reviews short term developments 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 updated in Report No. 1856-HO, Memorandum on Recent Economic Development and Prospects of Honduras (January 10, 1978). In view of recent trends, further work is underway by the World Bank on the rural dynamics of population growth, food production 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 worst hurricanes in its history. While the GDP growth rate during 1950-75 was inadequate to substantially raise living standards -- real per capita GDP grew less than one percent a year -- Honduras recently has shown a remarkable growth rate, about 7.8 percent a year during 1976-79. This is reflected in a significant increase in per capita GNP to about US$565 in 1980. 1/ Exports and investment were the most important growth factors during 1976-79. The quantum of exports grew rapidly at 11 percent a year -- partly the result of the gradual recovery of banana production from the destruction brought about by Hurricane Fifi in 1974 -- and fixed investment increased from an average 15.8 percent of GDP in 1970-74 to an average 21.7 percent in 1976-79. Both public and private investment were very dynamic; real private investment increased by about 50 percent, and public investment by about 70 percent between 1975 and 1979. Domestic savings and external credits expanded significantly to finance the much larger investment effort. 3. Gross domestic income (GDY), however, increased very slowly after 1977 (1.2 percent a year between 1977 and 1979) because of rapidly rising import prices coupled with a sharp decline of coffee prices from their 1977 peak level. This has shaken the traditional price stability of the Honduran economy and adversely affected real wages. The annual average increase of the consumer price index rose from 3.4 percent a year in 1970-73 to 7.7 percent in 1976-79, owing to imported inflation from developed countries, oil price increases, and stagnating production of basic grains. During 1975-78, minimum wages were not adjusted for cost of living increases and real wages declined by about one-fourth. For 1979, however, the Government decreed an increase in minimum wages that reestablished a significant proportion of the lost purchasing power. 1/ World Bank Atlas methodology. - 2 - 4. The dynamism of economic growth together with the transitory income effect of the doubling of coffee prices in 1976 and again in 1977 resulted in 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 continued to show large deficits in the current account in spite of the rapid growth of the value of exports. B. Recent Developments 5. In 1980, the Honduran economy slowed down. Real GDP increased only 2.5 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 by political uncertainties associated with recent elections and with political events in the rest of Central America. 6. Inflation accelerated in 1980. The consumer price index rose at an annual rate of 18.8 percent while the yearly inflation rate in 1979 was only 8.8 percent. Among food products, the most striking increases were those for red beans (100 percent) and corn (42 percent), the basic food staples of the poor, because of difficulties with domestic crops. This trend requires careful consideration and prompt action to improve production conditions because of its longer-term social implications. The sharp acceleration of inflation eroded real wages, in spite of a 1980 increase in the minimum wage and other wage hikes. 7. The current account of the balance of payments showed a deficit of about US$324 million in 1980, 12.7 percent of GDP. Import growth significantly exceeded export growth, partly owing to a 55 percent increase in the value of imported oil and partly to large imports of capital goods for projects under construction, such as a new cement plant. In spite of large inflows of official capital, foreign exchange reserves declined by about US$60 million. 8. The financial position of the Central Government deteriorated in 1980. The main reason was a 30 percent increase in current expenditures. This development effectively offset the revenue impact of a December 1979 tax reform. In addition, some public enterprises and autonomous agencies are confronting financial difficulties. (These issues are explained further in Section I.) C. Sectoral Developments Agriculture 9. Honduras is predominantly an agricultural economy; agriculture's share of GDP is close to 30 percent and about two-thirds of the population and work force are rural. Raw and processed agricultural exports represent about four-fifths of total exports. In recent years, however, agriculture has not completely supplied the food needs of the country and maize, rice, and milk have been imported, in sharp contrast with the 1960s and early 1970s 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 hectares and accounted for only 17 percent of the farmed area. Small farms had a much higher intensity of cultivation with little fallow land and were mostly dedicated to annual crops. Farmers with less than 2 hectares make fuller use of the land than other, larger farmers but are unable, in general to shift production to higher value crops. 1/ Their incomes are low and subject to wide fluctuations. Rural poverty, however, has another dimension: there are a large number of landless rural families, estimated at over 120,000 in 1974. 2/ Since 1972, the Government has undertaken important steps to remedy the situation. Significant efforts have been made to expand and strengthen the program through comprehensive agrarian reform legislation enacted in 1975; considerable financial support has been given to the agrarian reform 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 in the 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 PEASANT ORGANIZATIONS, 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 3.2 FECORAH (1973) 150 6.8 5.3 51.2 48.5 9.2 Independents 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 are producing coffee; they represent 17 percent of the coffee farms, but produce only 4 percent of the country's coffee production. 2/ This is a very crude estimate that most likely is too high; total rural 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 (about 20 percent of the rural working force), and families of laborers on commercial 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 after 1976, it has continued. Over 48,000 families had benefitted at the end of 1980 but only about 36,000 remained on the land. About 8 percent of the total farmed land had been distributed through 1980. 11. Some families abandoned the settlements because they did not receive enough productive land and support services; others because they could not adapt to hard living conditions in the settlements of the Aguan valley. Limited absorptive capacity and financial and trained human resources have prevented the Government from providing the needed service levels to all settlements. These constraints together with major policy changes have shifted the emphasis of the program, although a significant number of landless families still exists. The Government is now consolidating the gains of the agrarian reform and concentrating its efforts in the potentially most productive areas. Agricultural Production 12. Real value-added in agriculture grew 2.5 percent a year during 1970-79, in spite of the extensive destruction of the banana plantations in 1974 and the lack of growth of domestic market-oriented crops of corn and beans. Export crops provided the main thrust of agricultural growth. 13. Coffee production recorded a 50 percent increase in the late 1970s in 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 the 1969/70 level. Coffee exports grew from US$26 million (one-third of the value of banana exports) in 1970 to US$223 million (11 percent above the value of banana exports) in 1980. Further expansion of coffee production is underway; the Government expects it may reach 2 million quintals by 1985. An important element will be improved yields and higher plant density. Nevertheless, recent price declines in the coffee market have triggered the application of export quotas. Honduras' quota of 1.1 million bags of 60 kilos for 1981 is somewhat below the expected exportable surplus of 1.2 million bags, and may raise 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 tons in 1980 and is expected to reach 100,000 metric tons in 1981. Higher sugar prices contributed also to the increase in value exported in 1980. Further expansion of sugarcane plantings is expected in the near future, and there is a possibility of increased alcohol production for use as car fuel. - 5 - 15. Banana production has recovered from the damage of the 1974 hurricane and exported volumes are very close to the pre-hurricane peak level. Higher prices explain the more than doubled export value from 1970 to 1980. COHBANA, the government banana corporation, is programming an expansion of about 15,000 acres for 1981-85, mostly in cooperatives, at an estimated cost of about L/80 million. However, any expansion of COHBANA's activities should be closely scrutinized because the corporation has increasing yearly operating losses related to its large administrative costs. In addition, COHBANA is involved in the poorly managed Isletas Cooperative of Banana Growers (EACI), which creates additional pressures on its resources. Commercial foreign loans have 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 Honduras and benefits 1,300 families but it is now losing money. Its cumulative deficit of about L/12 million has been covered by COHBANA. The losses appear to be the result of poor management as EACI's production and administrative costs per banana box increased more rapidly than its prices. Since Honduras has a strong comparative advantage in banana production, it should not be difficult to produce them at a profit. EACI needs to bring down its costs per box and cover its commitments to COHBANA; otherwise, other means of organizing the growers for production and marketing must be found. Further- more, all plans to expand Government participation in banana activities by cooperatives must be carefully weighed. The country's ability to export at a profit one of its main sources of foreign exchange could be jeopardized if other inefficient EACI's are created. Table 2: EACI: BANANA PRICE AND UNIT PRODUCTION COST (in Lempiras per box) Annual Growth 1977 1978 1979 Rate 1979/77 Price per unit 5.15 5.22 5.58 4.1 Production Costs 2.94 3.14 3.47 8.6 Gross Operating Profit 2.21 2.08 2.11 -2.3 Administrative Costs 0.09 0.17 0.22 59.4 Sales Costs 1/ 1.49 1.73 1.62 4.3 Financial Costs 0.25 0.09 0.25 Other (net) -0.11 -0.13 0.13 Net Profit (+) 0.50 0.22 -0.11 1/ Includes export taxes. Source: COHBANA - 6 - 17. Production of corn and beans, the staple food of the poor, has stagnated. Corn production grew at 0.6 percent a year and bean production declined 1 percent a year during 1970-79. About 40 percent of both corn and beans production comes from farms with less than 5 hectares; about 70 percent of both crops comes from farms below 20 hectares. 1/ Factors that account for the lack of dynamism are higher profits in other crops, particularly for the medium and large farms, reflected in the rapid growth of some export crops; limited technical assistance and low support prices (US$6.50 per qq of corn 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 of corn and beans increased during the 1970s but real prices in 1980 were only modestly above the 1970 level. Forestry 18. Honduras is relatively well endowed with timber resources (about 5 million hectares of active forests, of which 2 million hectares are conifers and 3 million tropical hardwoods). About a third of the land suited for forests has been denuded by poor exploitation practices, migratory agricul- ture, and grazing. Furthermore, every year about 5.5 million cubic meters of lumber are used for fuelwood, putting additional pressure on forest resources. In spite of depletions, a 1978 survey showed that there were about 66 million cubic meters of commercially exploitable pine lumber or about 25 times the annual exploitation rate, and about 204 million cubic meters of broadleaf forests, 70 percent of which are commercial varieties. 19. A 1974 Forestry Law nationalized timber rights, established the guidelines for private sector participation, and created the state-owned forestry corporation (COHDEFOR) in charge of exporting wood products and forest management. As a result of COHDEFOR's more conservation oriented policy, production and exports of sawnwood and timber declined; the 1980 quantum of lumber exports was about 56 percent of the 1974 level. 20. COHDEFOR's operation so far has been profitable, generating yearly surpluses of about L/15-20 million, part of which has been transferred to the Central Government. However, current expenditures, particularly wage expendi- tures, are increasing rapidly and, if not carefully controlled, will lead to an operating deficit in the near future. 21. COHDEFOR has undertaken a substantial expansion of the country's lumber industry. The major focus is in the development of the Olancho forest area with an estimated pine reserve of 32 million cubic meters (smaller than an earlier estimate of 48 million cubic meters). CORFINO, a COHDEFOR owned corporation, was created to build and operate two sawmills in the Olancho area for which significant road and port infrastructure is now under construction to provide an outlet for their production. CORFINO sawmills will almost double lumber exports in the next few years. The first sawmill is expected to begin production in 1982 and to reach its full capacity of 170,000 cubic meters of sawnwood and 128,000 cubic meters of chips in 1983 or about three 1/ 1974 Agricultural Census. - 7 - years behind the original schedule. The second sawmill is expected to begin production in 1983 and to reach its full capacity of 119,000 cubic meters of sawnwood and 90,000 cubic meters of chips in 1984. Both sawmills have been scaled down from the originally planned capacity and plans for a third one have been abandoned because of the downward revision of the pine reserve. COHDEFOR has also built two smaller sawmills in the central zone of Honduras with annual processing capacities of 25 and 50 million board-feet respectively. The largest one is running into serious difficulties with the lumber supply in the Yoro area and may have to be relocated. 22. Pulp and paper production is the next step in the development of the Olancho forest reserve with a plant projected at 125,000 annual tons capacity using 220,000 tons of chips from the Olancho sawmills. The feasibility study 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 on its capacity to develop technical and administrative manpower to manage and protect the forests but also on its ability to organize the peasants to exploit under supervision some forest resources, such as pine resin, "liquid amber oil", tuna latex, pine seeds, and firewood. Results of a program to organize peasant cooperatives have been limited so far. COHDEFOR plans call for the expansion in the number of peasant cooperatives and for the construction of 115 fire detection towers to control forest fires. COHDEFOR expects to expand its protected area from 587,000 hectares in 1978 to 1,400,000 hectares in 1983. Although COHDEFOR is gradually building up field competence in fire prevention, detection, and control, a sound program will take probably at least a decade to become firmly rooted. Reforestation is underway or planned in four project areas: PRODERO, Plan Comayagua, CORFINO, and La Mosquitia. Natural reforestation, however, is under consideration for most of the CORFINO project areas. Since this has shown a limited success in the past, this choice raises serious questions about the long-term viability of the important forest resources. Manufacturing 24. Manufacturing accounted for about 17 percent of GDP at factor cost and employed about 12 percent of the working force in 1979. Moreover, it expanded rapidly, averaging 9.6 percent annually during 1975-79, which sharply contrasted 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 larger transport investment effort, which resulted in a better integration of the domestic market; improved Government economic management, including a clear definition on basic incentive legislation; an active role of the government industrial finance corporation, CONADI, in promoting industrial development; and the more favorable conditions created for local industrialists by the cessation of trade with El Salvador and the introduction of bilateral treaties with the other members of the CACM. - 8 - 25. By far the most important policies affecting the manufacturing sector have been determined by the reinstatement in 1973 of the Central American Agreement on Fiscal Incentives as the basic incentive legislation. This had important effects in encouraging industrial investment but has been costly in terms of revenue foregone (about 15 percent of total Central Government tax collections). In addition, the system has a definite bias towards production for the CACM; the future of regional exports, however, is subject to significant uncertainty, since some neighboring countries need to reduce imports and civil disorders are rife. This situation emphasizes the need for increased attention to manufactured exports outside the region and makes essential a revision of the incentives system in the CACM, which has been under consideration for some time. D. Government Development Policy 26. The public sector's role in the economy expanded significantly during the 1970s. This expansion is noticeable in more active development policies, particularly in forestry and agriculture; the increasing role of public enterprises and decentralized institutions in the economy; and the much higher level of Central Government operations that rapidly expanded infra- structure and social services. Public Investment 27. Since 1972, improvements in Government planning and implementation capacity resulted in a substantial increase in public investment, which reached 8.8 percent of GDP in 1980 compared to 3.3 percent in 1972. Given the serious lack of basic infrastructure and the mountainous topography of the country -- which makes the expansion of the road network difficult and costly -- a very large share of public investment has been traditionally allocated to transport 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 the completion of a major network of highways linking the main population and production centers, the development of port facilities on both Oceans, and a rapid increase in power generation which still serves only one-third of the Honduran population. 28. Although receiving a smaller share of public investment, social and productive sectors have acquired more importance since 1972. Allocations for social investments have risen from 0.5 percent of GDP in 1972 to 1.3 percent in 1980. Productive investments also have increased substantially as a result of the nationalization of forest resources and the agrarian reform program; 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 performance of the economy and the expanded government role. During 1975-79, current savings increased from 3 to 4 percent of GDP while capital expenditures expanded 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 - 9 - external borrowing. In 1980, the situation, however, showed some important changes. Current savings declined to 3 percent of GDP and, even though capital expenditures declined, the overall deficit increased to 8.7 percent of GDP. Domestic financing played a larger role than in earlier years, a trend that was initiated in 1979. 30. Taking into account the financial implications of its ambitious public investment program 1979-83, the Honduran Government negotiated an EFF program for IMF assistance for a three-year period beginning in mid-1979. This program centered on a strengthening of the public sector's financial position by limiting current expenditure growth to 14.5 percent a year, undertaking tax measures equivalent to two percent points of GDP, and other measures to increase the operating surpluses of state enterprises. Similar undertakings were considered before El Cajon negotiations with the World Bank. Unfortunately, current expenditures exceeded in 1980 the agreed target, the 1979 fiscal reform was less than sufficient, and the financial position of some 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 2.9 Capital Expenditures 5.5 8.5 11.0 10.4 11.7 Overall Deficit (-) -3.1 -4.5 -6.4 -5.3 -8.7 External Financing 2.3 5.0 6.5 4.9 5.5 Domestic 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, total expenditures (excluding debt amortization) grew at 22 percent a year; the overall deficit, as a percentage of GDP, widened substantially from 2.3 percent in 1970 to 4.5 percent in 1979 and 7.5 percent in 1980. 1/ These trends contrast significantly with those of earlier periods when revenues were less buoyant and expenditures were constrained by lack of projects and a more conservative current expenditure policy. The growing deficits were financed by large amounts of external credits and also by increasing the use of domestic credit, 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. - 10 - 32. Current savings remained low in spite of rapid revenue growth. Some recovery 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 performance is explained by the rapid real annual growth of current expenditures, over 11 percent and 1.7 times the GDP growth rate, during 1975-80. In 1980, when the economy slowed down, the real growth rate reached 12 percent, 4.8 times the GDP growth rate. Moreover, this large increase is about double the level the Government had programmed. 33. Current expenditures for wages, goods and services, and transfers showed 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 operating expenditures for education, health and defense. Budgeted current expenditures for education showed an annual real increase of about 12 percent, for health 14 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 14.9 Taxes 10.0 11.0 11.1 13.8 13.2 13.6 On Income and Property 1.7 3.2 3.5 3.5 3.5 4.6 On Domestic Transactions 2.8 4.3 3.9 4.0 3.8 3.6 On 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 7.9 Investment 2.3 3.4 3.6 4.8 3.6 3.4 Capital Transfers 0.2 1.1 2.5 1.8 1.5 1.8 Net 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 7.5 External (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 - 11 - 34. Central Government current transfers are mostly for autonomous institutions, basically INA (the agrarian reform institute), the university, and the national social welfare institute. While the transfers to the welfare institute grew 9 percent a year during 1975-79, transfers to INA and the university grew at 30 percent and 20 percent a year, respectively. While expenditures 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 be designed to finance higher education. 35. As a percentage of GDP, capital expenditures of the Central Government have been very high since 1976. Fixed investments are mostly for highways, health centers, and schools. Capital transfers are also becoming increasingly important 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 percentage of GDP during 1975-80 because of the performance of export taxes. A tax on bananas was introduced in 1974 and increased gradually until it reached US$0.50 per box in 1979. In 1975, coffee taxation was revised; an ad-valorem tax with marginal progressive rates ranging from 10 percent for coffee prices below US$50 a bag of 60 kg to 20 percent for coffee prices above US$60 a bag substituted the earlier tax of US$5 per bag. This change in the coffee tax rate, coupled with the much higher export prices, resulted in significant new revenues. 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 during 1974-79, domestic transactions taxes had a buoyancy of 0.96. This situation reflects partly the per unit excise taxes on beer, liquor, soft drinks, etc. Tax collections on these items increased rapidly when new tax rates were put into effect in 1975 but afterwards additional revenues from these taxes were determined 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 compared to 14.6 percent in 1979. This reform consisted of the introduction of a pay-as-you-go system for income taxes; increases of the excise tax rates on cigarettes, beer, soft drinks and liquor; new export taxes on beef and sugar; a 1 percent tax on all exports, except bananas, coffee, beef, sugar and minerals; and minor revisions of sales and property taxes. Most of the revenue impact of the reform was due to the new payment system for the income tax of corporations, so that most of the incremental effects of the reform will vanish in 1981. This and the higher level of current expenditures expected in 1981 required new tax measures in April 1981. E. Monetary Developments 39. Credit expanded rapidly during 1976-78 at a rate slightly higher than that of monetary GDP. Both private and public sectors received increased credit allocations; the public share was 11 percent at the end of 1978. - 12 - Financial private savings doubled as export earnings expanded rapidly, and increased its ratio to GDP. This increase is mostly explained by the growth of quasi-monetary deposits at 27 percent a year. Domestic savings were supplemented by substantial foreign borrowings and loanable funds exceeded domestic credit demands. Thus, net international reserves of the banking system grew from US$48 million in December 31, 1975 to US$134 million in December 31, 1978. 40. This favorable situation, however, has changed since mid-79. The growth of financial savings weakened as a result of political uncertainties and low domestic interest rates, while foreign medium- and long-term borrowing from commercial banks was limited by a reduction of the exposure of foreign commercial banks in Central America and by sharply rising interest rates in foreign financial markets. Domestic credit demands exceeded the supply of loanable funds, and also private banks in Honduras experienced a liquidity squeeze. The slow growth of private financial savings continued in 1980 and total credit growth at 13 percent, even though it exceeded loanable funds, was negative in real terms. Foreign exchange reserves of the total banking system declined to US$55 million in December 31, 1980. 41. While the domestic capacity to expand credit by the monetary system was sharply reduced in 1979-80, credit to the public sector doubled; its share increased to 17 percent at the end of 1980. As a result, credit to the private sector increased nominally by 23 percent while inflation reached 29 percent in 1979-80. The reduction in real credit affected adversely private sector activities. F. The Balance of Payments 42. The balance of payments position of Honduras traditionally depends on the export of a few commodities (bananas, coffee, lumber, beef, sugar). Recently, coffee has become as important as bananas. From 75 percent of the value exported in 1950 the banana share dropped to 25 percent in 1980. 43. During 1974-75, Honduras' balance of payments was adversely affected by a 1974 hurricane, the oil price rise, and the OECD recession. The severe balance of payments difficulties eased in 1976-80, with the gradual recovery of banana production, the extraordinary increase in coffee prices and a 40 percent expansion of coffee production, and the growth of sugar and other exports. However, the balance of payments current account continued to show large deficits as imports grew rapidly because of higher prices for oil and other imported goods and the more dynamic performance of the economy. Expansionary policies which led to the more rapid economic and investment growth also had an impact on the quantum of imports. Increased foreign loans financed the growing current account deficit and even permitted some accumulation of foreign exchange reserves towards the end of 1978. More recently, however, capital inflows were not enough to cover the current account gap and net foreign exchange reserves declined to an equivalent of about one month of imports. The debt service ratio was about 11 percent in 1980. - 13 - 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, on the one hand, the promotion of industrial and agricultural growth through large infrastructure investments and longer-term credit and, on the other hand, an accelerated implementation of social projects, particularly for rural development, health, education, water supply and sewerage, and housing, to directly improve the welfare of the population. This dual strategy of accel- erated growth and expanded social programs entails possible conflicts, whose resolution will be closely associated with the Government's determination to: (i) maintain prudent fiscal and financial policies in order to provide sound financing for its ambitious investment program, and (ii) restore the private sector's confidence and reactivate private investment by improving the political and financial climate, stepping up efforts to promote private activities, particularly exports, and avoiding further expansion in productive activities which the public sector cannot profitably undertake. These are serious 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 large Government investment effort will accelerate growth by the mid-1980s, and the good prospects for increasing export volumes of lumber, sugar, coffee, beef, fruits, and even bananas, as well as diversification efforts in products such as cacao, cashew, and citrus fruits may yield significant results in the mid to late 1980s. The outlook for 1981-82, however, is less optimistic because 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 percent a year during 1981-85 unless the response from the private sector is more positive. If private investment recovers significantly, however, GDP growth may be about one percentage point higher. Moreover, by the mid-1980s, much of the public and private investment will permit a greatly accelerated growth. 46. Real export growth, nevertheless, is expected to be somewhat slower during the early 1980s than in the recent past. Banana production has almost recovered to prehurricane volume levels, coffee production growth will likely slow down for a while since prices are down and quotas have been introduced in the world coffee market, and industrial exports to the CACM may be adversely affected by financial constraints. The most dynamic and crucial new export will likely be lumber -- once the new sawmills become fully operational during 1982-84 -- while exports of beef, sugar, minerals, and seafood products are also expected to expand. Based on an assessment of known plans and prospects for these exports, the quantum of exports may expand at 9 percent a year during 1981-85 compared to 12 percent during 1976-80. - 14 - 47. Public expenditure levels will also be an important growth factor as the Government continues with the implementation of its 1979-83 investment plan and further expands some programs to improve the welfare of the poor. Public consumption is expected also to grow significantly but at a slower pace than in the recent past if the Central Government is successful in its declared intention 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 slow growth of the banking system resources during 1980 was mostly siphoned to the public sector with negative effects on private investment. This together with high interest rates and political uncertainties in the area had negative effects on private investment. Furthermore, CONADI's support for large private projects, such as the sugar mills, may have peaked since most of them have been completed and CONADI is in financial difficulties that effec- tively limit its capacity to enter new operations on a sound base. On the other hand, an expanding public investment and increased credit availability for the private sector (if the Central Government strengthens its finances) could provide the right environment for private growth, if existing political uncertainties are resolved. 49. In the longer run, the Honduran population is expected to grow to over 7 million by the year 2000 with one million concentrated in Tegucigalpa, and over three-quarters of a million in San Pedro Sula. This population growth and urbanization trend reflect much lower mortality rates as well as high rural fertility rates (in spite of an expected one-third decline), the expected increase of population density with respect to arable land (over 230 people per square kilometer by the year 2000) and its related impact on internal migration. Large number of people would be migrating from the poor Western and Southern highlands to the main growth poles on the San Pedro Sula-Tegucigalpa axis, the Atlantic littoral, the Aguan Valley, and the Olancho area. The speed and direction of this internal migration would depend on the creation of jobs and other opportunities in the towns and in promising new agricultural areas; the advances of the land reform program; and the access of the rural population to social services, including family planning. 50. Expected population growth makes evident the need for a longer term development strategy for Honduras geared towards increasing output, employment, and exports and improving social conditions. Medium-term favorable growth prospects are fairly well established barring unpredictable events, such as natural disasters. Beyond 1985, however, the future prospects are less certain. New sources of growth which could take advantage of the large public investments now underway need to be identified. These new sources of 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 of these activities. At the same time, the country has to continue its efforts to diminish the fuel import requirements of the economy by pursuing the development of further hydropower plants and intensifying its petroleum exploration promotion activities. - 15 - 51. Honduras also needs to take a longer-term view of its rural develop- ment. Rapid rural population growth means mounting pressures on natural resources, such as forest and arable land; increasing numbers of landless peasants and pressures for more land redistribution; and a rapidly growing labor force because lower fertility rates will have little impact in decreasing the labor supply in the late 1980s and early 1990s. Evidently, agriculture must grow rapidly to absorb productively a large proportion of the new entrants to the rural labor force; otherwise, rural migration to the towns will accel- erate even more. Fundamental long-term decisions will be needed about programs for the development of rural areas; increased support to small farmers; and the future scope of agrarian reform efforts and the technical, managerial, credit, and marketing support to its settlements. Essential to the success of rural development efforts will be major institutional improvements to ensure a more efficient and effective agricultural public administration. 52. Even if progress is made in the rural areas, rationalizing urban development has also a high priority. Honduras already is experiencing shortcomings from the present unregulated physical development and low service levels of its towns and cities. Rapid urban growth will create serious pressures for improved access to water and sewerage services, housing for the poor, street lighting, garbage and trash removal, access streets, etc. In addition, the finances of the municipalities and the public water and sewerage enterprises are weak, limiting their ability to meet these needs. B. The Public Investment Program 53. A projection of the possible 1981-85 public investments shows large investments likely for infrastructure, particularly for on-going power and transport projects, which are still crucial given the country's development stage; and heavy investments for export diversification, mainly through forestry development. Major expenditures are also likely for agricultural and rural development to advance incomes and social conditions of the agrarian reform 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 Pedro Sula and provincial towns, as well as expanded health services in rural areas. Parallel increments in current expenditures are planned to staff and equip the education and health centers. The Bank mission examined CONSUPLANE's project lists and prepared a scaled-down investment program essentially taking into account physical and financial constraints of the public sector (see para. 62). - 16 - Table 5: PUBLIC INVESTMENT PROJECTION BY SECTORS (in percentages) Actual Projected 1978 1979 1 9 8 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 17.8 Telecommunications 8.0 2.7 1.8 2.6 4.0 5.8 5.3 5.3 Energy 13.0 18.0 36.1 39.8 36.7 40.2 39.7 24.3 Urban 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 7.7 Forestry 1.7 4.5 9.8 11.2 11.6 7.9 11.5 27.9 COHDEFOR (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 0.2 Industry 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 4.2 Health 7.5 9.3 8.2 8.2 6.4 8.7 10.4 9.7 Housing 1.4 1.1 1.1 1.1 1.5 1.4 1.4 1.4 Social 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. - 17 - 54. Power investments will be very large during 1981-85, representing almost 40 percent of the public investment program. A large hydroelectric project at El Cajon will double power generation by 1986 and reduce the share of thermal electricity generation from 35 percent in 1979 to 16 percent. The project, operating at full capacity, will have a significant balance of payments impact since it will reduce the demand for imported oil by about US$90 million a year at 1980 prices. Unfortunately, the project is very capital intensive with total financing requirements (including interest during construction) at about US$600 million. Substantial financing on concessionary terms will significantly reduce the financial burden. 55. Transport investments will also be large for the trunk highway system and the roads and new port (at Castilla) for wood products exports. This will permit most of the important agricultural areas to have all-weather access to major urban areas and ports. With the primary network virtually completed, the emphasis in road building is shifting towardl secondary and feeder roads as well as proper maintenance of existing roads. The investment program includes a large feeder road program to support increased agricultural production and to improve rural living conditions. However, investment levels programmed by the Ministry of Public Works exceed CONSUPLANE's ceilings and will have to be spread out over a larger time period to avoid an excessive demand of financial resources for road construction. 56. Telecommunications investments are not large, but include a rural telephone system, two large phone centers in Tegucigalpa and San Pedro Sula, a national digital transmission network, and a new international telephone exchange. 57. Forestry investments by COHDEFOR and CORFINO are substantial. COHDEFOR plans to undertake feeder road development and maintenance in the Olancho and Comayagua areas, the development of two mid-size sawmills (at Las Lajas and Rancho Grande) by 1984, the purchase of forest protection equipment, and substantial reforestation, particularly in the Mosquitia and Western areas. There are other wood industries under consideration, such as a scaled-down hardwood complex. The Las Lajas and Rancho Grande sawmills should be carefully evaluated, particularly given COHDEFOR's recent experience with a sawmill which has an insufficient timber supply. In addition, COHDEFOR will require financial resources above what it can provide itself to complete this program, given the significant contribution required for its majority participation in forest industries. CORFINO is responsible for the construction in 1982-84 of two large sawmills in the Olancho area and for a pulp and paper plant during 1985/87. 58. Reforestation in the Olancho area will be crucial and it is essential that COHDEFOR or CORFINO undertake this task, which cannot be left alone to natural reforestation. Similarly, lumber marketing is another area which needs a policy definition so that benefits from the Olancho sawmill operation can be maximized. COHDEFOR is the only agency legally authorized to export wood products, but a practical formula must be found to let CORFINO market its production to take full advantage of fluctuating market demand for specific wood products. - 18 - 59. Agricultural fixed investments are large and mostly in support of the agrarian reform projects of INA, particularly in the Aguan Valley. These projects will produce African palm oil, cacao, grapefruit, cashew nuts, 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 the recent past. Not included in the investment program is a sugar mill with a total cost of over US$160 million (including land clearing and expensive flood control works) under review by some agencies of the Honduran Government. An INA cooperative of 4,000 families would own the mill and the Government is expected to provide loan guarantees for the large external credits needed. The Government should thoroughly review this project; it could well be a poor one given its implications for the external debt service and creditworthiness of Honduras. The recent poor experience with sugar mills and state supported banana cooperatives indicate the likelihood that the Government will end up in charge of a losing operation and underline the need for a clear technical, economic, and financial justification for a proposal of this size. The state coffee institute is promoting agricultural diversification among coffee farmers as well as technical assistance combined with renovation of coffee trees. Present expenditures are only for a pilot project for citrus and other crops, but this may provide the basis for an important export diversif- ication project in the future. COHBANA is involved in the expansion of banana production, an expansion affected by the shortcomings noted earlier. The Ministry of Agriculture is concerned with the development of some valleys, such as Guayape, Comayagua, and Choluteca. The Ministry of Public Works is working in limited river and flood control in the Aguan and Sula Valleys. Financial investments in support of agricultural and rural development are also expected to be substantial. This will require a rechanneling of credit away 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 out effectively the Government's programs. 60. Social investments are largely for health (including water and sewerage) and education. Health investments will be concentrated on water supply and medical facilities for Tegucigalpa, San Pedro Sula, and provincial towns, as well as for expanded health services in rural areas. Education investments are divided mostly between primary schools (three-fifths), the university (one-fifth), and agricultural and vocational training institutes (one-eighth). Public housing and urban development are expected to receive only small allocations since the implementing and financial capacity of the agencies involved is quite limited. Given the foreseen population pressures, administrative and financial strengthening of public institutions in the social sectors is also essential to enable them to run their programs efficiently and in a timely manner. 61. In view of the existing financial and absorptive capacity constraints for the execution of the project list contained in the investment program, the Government established investment ceilings in 1979. More recently, it has issued new general guidelines which have been used for the inclusion of projects in the 1981 budget. These guidelines respond to financial constraints - 19 - and general priorities in support of productive and social sectors, and the agrarian reform program. First priority projects are those that: (i) have external financing and are already under execution or are ready to begin; (ii) have domestic financing and are under execution or will be initiated soon to 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 conditions to initiate disbursements and will be included in an extraordinary budget; (ii) have domestic financing and support productive and social sectors or the agrarian reform but are located outside the priority areas; (iii) cover preinvestments for FY82 projects; and (iv) provide for infrastructure invest- ments that do not support productive sectors and the agrarian reform. Third priority projects are those that: (i) meet the criteria for a first or second priority qualification but require large investments and other complementary infrastructure, 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 indicates that actual investments will be lower in 1981-85 than those in the detailed project list prepared by CONSUPLANE. Taking into account existing commitments and financial availabilities, an alternative possible investment program has been prepared by the mission. The program assumes a postponement of projects without financing from 1981-83 to the 1984-85 period and that new projects will be available in sectors where investment levels projected on the basis of existing projects imply a substantial investment decline in the final year 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, would peak in 1981-82 because of the Cajon power project. The composition of public investment could change significantly. The infrastructure share could decline from 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 to over one-third. The social sector share would fluctuate around 15 percent. D. Public Finance Prospects 63. Given the public sector's ambitious investment program, additional efforts will be required in the next few years to increase public savings to generate the funds needed for financing investments in a framework compatible with monetary and price stability. Recent tax measures are a significant step to strengthen public finances after their deterioration in 1980. Central Government savings, however, could decline again in the next few years if current expenditures are not tightly controlled. Similarly, public enterprises savings would not increase much unless tariff action is taken. The port authority, the telecommunications agency, and the water and sewerage company have increased or are in the process of increasing their tariffs, which will be a significant step to improve their finances and avoid the need for Central Government transfers. - 20 - 64. The Central Government will need to generate adequate savings in the next few years. In 1981, the loss of much of the incremental effect of the 1979 tax reform 1/, the effect of the slowdown of economic activity on tax collections, and the difficulties of enforcing some of the expenditures cuts introduced in the 1981 budget forced the Government to double sales taxes on cigarettes, liquor, and beer and to raise import taxes by 5 percent for most intermediate and capital goods and 10 percent for consumer goods 2/. These measures are expected to yield L/85 million in 1981 but over L/125 million in 1982. 65. In addition, the Government plans to restrict, current expenditure growth 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 and the telecommunications agency were increased in June, 1981. The restriction on domestic credit to the public sector together with freeing interest rates on savings deposits as well as on loans financed with commercial external credits should improve the availability of funds to the private sector from the banking system. 66. The financial program of the Government -- which is being supported by 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 the Central Government's current and development expenditures in the next few years however, is still essential to avoid continuing fiscal crises requiring frequent fiscal reforms. If GDP growth slows down, even the agreed current expenditure restraint would require another tax package or lower current expenditure growth in the next few years. Alternative projections of current expenditures 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 sources become more buoyant than projected. Given Honduras' poverty and needs, the importance of a selective approach for the expansion of current and development expenditures cannot be overemphasized. Similarly, much improved efficiency should be sought from agencies that are the recipients of significant Government transfers, such as INA, to effectively satisfy the needs of the Honduran popula- tion within the country's resources. Operational costs of these agencies should be strictly controlled so that the money received is spent efficiently and mostly for the benefit of their intended beneficiaries. 67. Furthermore, the Government and donors should carefully appraise the full budgetary implications of its projects before carrying them out to avoid a repetition of recent experiences with projects in education and health, which have been undertaken without considering their recurrent budgetary implications. 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 income of 1979 and advance payments on 1980 income. 2/ Budgeted levels reflect the 1980 initial budget plus wage increases granted during 1980. - 21 - Table 6: CENTRAL GOVERNMENT EXPENDITURES,/- 1979-81 (in thousand lempiras) 1981 (initial budget) /i2 1981 (after April 1979 1980 Financing reform) Total DomestIc External Total I. Current Expenditures 549 726 822 757 65 815 1. Consumption Expenditures 425 459 499 491 6 519 Wages 186 171 224 224 0.5 229 Goods and Services 196 221 186 181 5 215 Interest 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 - 93 Goods and Services 25 79 113 60 53 79 Equipment 1 5 4 4 - 4 Construction 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 72 126 188 Wages 4 5 6 6 - 5 Goods and Services 2 2 2 2 - 1 Equipment 13 14 10 3 7 8 Construction and Other Works 114 142 180 61 119 141 2. Indirect Investment 85 124 207 79 128 94 Of which: public sector (85) (124) (207) (79) (128) 3. Financial Investment 14 9 _ - - 66 III.Dbbt Amortization 88 108 124 124 - 110 External 22 22 26 26 - Domestic 66 86 98 98 - 84 TOTAL BUDGET 869 1,129 1,350 1,031 319 1,284 Sources External 123 161 319 - 319 304 Domestic 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 and over 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 the trade-offs involved (increased tax revenues, budget cuts in other areas, lack of counterpart funds for investment). Similarly, these projects should be carefully evaluated as to the availability of professional and para-professional personnel and the strength of their future negotiating position for higher wages 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 1,509 II. Current Expenditures 840 924 1,016 1,118 1,230 III. Current Savings 30 96 145 217 279 B. Current Expend. Growth: 14 percent I. Current Revenues 870 1,020 1,161 1,335 1,509 II. 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 1,509 II. 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 1,509 II. Current Expenditures 840 1,050 1,313 1,641 2,051 III. Current Savings 30 -30 -152 -306 -542 68. The budgetary process in Honduras has deteriorated in the last few years. First, there has been substantial overspending for current and development expenditures (see Table 8), which breaks the budgetary discipline; second, additional (unbudgeted) expenditures have not been matched by new sources of revenues; third, the recurrent expenditure needs of new programs and projects have not been carefully analyzed before carrying them out; fourth, loose controls over the public agencies dependent on Central Government transfers to finance their expenditures have resulted in significant demands for additional transfers. - 23 - Table 8: CURRENT AND DEVELOPMENT EXPENDITURES, BUDGETED AND ACTUAL (in million lempiras) 1977 1978 1979 1980 Budgeted 370 455 542 597 Actual 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 to strengthen its budgetary control over autonomous institutions, particularly those that depend on its transfers, to ensure that they operate in accordance with Government guidelines and follow hiring and salary policies compatible with those of the Central Government.l/ In particular, agrarian reform insti- tute expenditures must be carefully controlled. Similarly, the university needs to revise its tuition policies -- charging more to the affluent students -- to increase its own revenues and reduce its financial dependence on the Central Government. 70. In this connection, the Government recently has taken measures to strengthen its control over autonomous and decentralized institutions. The 1981 budget created a superintendence to supervise autonomous and decentralized institutions; resolution No. 342 of May 1981 restricted some categories of expenditures of the decentralized institutions and ordered the superintendence to control their compliance. Further steps are being considered to strengthen the superintendence to exercise additional control over their expenditures. 71. Public enterprises also need to increase their savings to be able to finance soundly their investment programs rather than depend on Central Government transfers. Timely pricing and tariff actions on the base of revalued assets are now needed. The Port Authority (ENP) failed to revalue its assets in 1980 and did not increase its tariffs accordingly, with adverse results on its finances and liquidity, including difficulties in servicing its external debts. It revised recently its tariffs effective June 1. This is expected to improve its finances but strict control should be applied to its expenditures to avoid a recurrence of financial difficulties. SANAA's limited service levels now benefit mostly middle-income and affluent families 1/ The agencies' salaries for senior executives increased inordinately recently; far above the level paid by Government. - 24 - so that Government subsidies to SANAA are regressive. Unless water charges make a greater contribution to the expansion of water and sewerage services, it will be difficult to continue expanding coverage levels. The Government financial program considers a revision of water rates, which will improve SANAA's finances and reduce the need for Central Government transfers. COHBANA needs to reduce its administrative costs or raise its revenues to end its losses; otherwise, this agency would be in serious trouble in a short period of time. Financial difficulties of other public agencies have been noted earlier. Table 9 shows selected financial indicators of some public entities. 72. Public enterprises and autonomous agencies should also evaluate carefully the profitability, the resource base, the transport facilities, and other necessary elements of new investments before they undertake them to 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 losing operation; by COHBANA with the Isletas losing banana operations; and by INA with some new production projects. Otherwise, new burdens would be placed on their limited financial capacity. 73. Although not included in the non-financial public sector, CONADI's financing policies also deserve close scrutiny. It has accumulated large liabilities. In 1979, it had accumulated L/139 million in debts, mostly with foreign banks; it had also contingent liabilities or banking guarantees for about L/213 million, of which L/175 million are related to corporations where CONADI had participations. About L/130 million of the guarantees and L/30 million of the accumulated debt were the result of 1979 operations. These practices continued in 1980. As a result, CONADI in 1981 faces a serious cash flow situation. Immediate remedial action is needed together with improved and stricter investment criteria. CONADI has financed equity participation in investment projects, some with low or negative profitability, as well as has made loans with longer maturities than those of CONADI's borrowings. New indebtedness or guarantees of CONADI should be strictly controlled or stopped to avoid additional difficulties in the future and steps taken to remedy the present situation. 74. Similarly, the agricultural development bank 1/ has financial difficulties. At the end of 1979, 32 percent of its portfolio was overdue and another 13 percent had been extended or refinanced. An analysis of the overdue loans in 1977 showed that only 23 percent of them were owed by small farmers (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/50,000 or more). Limited efforts have been made to collect,and the agricultural bank has received credit from the Central Bank to continue operations. In October 1980, BANADESA owed the Central Bank L/61 million. However, better collection practices 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 ENTERPRISES AND AUTONOMOUS AGENCIES, 1979-80 in thousands lempiras 1978 1979 1980 SANAA Net Operating Revenue - 869 10 -2,380 Net Income 401 -375 -2,882 Net Income plus Depreciation 2,485 2,104 -482 Overall Deficit (-) - -6,432 -5,604 10,611 Overall Deficit (after Gov't transfers) 544 2,063 1,165 COHDEFOR Net Operating Revenue 16,331 19,953 10,629 Net Income 15,325 19,308 11,174 Net Income plus Depreciation 16,754 20,897 12,774 Overall Deficit (-) 10,141 19,254 4,135 Overall Deficit (after transfers to Gov't)(-) 5,141 12,710 -5,870 COHBANA Net Operating Revenue 1,109 -98 4,441 Net Income -1,186 -2,511 -1,819 Net Income plus Depreciation -1,036 -2,189 -1,419 Overall Deficit (-) -1,308 -3,292 -3,086 HONDUTEL Net Operating Revenue 11,085 8,919 17,701 wIet Incoime q,996 6,782 14,37u Net Income plus Depreciation 10,665 8,874 14,570 Overall Deficit (-) -22,204 -9,584 -1,477 ENP Net Operating Revenue 7,057 8,554 8,511 Net Income 5,425 2,553 -1,838 '"et Tncore plus nepreciation 7,0Q5 6,059 h,172 ENEE Net Operating Revenue 26,085 35,445 43,691 Net Income 13,307 20,923 27,031 Net Income plus Depreciation 22,577 33,148 43,031 INA Net Operating Revenue (before Gov't transf.) -17,263 -17,925 -22,962 Net Income (before Gov't transf.) -17,263 -18,038 -22,962 Net Income plus Depreciation (before Gov't transf.) -16,805 -17,430 -22,262 Overall Deficit (before Gov't transf.) (-) -37,297 -32,103 -36,975 Overall Deficit (after Gov't transf.) (-) 556 7,069 4,652 UNAH Net Operating Revenue (before Gov't transf.) -14,363 -18,938 -24,364 Net Income (before Gov't transf.) -14,510 -18,805 -24,486 Net Income plus Depreciation (before Gov't transf.) -14,510 -18,805 -24,486 Overall Deficit (before Gov't transf.)(-) -16,314 -22,245 -33,501 Overall 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. - 26 - 75. In summary, the consolidated financial position of the non-financial public sector has improved significantly with the new taxes. Only if current expenditure growth is controlled and public enterprises and autonomous agencies increase tariffs and prices to increase their savings capacity, will continued high overall public investment levels be feasible, as shown in Table 10. Table 10: CONSOLIDATED FINANCIAL POSITION OF THE NON-FINANCIAL PUBLIC SECTOR (in million lempiras) Actual Estimate Projections 1979 1980 1981 1982 1983 1984 1985 Central Government Savings 58 17 30 62 69 90 90 Local Governments 6 -5 3 6 7 10 10 Automous Agencies Savings 57 60 72 79 86 95 105 Public Enterprises Savings 86 75 85 110 135 150 170 Public Sector Savings 207 147 190 257 297 345 375 Fixed Public Investment 366 449 465 545 655 748 843 Other Capital Expenditures 34 68 60 60 70 70 70 Net Loans 39 72 50 30 35 40 45 Overall Deficit (-) -232 -442 -385 -378 -463 -513 -583 Financing 232 442 385 378 463 513 583 External (net) 235 283 340 345 427 496 565 Internal (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 strengthen public finances, the following main balance of payments developments can be expected: a deceleration of export growth at constant prices from 12 percent during 1976-80 to 9 percent during 1980-85, as noted earlier; higher import levels partly fueled by rising public investment and by higher import prices which will result in increasing and large current account deficits of the balance of payments; substantial inflows of foreign official capital in support of the public investment program; and a deceleration of capital inflows to the private sector, which, if not reversed, would be reflected in a decline of foreign exchange reserves. 77. Honduras' public external debt repayable in foreign currency amounted to 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 external debt service ratio low because foreign loans were almost all on concessionary terms. 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. The bulk of the external financing needed is expected to be met through public borrowing. Honduras will require an estimated net capital inflow of about US$1.5 billion during 1981-85, of which about US$1 billion will be disbursed from commitments made through the end of 1980. It is important that the country continue to borrow on reasonable soft average terms in view of its poverty, the fact that it will continue to depend on exports of a few commodi- ties with sharp price fluctuations, and because, historically, natural disasters have sharply reduced the volume of exports every few years. Even if Honduras is successful in obtaining about two-thirds of the financing it needs for its investment program on terms similar to these offered by the international lending agencies, the debt service ratio is likely to rise to about 14 percent by 1985. Continued maintenance of Honduras' creditworthiness will depend on the efficiency with which it chooses and implements its major public investment projects; on careful, continued demand management including cautious use of domestic credit, and on its export promotion policies. - 28 - ANNEX A Page 1 SECTORAL INVESTMENT PROGRAMS 1. This annex describes the Government's 1981-85 public investment program. In general terms, this program is fairly well defined for the period 1981-83; however, the lack of specific projects for the later years in several sectors indicates the need for greater attention to pre-investment activities. A. Power 2. Honduras' most abundant known energy resource is hydropower, whose use has grown rapidly in the 1970's and will expand further with the recently completed extension to the Rio Lindo plant and the Nispero and El Cajon projects currently under construction. However, Honduras still depends heavily on petroleum imports, and in view of increasing prices for these imports and domestic demand for energy, the Government is trying to diversify and increase the supply of domestically produced energy. Apart from hydropower, known domestic resources are wood, charcoal, bagasse and coal. Efforts are underway to explore for coal in central and western Honduras and petroleum and gas in the Caribbean offshore area, with the Government undertaking minor investments to gather, synthesize and analyze existing seismic data to attract private investors to make the expensive, high risk exploratory drilling invest- ment. Furthermore, areas with geothermal potential are being evaluated and pelletyzing wastewood from the country's sawmills is under consideration to make steam power plants economically feasible in rural areas, thereby providing earlier access to electricity than would otherwise be feasible. Finally, the Government 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, and adequate 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 two alternative approaches to sector organization--creation of a National Energy Commission or a Ministry of Energy--which are currently under review, plus further institutional measures to strengthen the sector. The Government will also prepare an energy balance by sector to the year 2000; coordinate and compare the costs and benefits of the various studies of energy alternatives being undertaken; do an evaluation of its existing petroleum pricing and taxation policy in order to establish an adequate pricing system; and provide training for sector officials. 4. Based on recent market studies, generation requirements in the National Electrical Energy Company's (ENEE's) system, which serves all Honduras' major cities and towns, are expected to grow at 11.7 percent per annum during 1979-1988. Demand will thus grow from 137 MW in 1979 to 371 MW in 1988. ENEE will meet the increased demand through 1982 with the addition of a 30 MW diesel plant at Puerto Cortes and the 22.5 MW Nispero hydro plant by 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 necessary complementary generating capacity to meet demand during 1982-85; additional - 29 - ANNEX A Page 2 capacity needs would be defined when El Cajon's construction is more advanced and its scheduled operation more definite. From 1986 until about 1989, El Cajon's output (292 MW) would provide ample electricity for Honduras. For the 1990's, sites aggregating about 650 GWh annual production have been studied. ENEE will update the existing inventory and prepare a prefeasibility study of the most promising site for development after El Cajon, currently assumed to be the Piedras Amarillas site on the Patuca River. ENEE is also studying possible small hydro projects to expand the options available for supply to isolated areas. 5. Total power investments during 1981-85 are expected to reach L 1,150 million (in current prices) or over 35 percent of total fixed public invest- ment. Because of El Cajon, power investments during this period represent a greater 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 other financial charges) is estimated at L 986 million. 6. Access to electricity is currently available to only 22 percent of the total population, mainly in urban centers in the more densely populated parts of the country. ENEE has been involved in rural electrification since 1971 when six priority markets near the interconnected system were selected for development. ENEE has built about 270 Km of 35 kV rural lines and related distribution facilities in these areas, and is now undertaking electrification of the Aguan Valley and western rural areas. Including these efforts, ENEE expects to make electricit- available to about 37 p.cL r of tile totai p_puia tion by 1986. However, the dispersion and low level of production and income of rural population centers will continue to handicap their access to elec- tricity services. 7. ENEE sets its own tariffs. Since 1974, several tariff increases have been undertaken together with increases through a fuel adjustment clause. These tariff actions and an increasing use of hydro resources have helped ENEE offset petroleum price increases and achieve sound financial performance. Tariffs for commercial and large industrial consumers, however, are low, and on the basis of a 1978 study based on long-term marginal cost criteria, ENEE has prepared a program for tariff structure revision and ordered required metering equipment. B. Transport 8. During 1972-80, transport investments, mostly for highways and ports, represented 38 percent of total public fixed investment, reflecting the high priority given to establishing a primary transportation network to support economic growth. Highway and airport development are the responsibility of the Ministry of Communications, Public Works and Transport (SECOPT), port development of the National Port Company (ENP) and rail development of the National Railway of Honduras (FNH). - 30 - ANNEX A Page 3 Roads 9. Distances in Honduras are relatively short and the terrain is rugged, thus accounting for the dominance of highways in transport investments. As a result, the total length of the road network grew from 5,746 Kms (1,228 paved) in 1972 to 8,543 Kms (1,609 paved) in 1979. There are road connections among the main population centers and with the neighboring countries, although the sparsely populated eastern area has few roads. The backbone of the existing network is the north-south road which, from San Lorenzo on the Pacific Ocean, passes through Tegucigalpa and San Pedro Sula, and reaches Puerto Cortes on the Caribbean. Several road projects are underway to cross the mountains and further connect the southern and northern parts of the country. All major productive areas will then be linked by an all weather road system. A 1977 Highway Master Plan concluded that with the primary system practically completed, future emphasis should be on small-scale improvements, with special attention to maintenance and construction of new low standard roads to serve agricultural areas. The Government's investment program for 1981-85 reflects these recommendations, with a considerable decline in new construction. Apart from maintenance and rural roads (discussed below), investments over this period will focus on completion of the Tegucigalpa-Jicaro Galan road to the south, the La Entrada-Copan Ruinas access road in the west and the Talanga-Catacamas road to the east; the Aguan Valley roads; and the Olancho forest area roads to link this zone with the Bonito Oriental and La Union sawmills and Puerto Castilla in the north. The massive investments, both infrastructure and productive, which are underway and planned in this latter area will undoubtedly give rise to considerable immigration of population and it seems that insufficient attention has been given to the complementary social investments which will be required. This should 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 network was in good condition in 1980). Since 1978, DGM has employed consultants to improve maintenance planning and management, and will continue this technical assistance, as well as providing training to its staff. The main problem is the shortage of maintenance equipment, so that significant investment during 1981-85 is being allocated to renewal and expansion of the maintenance vehicle fleet. It is expected that the portion of the road network in good condition would grow to 64 percent by 1984. 11. Continued development of secondary and feeder roads in rural areas is necessary to support increased production and improve living conditions. The Government is therefore embarking on a large feeder roads program (about 500 Km per year) over the next few years to improve rural access in support of ongoing efforts in agricultural and rural development. This program will focus on a number of valleys of high agricultural potential, such as Guayape, Yoro, La Masica, Comayagua and Jamastran, and on the western part of the country. - 31 - ANNEX A Page 4 12. The highway planning process has improved over the years. SECOPT staff has a good understanding of how to conduct economic analysis, and the road investment program (even rural roads) is increasingly well justified on the basis of engineering and economic feasibility studies. SECOPT plans to improve its planning capability by instituting systematic collection of traffic data and updating its Master Plan. Careful analysis and selection of road projects to be undertaken during the 1981-85 investment period is very important in view of limited Government resources. Ports 13. Ports receive a significant share of transport investment. Honduras has four ports on the Atlantic coast--Puerto Cortes, Tela, La Ceiba and Puerto Castilla. On the Pacific side, there is a deepwater anchorage at Amapala on El Tigre Island and a mainland port at San Lorenzo. ENP plans and operates all ports in the country. 14. Puerto Cortes is the principal general cargo port, accounting for more than 70 percent of all seaborne traffic. Considerable investment in the past has provided it with five berths, and it has quickly adapted to new types of traffic such as roll-on/roll-off, containers and lighter-aboardship. Since there is now no specialized terminal for solid bulk cargo and the facilities for liquid bulk cargo are deteriorating, ENP has programmed some L 27 million investment for this purpose during 1981-85 and a preliminary feasibility study is underway. ENP also plans a sixth berth for bananas and ten new buildings for its Free Zone at Puerto Cortes, but these are not now included 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 Puerto Castilla, including construction of a wharf, transit and lumber sheds, a warehouse and storage tanks for palm oil and petroleum, as well as provision of general cargo, lumber handling and chip loading equipment. These facilities will serve the important developments undertaken by the Government in the Aguan Valley and the Olancho forest area. Most immediately, the facilities are needed to export lumber and chips to be produced by the Bonito Oriental sawmill, scheduled to operate in March 1982. Although construction at Puerto Castilla began in 1978, the contractor stopped work in March 1980. This has seriously delayed the works and increased costs. ENP is currently seeking a new contractor and estimates that it will invest L 70 million at Puerto Castilla between 1981-85. It also has additional plans beyond this investment period for developing a petroleum transfer terminal, a fishing port, 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 better average load and equipment utilization for shipments with origin/destination at Puerto Cortes and at developing Honduran participation in the roll-on/roll-off Caribbean market. However, given ENP's limited financial resources and the revisions and political decisions needed to tie this project into a Central American system, the project would not appear advisable at this time. - 32 - ANNEX A Page 5 17. ENP generates some of its financial requirements through a system of port charges, which are expected to allow ENP to earn an 8 percent rate of return on revalued assets. However, ENP's financial position deteriorated significantly in 1980 and early 1981 because its current expenditures for wages expanded considerably while its tariffs were not increased since 1977. In addition, the large investment program carried out in recent years with borrowed funds means serious financial strains originating from ENP's debt service. Moreover, some of these investments have not been profitable, such as the free zone at Puerto Cortes. ENP has recently increased tariffs in order to improve its debt service capability; further action may be needed in the future to maintain ENP's financial viability and allow it to contribute to its investment program as well as service its relatively large debt service. Because of ENP's tight financial situation, it should also carefully review the feasibility and timing of its new investments. In the past, some of its investments have been over-programmed; for example, ex-post analysis showed that investments at San Lorenzo could have been delayed for about 10 years, and traffic at Puerto Castilla may also prove lower than expected given reduced estimates of the Olancho forest resources and consequent smaller sawmill and pulp and paper investments. This is an additional reason for greater attention to future investments. Airports 18. Airport investments will be small until 1984 when construction may start for a new Tegucigalpa airport. The San Pedro Sula airport has a good runway of 2,800 meters, but needs minor investments in a new terminal building which has already been contracted. Extensions are also planned for the Roatan airfield to support tourism, and work is underway at the Comayagua airport. The Toncontin airport at Tegucigalpa is not satisfactory, with a 1,930 meter runway 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 near Talanga, estimated to cost about L 145 million. This investment represents a major financial burden in view of the Government's fiscal constraints and should not be undertaken at least before 1984. Railroads 19. The rail system operated by FNH consists of three narrow gauge railways in the north, with 992 Km serving primarily the banana plantations in the Sula Valley and the northern coastal strip. It also transports sawn timber and agricultural imports and exports. With simple operation and captive 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 and the Aguan Valley, as well as for urban transport in Tegucigalpa, the priority of these investments seems low given the heavy investments in the road network. - 33 - ANNEX A Page 6 C. Telecommunications 20. The Honduran Telecommunications Company (HONDUTEL) has followed an aggressive policy since its creation in 1976. However, although investment plans for the 1981-83 period seem well supported, little information is available for 1984-85. In addition, financing for several of its planned projects is not yet firm. HONDUTEL recently raised its tariff rates by an average 25 percent, so that its finances should improve significantly in the near future. 21. Central American telecommunications traffic could grow by about 20 percent a year and traffic to the rest of the world by about 30 percent. This means that the current international exchange facilities would handle service only through 1983; international transmission facilities could also be saturated. HONDUTEL therefore plans to start transmission services through Guatemala and also to construct an earth satellite station in Honduras to improve significantly international telecommunications facilities, and increase traffic and benefits. In addition, HONDUTEL programs a new international exchange in Tegucigalpa, adding 810 new international circuits to its current 980, a digital telex center and a transmission tower. 22. With regard to domestic service, HONDUTEL will undertake a major program to provide telephone service to rural areas such as Puerto Castilla, the Aguan Valley and Bonito Oriental. HONDUTEL's other major projects will be establishing a microwave network for the northern region, with centers in Tegucigalpa and San Pedro Sula, expanding the national digital trans- mission system beginning in the north and providing a network for rural telecommunications, and expanding the exchanges for a number of cities. A possible project for the later years is improvement of San Pedro Sula's internal system. D. Housing, Urban and Community Development 23. The urban population of Honduras has grown from 329,000 (23 percent of the population) in 1961 to 1,323,000 (36 percent) in 1980, and is projected to grow even faster for the remainder of the century. While total population growth is slightly over 3 percent and urban population is expanding at around 5 percent, the major urban centers are growing even faster. In addition to sizeable migration from rural areas, there has also been substantial movement between urban areas, principally to Tegucigalpa (445,000 people in 1980) and San Pedro Sula (276,000). The migrants, mostly poor, are aggravating already difficult conditions in these cities. While Tegucigalpa and San Pedro Sula are growing at annual rates of 6.4 and 8.0 percent, respectively, their marginal populations are growing twice as fast. Excluded from even the lowest priced units produced by the public sector, an estimated seven to eight thousand low-income households annually solve their housing needs through their own efforts in the informal sector. This has led to large marginal concentrations which are characterized by lack of legal title and basic sanitation. - 34 - ANNEX A Page 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 housing sector. 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 from public 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 its implementation 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, - 35 - ANNEX A Page 8 and intermittent service or rationing are commonplace. This is due to the absence of treatment (only in the largest cities is chlorination practiced) and inadequate operations and maintenance, partially explained by the low training level of operators. Sewerage service levels are even lower than for water. In 1978, only 15 percent of the total population, all in urban areas, had water borne sewerage; another 14 percent had either latrines or septic tanks. 29. The National Water and Sewerage Service (SANAA) is the Government agency for water supply in communities above 200 inhabitants, for sanitary sewerage in towns with more than 20,000 people, and for stormwater drainage in the largest cities. Its function includes planning, construction, operation and maintenance, and it is currently responsible for 21 urban and 81 rural water systems. 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 the Municipal Development Bank, and currently handle some 457 water and 33 sewerage systems. In San Pedro Sula, this role is played by its Municipal Water Division (DIMA). The Ministry of Health has responsibility for supplying water to all communities below 200 inhabitants and building latrines in rural communities with more than 50 inhabitants and in marginal urban areas. it also sets and supervises water quality norms. The Ministry has experienced difficulties in fulfilling its role, but is now receiving foreign financial and management assistance to increase its capacity to install wells and latrines. Overall coordination in the water supply and sewerage sector is covered by a unit in CONSUPLANE which works with the planning offices of SANAA and the Ministry of Health. However, program responsibility between these two agencies, although defined, is not always followed, and improved planning and management are needed. A better trained supervision and management staff is also a must to insure system durability. Long term management assistance will be provided to both SANAA and the Ministry under a USAID project. 30. The Government has set both short-/medium-term and long-term targets for the sector. By 1983, it aims to increase the proportion of population with access to public water from 52 to 75 percent, largely by freezing the share with house connections while expanding the segment with easy access, and to raise the proportion with access to some form of sanitation from 29 to 46 percent. The longer-term goals correspond closely to those of the International Water Decade for 1990--complete coverage in urban areas, and water and sewerage service to 90 and 75 percent, respectively, of the rural population. 31. Achieving these targets will necessitate investments significantly above 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 near this level and its composition is biased in favor of rural sanitation and water supply. A number of rural sanitation projects, executed by SANAA and - 36 - ANNEX A Page 9 the Ministry of Health, are underway or planned with USAID, IDB and other financing sources. SANAA is undertaking water supply systems in El Progreso, Puerto Cortes and La Ceiba, as well as more minor works in other cities. In Tegucigalpa, SANAA has prepared a Master Plan for Water Supply and Sewerage to meet the city's needs through the year 2010. It plans major investments for a dam on the Guacerique River, with interim well fields to be developed on the Hondo River, and has already arranged for design studies. However, preliminary estimates of the costs of these works are very high and most likely the cost and size of the Tegucigalpa project will have to be reduced. In addition, SANAA's finances will be a serious bottleneck to any major expansion in Tegucigalpa. In addition, DIMA has prepared the technical and financial analysis of a project for water supply and sewerage in San Pedro Sula, closely tied to planned low-income housing programs in the city. If financing is forthcoming, there is potential for significant additional investment for water supply in the coming years. Despite these prospects, there is very little 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 recuperating costs and generating revenues for the counterpart contribution to the sector investment program. This is critical in view of limited Government financial resources, which could significantly cut back on new investments. Present tariff levels do not allow for sufficient cash generation to provide for debt servicing and investment expenditures. Without financial reform, SANAA will have to rely on continuing Government funding, and DIMA will be unable to generate sufficient internal resources to finance its expansions. It must be recognized that a failure to produce revenues will seriously limit future progress in this sector. F. Health and Nutrition 33. In terms of health indicators, Honduras ranks near the bottom in Central 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 and private practitioners. In rural areas, knowledge of preventive measures is rudimentary due to lack of education and almost no contact with professional health personnel. Primary causes of death are diseases of the digestive, respiratory and circulatory systems. Diarrheal disease is the single most important cause of death, and Honduran mortality and morbidity rates for water-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 morbidity statistics clearly indicates that lack of environmental sanitation is the most serious health problem facing the country. The Government's programs in water supply and sewerage are discussed in Section E above. This Section focuses on the provision of other health services.) 34. Responsibility for health care lies mainly with the Ministry of Health, which delivers services through a six-tier system: the national level with three hospitals and central offices in Tegucigalpa; the regional level with eight sanitary offices and six hospitals; the area level with seven - 37 - ANNEX A Page 10 emergency hospitals; the sector level with 76 health centers staffed by physicians; the subsector level with 379 rural health centers staffed by auxiliary nurses; and the community level represented by health promoters and local volunteers. The Ministry's program for expanding basic health service is 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 promoter is key to initiating community participation in the delivery of health services and 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 the provision of health services. IHSS is essentially an insurance system providing relatively high quality services to workers who can afford to make payments out of their salaries. The average unskilled worker's income is so low as to preclude participation in the system, which consequently covers only 5 to 7 percent of the population. IHSS runs two hospitals, in Tegucigalpa and San Pedro Sula, as well as a number of peripheral clinics and medical service offices. PANI is an autonomous institution for mothers and small children supported by the national lottery. Finally, in the area of nutrition, a National Nutrition Planning and Evaluation System was created within CONSUPLANE to plan, execute and evaluate nutrition-related programs, in coordination with other ministry and agency programs: for example, water supply and environmental sanitation 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 to improve health conditions, particularly in rural and marginal urban areas, by increasing the health service coverage of these populations, especially for mothers 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 investment program 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 additional urban and rural health centers and community volunteers, with the number of centers 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, planning and management, and human resources development and supervision. The latter is important to assure effective implementation of the Government's health programs. However, the USAID program is largely development expenditures, not fixed investment. Direct medical attention in hospitals is a second priority in the Government's plan, and although a number of hospital projects are in the 1981-83 program, they are less likely to materialize than locally-oriented projects, largely due to lack of financing. In the area of nutrition, planned investments are small, mainly because of poor project identification and preparation. - 3E - ANNEX A Page 11 37. Although expenditures to improve health (including the USAID development expenditures noted above) are expected to be large and actively supported by external agencies, too little attention has been given to their recurrent expenditure implications--salaries for health personnel, purchase of equipment and supplies, etc. This must be considered when formulating health programs, especially in view of limited Government resources, in order to assure continued sector progress and to avoid deterioration and incomplete use of facilities. G. Education 38. Honduras' formal education system consists of one to three years of pre-primary education, six years of primary, six years of secondary (including a common lower cycle and a diversified upper cycle) and three to six years of higher. The Ministry of Education administers most of the formal system up to university level; it is heavily centralized with poorly trained administra- tive personnel. The Ministry of Natural Resources handles training for middle-level agricultural technicians, while higher-level agricultural and forestry personnel are trained at the private Pan American Agricultural School and the National Forestry School. The National Training Institute provides apprentice and affiliated training for skilled and semi-skilled industrial, agricultural and service workers. In addition, several Government and 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 all students, 81.5 percent are primary, 15.5 percent secondary and 3 percent higher. Due to the priority attention given to primary education in the past, 92 percent of all primary school age children matriculate; however, only 23 percent of first grade entrants complete the six-year cycle. To improve the situation in rural areas, the Government has developed a nuclearization system of school construction and organization. As regards secondary educa- tion, approximately 90 percent of primary school graduates go on to the common lower middle cycle, 90 percent of these then advancing to the diversified upper middle cycle and 50 percent graduating. Finally, 70 percent of secondary school graduates proceed to university training. If past trends continue, the decade from 1980 to 1990 will see a doubling and tripling in the number of primary and secondary graduates, respectively. This indicates the need to give greater attention to the higher levels of education and to developing and rationalizing education planning. More investment will be needed in secondary education, an area in which the private sector participates and must play an increasing role in view of limited Government resources. Also, university expansion might be deferred, since its prospective levels are incompatible with both public financial capacity and the employment prospects of its graduates. 40. Although important advances have been made during the last ten years, the quality of education services continues to be low with many unqualified and poorly trained teachers, limited supervision and insufficient textbooks at the primary and secondary levels, and poor admissions criteria, inadequate preparation of students and poor student/teacher ratios at the university level. - 39 - ANNEX A Page 12 41. It is important for Honduran education to meet the needs of the country's labor market, and this has been a priority since 1974. Facilities for agricultural, technical/industrial and commercial/secretarial education appear to be sufficient now, but should be reviewed further in the light of long-term needs. Primary and secondary school teacher education must be improved 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 for the construction of rural primary schools under projects already financed by the Bank and USAID. In fact, the Ministry of Education limited execution capacity may slow its completion of these projects on schedule. The other large area of investment is for university education, whose priority seems less pressing, as noted above, as does increased investment in technical education. There seems to be little projected investment, however, for secondary education, or for such areas as educational administrative reform and extension and improvement of teacher education. This imbalance in the investment program should be reviewed. 43. In analyzing the Government's investment program, it is important to consider the Government's ability to finance the growing recurrent expendi- tures it will create. In 1981, current expenditures in education are about one-quarter of the Government's current budget; UNESCO estimates that this figure could rise to 33 and 38 percent in 1985 and 1990, respectively, in order to accommodate the fast growing school population. An inability to maintain schools, pay teachers, buy supplies, etc. could negate some of the advances expected from increased physical facilities. In Honduras, consider- able success has been achieved in the area of educational credit, which is a good instrument to reduce public education expenditures, allow poor students to get an education and stimulate personal responsibility for education, and whose expansion should be considered at a time of limited Government resources. H. Agriculture 44. Honduras is divided into five geographical regions. In central and western Honduras, the terrain is mountainous and used mainly for timber, cattle and coffee. The northeastern coastal plain, with a humid tropical climate, poor soils and low population density, is used mostly for extensive cattle raising. The southern coastal plain has a long dry season and limited water resources. The central valleys are relatively fertile and have moderate supplies of water. The northwestern valleys and coastal plain have the most productive soils and important banana plantaions; the major limitations to production are flooding and inadequate soil drainage. Apart from the valleys, soils are generally shallow and have serious deficiencies of nitrogen and phosphorous. 45. Although Honduras' natural resources are limited and difficult to exploit, the technical possibilities for raising agricultural output are substantial. Available technology is not widely disseminated and cropping practices are often traditional with little use of modern inputs, especially among subsistence farmers who also lack adequate market incentives and - 40 - ANNEX A Page 13 facilities. Export-oriented industrial crops such as bananas, tobacco, sugar cane, citrus, cotton and coffee employ comparatively high technology production systems 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 and to a lesser degree tobacco, cotton and vegetables, its utilization is far below its potential. Studies for future irrigation projects are underway for a number of valleys, for example Guayape and Aguan, but before specific project implementation is undertaken, there is a need for better coordination of Government agencies and a comprehensive water law. Another important means of raising agricultural output would be through shifting land from lower to higher value farm enterprises such as from grassland to sugar cane and rice. It is estimated that only 28 percent of land suitable for annual crops is now used for these purposes; the comparable figure for perennial crops is 18 percent. 46. The large numbers of landless rural families living in extreme poverty gave rise to agrarian unrest and invasion of private land during the early 1970's, creating concern among private farmers and disrupting the production process. The Government, therefore, gave land reform and redis- tribution considerable attention. 47. Estimates suggest that nearly 80 percent of small-scale farmers depend on private money lenders who charge usurious rates of interest. However, the National Agricultural Development Bank (BANADESA) provides a major portion of Honduras' institutional financing for agriculture and has the largest participation in small-scale farmer credit, both within and outside the land reform sector. The Government has established a fund in the Central Bank to channel credit to Honduras' farmers through BANADESA and the commercial banking system. 48. Duplication of effort by different agencies, excessive centralization and shortage of trained professionals are also constraints in the sector. However, better administration techniques are being considered and projects are 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 animal health, plant quarantine, research, extension, some input services and project preparation. Although the Ministry has been reorganized, it is still weak in extension, research and seed production, but is receiving foreign assistance in these areas. INA is responsible for implementing the land reform program, settling land disputes, granting titles and providing guidance to agrarian reform farmers until they achieve full cooperative status and gain title to their land. It is also receiving technical assistance. In addition, a number of specialized agencies deal with specific areas. The Honduran Banana Corporation (COHBANA) promotes the development of bananas and increasing national participation in their production, marketing and transport. Its production expansion program is being coordinated with the agrarian reform program. The Honduran Forestry Development Corporation (COHDEFOR) is mandated to generate funds for the nation through sound economic forest development and - 41 - ANNEX A Page 14 is also responsible for organizing a Social Forestry System to offer the rural poor employment alternatives, for example through cooperatives engaged in resin refining. The Honduran Coffee Institute (IHCAFE) supports coffee farmers and more recently has instituted a program of diversification. The Honduran Marketing Institute (IHMA) establishes support prices, storage facilities and marketing arrangements for farmers. 49. In its five-year agricultural program, one of the Government's main goals is to attain production levels of basic grains (corn and beans) that would allow self-sufficiency and even small surpluses for export. Land titling, assistance to help farmers manage ongoing settlements, strengthening of the regional offices of all institutions, the provision of grain silos, other on-farm storage and market structures, and COHDEFOR's Social Forestry System will receive priority. These efforts are to be achieved by a number of individual agency programs, as well as through integrated rural development projects in key valleys. The Government's 1981-1983 investment program is designed to support these objectives, as well as increases in banana and timber production. During this period, MNR will promote artisan fish produc- tion and undertake agricultural research and extension, mechanization, control and eradication of cattle and plantain diseases, small irrigation projects, and rural development projects in the Guayape Valley, Santa Barbara and the western region (PRODERO), as well as a number of studies to develop further rural development projects, for example, in the Aguan and Guayape Valleys. Unfortunately, these studies have experienced delays and problems, and the identification and preparation of other projects is deficient. More attention must be given to these activities in order to assure the timely availability of projects suitable for external financing. In this regard, it would be useful for the Government to participate in the Central American Regional Office for Preparation of Agricultural And Rural Development Projects in San Jose. In developing integrated rural development projects, the Government may consider including social programs such as rural housing, rural women employment and nutrition. Finally, it is important to note that a substantial portion of MNR's investment program is designated for a sectoral program which will provide assistance in the areas of planning, information and provision of inputs. However, these are development or current expenditures, not fixed investment, and should be carefully reviewed and justified, and not allowed to over project the amount of resources dedicated to the sector. 50. INA has several settlement and development projects for agrarian reform beneficiaries, for example in La Masica, San Bernardo, Guaymas, Puerto Arturo, Ola Monjaras, San Manuel and Jamastran. Its largest effort is a colonization project in the lower Aguan Valley, which is ultimately intended to settle 6,200 families on some 70,000 hectares and provide them with credit, technical assistance and social services. This and other INA projects will focus not only on basic grains, but also on diversifying exports and improving rural incomes through production of crops like african oil palm, citrus, sesame, melon, cacao and cashews. While INA has received some external financing, many of its projects are financed with Government resources, and a number are not included in its investment program due to lack of financing. - 42 - ANNEX A Page 15 These projects should be reviewed taking into account INA's execution capacity and their relative importance to Honduras' agricultural development. 51. BANADESA's plans emphasize the provision of credit to agrarian reform groups, for which it has access to a number of externally financed programs. BANADESA feels a strong obligation to provide special terms to the poorest farmers, but while such programs are commendable, they should be carefully thought out to ensure continuing wide coverage and low arrears. BANADESA also plans significant investment to expand its physical facilities in order to compete more effectively with commercial institutions. In view of Honduras' development priorities and lack of resources, such investments should be well justified before being undertaken. 52. IHCAFE provides technical assistance, distribution of inputs, credit and infrastructure to coffee farmers. It handles road construction in coffee areas, which are mountainous, while SECOPT's feeder roads programs have concentrated in valleys of high agricultural potential. Its activity in road construction is limited by available financing. In addition, IHCAFE is considering programs to control the coffee rust disease, improve coffee yields, and encourage crop diversification among its farmers. Rubber, citrus, macademia, cardamom, pimienta and honey are currently under study. This diversification program is now beginning to get underway, but IHCAFE will have to obtain additional financing for it as well as for its other programs. 53. IHMA's program includes investments for rural silos and storage centers, as well as a teaching center and quality control laboratory. Further expansion 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 and plantation during 1981-85, hoping to plant some 12,000 new acres of bananas and bring the country up to pre-Hurricane Fifi levels of production. This program would require over L 100 million. Although areas for this development have been identified, little attention has been given to flood control and drainage requirements or land tenure, and this, coupled with COHBANA's financial difficulties, is likely to restrict the program significantly in the coming years. 55. Reforestation is critical to the maintenance of one of Honduras' most valuable resources and to slow the rate of soil erosion, and CORDEFOR has programmed a number of initiatives during the 1981-83 investment period. It will undertake a major reforestation project in the Comayagua area, where the soil is suitable for forestry, access is easy without requiring major new infrastructure, there is considerable available labor, and the El Cajon reservoir would benefit from forest cover. This project would also permit the formation of groups of rural poor for the orderly harvesting of timber and resins within COHDEFOR's Social Forestry System, and provision of assistance to ensure technical and efficient exploitation of these products. COHDEFOR will also undertake a natural resource management project in the Choluteca area, including preparation of a land use classification system and the introduction of modified agricultural and forestry practices to improve the Choluteca River Basin watershed area. In addition, COHDEFOR will prepare an - 43 - ANNEX A Page 16 inventory of resources in the central mountain range area and provide camps, towers and fire control equipment. It also has plans for reforestation in western Honduras and the Mosquitia area. It seems, however, that COHDEFOR's reforestation efforts should be intensified, particularly in the Olancho area where extensive use of the resource is expected. Furthermore, it will be important for COHDEFOR to strengthen its capacity to deal with so many dif- ferent efforts at the same time and to prioritize which areas to focus on in the future. I. Industry and Credit 56. The Government has a number of large industrial projects, mostly in the forestry sector. As part of the Olancho forest development, the Industrial Forest Corporation of Olancho (CORFINO) is building two sawmills at Bonito Oriental and La Union, which are to be ready by 1982 and 1984, as well as a pulp and paper mill to use the chips produced by the sawmills and to be on board in 1986. As noted earlier, considerable investment is being undertaken in roads to support these mills, and completion of works at Puerto Castilla will be critical to their success. An important related area will be the future requirements for integrated development of the area, where many migrant families are expected to work at the mills. COHDEFOR is considering the development of sawmills at Ranchos Grandes and Las Lajas in the Comayagua area and of a lumber and plywood plant at Corocito. These possibilities have been reviewed, and the Corocito plant's scope reduced based on its study. One major constraint will be COHDEFOR's limited current surplus after transfers to the Central Government. Furthermore, while development of Honduras' forest industry is important, it should be accompanied by timely reforestation and an appropriate pricing policy, neither of which has been adequately treated. As regards the Olancho development, there is an indefinition of responsibility for these areas between CORFINO and COHDEFOR. 57. Two other major industrial investments are the industrialization of african oil palm in the Aguan Valley and a cement plant, both already underway under CONADI. Other projects being considered include the production of calaguala (a pharmaceutical), and the construction of a sugar mill to produce gasohol. The latter would be developed for an agrarian reform settlement in the Aguan Valley. This project represents a major undertaking which should be carefully reviewed, and, in view of the Government's limited financial resources, would be difficult to justify over the next few years. 58. During 1981-85, the Government's objectives for industry include increases in industrial value added, contribution to GDP and manufactured exports, and more rapid development of labor-intensive small- and medium-sized industries (SMI's). Achievement of these objectives will require a more selective import-substitution strategy focusing on efficient industries in the intermediate goods and metal working fields, promotion of industries in which Honduras has a comparative advantage, in particular those which use raw materials from forestry and agriculture, and provision of increased credit and technical assistance to SMI's. - 44 - ANNEX A Page 17 59. Apart from COHDEFOR and CORFINO, several institutions created during the 1970's will play key roles in carrying out this strategy. The National Industrial Development Corporation (CONADI) is promoting, financing and implementing large industrial projects. The National Industrial Develop- ment Fund (FONDEI) operates within the Central Bank as a second-tier financial institution, 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 Development Center (CDI) was recently upgraded to provide technical assistance, and even 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 Government will therefore continue to support lending through FONDEI, whose program has been accepted by commercial banks and industrialists. Although the Central American political situation is uncertain, Honduran stability and movement towards democratic change may help create a positive investment climate. CDI is expanding its role and the Government will give it expanded technical assistance in the coming years. The project pipeline of commercial banks is extensive and growing. CONADI has recently undergone changes in management and policies and is expected to give greater attention to the agro-industrial sector. However, CONADI has financing problems (see main text), which will require a financial and operational reorganization. A review of CONADI's involvement in each subproject in its portfolio may be useful before any new project is undertaken. 61. The main area of industrial credit which appears weak is that of wood industries financing. Because the bulk of COHDEFOR's demand for financing has been for working capital and of an apparent lack of interest by its management in promotion of wood industry projects, very few have been financed through FONDEI. In view of the economic importance of forest industries 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 archaeological ruins, as well as its proximity to the North American market. International tourism is still in its infancy, however, since the Government has only recently accorded priority to the sector, in recognition of its potential for employment generation and foreign exchange earnings. Government tourism policy, however, has been weak and lacked coordination. On one hand, the Government has adopted a gradual and pragmatic scenario for developing the country's tourism potential, including (a) selective hotel development on the mainland in places where major infrastructure is not required or is already planned for other purposes, and (b) dispersed development on Roatan and other Bay Islands, with small hotels on suitable sites providing their own infra- structure. Development of the tourism sector can thus be achieved without major public sector investments. This approach is supported by a line of credit through FONDEI for onward lending to hotel and other tourism enterprises, - 45 - ANNEX A Page 18 as well as the minimum complementary investment required for improved air facilities at Roatan and San Pedro Sula, Copan archaeological park development and technical assistance for hotel training, tourism marketing and other related activities. On the other hand, CONADI has supported hotel development in the mainland with a less prudent scheme. With borrowed funds and guarantees contracted at maturities that were too short for this type of projects, hotels have been built or reconditioned with a heavy debt burden. Moreover, some of these hotels have low occupancy rates because of the slowdown of tourism in Central America, or are adversely affected by project shortcomings. This has created a serious financial pressure for some of the private investors as well as 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, 1975-1985 1.2 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, 1970-1979 2.4 Gross Domestic Product, Constant Prices, 1970-1979 2.5 Distribution of National Income, 1970-1979 2.6 GDP Projections 3.1 Balance of Payments, 1970-1979 3.2 Value, Volume and Unit Value of Principal Exports, 1970-1979 3.3 Summary of Merchandise Imports, 1970-1979 3.4 Balance of Payments Projections, 1981-85 3.5 Export Projections 3.6 Import Projections 4.1 Debt Repayable in Foreign Currency and Goods 4.2 Debt Repayable in Local Currency 5.1 Public Sector Operations, 1970-1979 5.2 Central Government Current Revenue, 1970-1979 5.3 Central Government Expenditure by Economic Classification, 1970-1979 5.4 Public Investment by Sectors, 1978-1985 5.5 Proposed Fixed Public Investment Plan by Project, 1981-85 5.6 Central Government Budget, 1980-81 5.7 Public Employment and Salaries, 1972-80 6.1 Summary Accounts of the Banking System, 1970-1979 6.2 Distribution of Bank Credit to the Private Sector, 1970-1979 7.1 Agricultural Production, 1960-79 8.1 Indicators of Industrial Production 8.2 Selected Indicators of the Manufacturing Sector, 1975 8.3 Employment in Manufacturing 8.4 Import Dependence of the Manufacturing Sector 8.5 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 173,332 181,219 189,039 197,080 205,464 214,102 223,023 232,325 241,934 251,814 261,972 Col6n 91,555 95,821 100,136 104,567 109,154 113,864 118,674 123,661 128,785 134,023 139,369 Comayagua 159,118 164,997 171,140 177,626 184,309 191,111 198,044 205,180 212,456 219,830 227,299 Copgn 175,152 179,906 184,933 190,279 195,718 201,172 206,653 212,213 217,770 223,309 228,828 Cortes 436,118 454,356 475,450 496,940 519,384 542,693 566.937 592,209 618,463 645,798 673,535 Choluteca 224,165 231,517 239,241 247,465 255,878 264,328 272,888 281,636 290,460 299,341 308,215 El Paraiso 162,966 167,900 172,990 178,312 183,766 189,265 194,840 200,564 206,383 212,214 218,058 Francisco Morazin 531,879 554,998 578,970 604,o46 629,914 656,269 683,138 710,844 739,180 767,784 796,772 Gracias a Dios 24,513 25,760 27,026 28,333 29,688 31,084 32,519 34,oo4 35,531 37,088 38,683 Intibucg 93,822 95,838 97,950 100,203 102,476 104,728 106,963 109,223 111,468 113,677 115,836 Islas de la Bania 15.271 15,708 16,139 16,564 17,004 17,452 17,910 18,382 18,862 19,352 19,845 La Paz 75,494 76,885 78,288 79,814 81,338 82,836 84,308 85,767 87,203 88,598 89,929 Lampira 146,648 149,874 153,259 156,840 160,478 164,087 167,690 171,363 175,025 178,671 182,282 Ocotepeque 58,021 58,749 59,553 60,442 61,321 62,153 62,943 63,720 64,454 65,135 65,764 Olanc 175,761 181,546 187,511 193,753 200,189 206,775 213,525 220,613 227,309 235,139 242,593 Santa Birbara 216,325 224,031 232,321 241,319 250,524 259,769 269,054 278,543 283,061 297,613 307,109 Valle 105,441 107,733 110,138 112,713 115,317 117,909 120,498 123,136 125,769 128,382 130,963 Yoro 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 1974 1975 1970 1971 1972 1973 Total Men Womn Total Men, toew. Total Men Women Total men Irsee Total Ien lo_4 Total Koo wo_en 125,666 674,845 743,854 130,991 904,742 767,875 136,867 TOTAL 7 7',916 666,314 111,602 800,234 683,905 116,329 823.240 702,508 120,732 848.053 772,387 53,244 4.687 59.772 54.684 4,888 61,761 56,630 5.131 10- 14 52,974 48,820 4,154 54,498 50,179 4.319 56,164 51,667 4,497 57,931 111.652 20,570 136,770 115,183 21.587 141,888 119,153 22,735 15- 19 120,414 102.013 18.401 123,947 105,205 18,744 128,000 10,376 19,624 132.222 107,885 23.729 137.584 112.461 25.123 144.150 117,563 26.587 20 - 24 116.566 96.320 20.246 120,846 99.591 21,235 125,942 103,521 22.421 131,614 90,514 18,679 112,060 92.669 19,391 115,889 95,617 20,272 25 - 29 102.957 85,937 17.020 104.976 67,433 17,543 106,940 88,465 18.075 109,193 78,349 15,047 95.427 79,881 15,546 97,794 81,689 16,105 30 - 34 88,164 74,407 13,757 89,880 7S,713 14,167 91,582 76,994 14,588 93.396 67,117 12,192 81.169 68.575 12,594 83,171 70.148 13,023 1 35 - 39 73,404 63,193 10.211 75,912 64.449 11,463 77.562 65.749 11,813 79.309 56,624 9,192 67,395 57,906 9,489 69,110 59,304 9,806 .1 40 - 44 61,549 53,146 8,403 63,025 54,275 8,750 64,335 55,424 8,911 65.816 47.180 7,189 55,845 48,413 7,432 57.376 49,692 7,684 45 - 49 50,261 43.727 6,534 51,574 44,835 6.739 52,941 45.985 6.956 54.369 37.748 5.386 44,458 38,882 S,576 45.827 40.052 5.775 1 50 - 54 39,457 34,580 4,877 40,631 35,594 5.037 41.857 36,651 5.206 43,134 28.942 3.997 34.098 29,953 4,145 35,293 30,993 4,300 55 - 59 29,750 26.154 3.596 30,756 2 ,033 3.723 31.20 27,965 3.855 32.939 20.029 2.512 23.437 20.821 2,616 24,366 21,641 2,725 60 - 64 20,121 17.892 2,229 20.875 18,557 2.318 21,685 19.273 2.412 22.541 12,725 1,400 14.751 13,268 1,463 15,397 13,870 1.527 65 - 69 12,451 11,218 1.233 12,968 1,.683 1.285 13,528 12.188 1,340 14,125 6,719 709 7.799 7,056 743 8,183 7,406 777 70 - 14 6.446 5,825 621 6,749 6,100 649 7,078 6,400 678 7,428 3.659 377 4.280 3,882 398 4,537 4,117 420 75 and -re 3,402 3,082 320 3.595 3,258 337 3,806 3,450 356 4,036 15 - 64 118.493 788.243 664,744 123.499 814,864 685.852 129.012 Y28RS 702.643 597.369 105.274 722,424 i5_,685 109,739 742.664 628,803 113.861 764,533 646.040 Page 2 of 3 Table 1.2: WnUDtAS - EC0Ul4ICALLY ACTIVE POPULAT1ONBY SEX AND ACF 1970-1985 1976 1977 1978 1979 Total 1980 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 is - 19 64,446 6,114 72,597 66,221 6.376 147,435 123,491 23,944 153,457 128.179 25,278 159.825 133.111 26.714 166.407 138,178 28.229 173.071 143.270 20 - 24 150.102 29.801 122.012 28,090 156.137 126.473 29.664 162.389 131,065 31.324 169.004 135,922 33.082 176.116 141.162 34,954 25 - 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 2 30 - 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 35 - 39 85,361 19,756 71,824 13,537 87.613 73,590 14,023 89,966 75,459 14,507 92,463 77,447 15.016 95,146 40 - 44 70,988 60,839 10,149 73,002 62.488 79,569 15.577 10,514 75.118 64.220 10,898 77,299 66,002 11,297 45 - 49 58,955 79.505 67.798 11,707 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 9.109 50 - 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 55 - s9 36,501 53,361 46,448 6.913 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 5.189 60 - 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 65 - 69 16,069 29,528 26.196 3,332 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 1.893 70 - 74 8.585 7,770 815 9,005 8,150 855 9,442 8,545 897 9.896 8,955 941 75 and ners 4,811 10.364 9.378 986 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 1985 Total 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 7,754 15- 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 38,672 20- 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 45,905 25 - 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 35.139 30 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 26,318 35 - 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 18,977 40 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 0 45 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 l 50 - 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 8.212 55 - 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 6.238 60 - 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 4,059 65 - 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 2,323 70 - 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 1,237 75 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 3424.0 GENERAL 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 1290.0 CHANGE 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 1840.0 IMPORT 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 4829.0 SOUCE 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 1467.0 GENERAL 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 391.0 408.0 421.0 460.0 410.0 386.0 438.0 505.0 525.0 586.0 606.0 IMPORT 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 1905.0 SOURCE= = 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 1384.0 MINING 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 180.5 197.5 218.0 244.7 279.4 314.0 361.0 435.0 540.0 648.0 778.0 CONSTRUCTION 64.6 63.0 66.0 73.0 95.6 108.0 118.0 140.0 169.0 200.0 220.0 PUBLIC 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 . 256.0 316.0 386.0 COMMERCE 171.1 183.0 189.0 196.7 216.8 242.0 280.0 300.0 390.0 477.0 582.0 BANKING. INSURANCE,ETC. 40.0 42.0 50.0 59.0 73.0 81.0 96.0 123.0 138.0 159.0 188.0 HOUSING 93.6 101.0 109.0 118.4 127.4 137.0 148.0 160.0 177.0 203.0 240.0 PUBLIC ADMIN. AND DEFENSE 44.0 49.7 62.0 58.0 61.7 68.0 84.0 100.0 115.0 134.0 159.0 PERSONAL 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 0 472.0 496.0 462.0 411.0 444.0 473.0 497.0 534.0 521.0 AGR CUL___ UR______------AGRICULTURE 405.0 438.0 446.0 462.0 417.0 378.0 416.0 446.0 469.0 505.0 491.0 MINING 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.'0 195.0 215.0 236.0 260.0 281.0 297.0 CONSTRUCTION 44.0 43.0 46.0 50.0 50.0 52.0 54.0 57.0 63.0 68.0 66.0 PUBLIC 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 94.0 105.0 108.0 111.0 120.0 125.0 132.0 137.0 151.0 163.0 169.0 COMMERCE 153.0 158.0 147.0 147.0 145.0 147.0 155.0 158.0 179.0 194.0 201.0 BANKING, INSURANCE, ETC. 30.0 32.0 36.0 39.0 44.0 46.0 50.0 55.0 60.0 64.0 66.0 HOUSING 83.0 87.0 91.0 96.0 100.0 105.0 111.0 116.0 122.0 127.0 131.0 u PUBLIC 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 N ITEM ------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 2 768.0 nm-===;= 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 35.0 LESS: 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 PROJECTIONS 1979 1980 P 1981 1982 1983 1984 1985 Gross Domestic Product 2,978 3,038 3,086 3,240 3,402 3,606 3,823 Terms of Trade Adjustment -10 -80 -157 -203 -259 -296 -301 Gross 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 1,528 Exports (terms of trade adjusted) 1,122 1,058 1,112 1,156 1.269 1.358 1,436 LA Consumption 2,234 2,314 2,336 2,441 2,469 2,599 2,735 Investment 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 t96.4 212.1 266.6 298.9 307.9 406.2 529.9 627.6 756.5 834.5 NON-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 4 177.1 176.5 243.6 387.8 377.6 414.3 550.1 654.5 783.4 955.9 NON-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 25.6 PAYMENTS 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 5.0 LONG 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 3 166.0 211.0 233.2 AMORTIZATION 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) PRELIMINARY SOURCE 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 BANANAS VALUE 75.3 95.7 90.7 94.0 79.7 61.5 106.7 130.2 141.2 200.4 220.6 VOLUME 738.5 970.8 847.7 825.6 651.6 368.4 609.8 719.5 723.0 908.4 876.6 UNIT VALUE 102.0 98.6 107.0 113.9 122.3 166.9 175.0 181.0 195.3 220.6 251.7 COFFEE VALUE 25.9 23.3 27.3 47.8 43 9 56.9 100.3 168.2 211.0 196.9 204.1 VOLUME 26.0 25.1 32.7 39.8 30.8 48.5 43.1 35.9 57.5 66.1 56.8 UNIT VALUE 996.2 928.3 834.9 1201.0 1425.3 1173.2 2327.1 4685.2 3669.6 2978.8 3593.3 LUMBER VALUE 16.2 19.2 27.1 39.1 40.7 38.8 40.8 47.2 42.3 42.1 36.2 VOLUME 356.0 402.0 491.0 591.0 479.0 396.0 364.0 545.0 358.0 336.0 269.0 UNIT VALUE 45.5 47,8 55.2 66 2 85.0 98.0 112.1 86t6 118.2 125.3 134.6 BEEF LA VALUE 9.7 12.5 16,1 21.9 16.8 18.3 25.6 21.7 38.8 60.8 60.8 VOLUME (CUBIC METERS) 12.4 15.3 18.1 19.8 13.1 16.7 20.7 17.6 22.6 30.0 28.6 UNIT VALUE 782.3 817.0 889.5 1106.1 1282.4 1095.8 1236.7 1233.0 1716.8 2025.0 2125.9 SUGAR VALUE 1.2 1.6 2.0 0.0 4.5 7.0 2.2 3.8 5.5 13.3 29.4 VOLUME 9.8 10.0 12.1 0.0 7.5 10.1 6.7 19.7 22.6 55.2 81.5 UNIT VALUE 122.4 160.0 165.3 0.0 600.0 693.1 328.4 192.9 243.4 240.9 360.7 PETROLEUM DERIVATIVES VALUE 6.2 3.0 3.4 4.1 14.5 12.3 1.1 0.6 0.0 0.0 0.0 VOLUME 356.7 212.5 216.6 222.1 214 0 180.9 16.3 8.0 0.0 0.0 0.0 UNIT VALUE 17.4 14.1 15.7 18.5 67.8 68.0 67.5 75.0 0.0 0.0 0.0 ALL OTHERS VALUE 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 178.1 196.4 212.1 266.6 298.9 307.9 406.2 529.9 627.6 756.5 834.5 VALUE (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 1,639 Non-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 1,793 Non-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 0 Current 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) 163 270 299 302 298 Disbursements 209 329 368 428 416 Amortization -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 raising actions 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 Projections 1979 1980 1981 1982 1983 1984 1985 Exports (constant 1975 prices) G. Bananas 152 136 153 156 159 162 167 Coffee 77 67 84 87 91 96 102 Lumber 33 29 28 35 65 69 73 Beef 33 31 33 34 37 40 43 Sugar 38 57 69 81 106 130 130 Lead 8 6 6 7 7 8 8 Zinc 9 12 14 15 16 17 18 Silver, Fish Products 28 34 35 37 39 40 42 Manufactures and others 133 143 151 160 173 189_ 204 Total 511 515 573 614 693 752 788 Exports (current prices) Bananas 200 206 258 283 304 325 352 Coffee 197 204 180 188 213 248 287 Lumber 42 39 42 57 118 138 162 Beef 60 60 65 66 70 80 92 Sugar 13 29 58 64 91 122 133 Lead 15 10 12 16 18 21 23 Zinc 11 15 18 25 31 38 45 Silver, Fish Products 48 61 68 77 86 96 106 Manufactures 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 113 176 207 239 271 309 353 435 498 570 Intermediate 2 5 4 300 337 380 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. 1979 DEBT 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 - n 1988 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 DIVISION ECONOMIC 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 LDANS TOlAL 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: - HONDURAS page 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 LOANS 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 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 TOTAL : : . : : PRINCIPAL INTEREST ) : (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 :1 1982 240.582 267.829 - 14.8al 5,885 10.702 16,587 - 1983 249.581 261,947 - 7.755 7,275 10.835 18,110 - -2 5 1984 250.059 254.670 - 3,979 51,046 10.639 61,685 - 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 - 4 1991 151.0t9 151.019 - - 8,546 5.280 13,826 - 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 INSTITUTIONS 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 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 - UNDISBURSED FROM ONE t THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING 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, 1979 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN TIIOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR SUPPLIERS CREDITS TOTAL 0 OTIIFR CIIANGF S YEAR 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 D : BEGINNING OF PERIOD AOIU1sI- DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E P A r M E N T S CANCFL MUNI : ONLY UNDISBURSED MENTS MENTS ------LATIONS PRINCIPAL INTEREST TOTAL (7) (8) 9) : ()} : (2) . (3) (4) (5) (6) 3 1975 5.695 12,503 - 5.849 946 920 1.866 - -9 1976 10.601 11,560 11.381 3,392 953 884 1.837 - 34 1977 13.031 21.979 1,029 8.127 1,461 1.010 2.471 - 332 t7 1978 19.710 21.581 - 1.539 2.539 1.845 4.384 211 1979 18.727 18.727 2.481 - 3.168 1.533 4.701 1980 15.587 18.251 * * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * * 2 1980 15.587 18,251 - 533 3.912 1.280 5,192 - -2 1981 12.209 14.341 - 693 3.077 999 4.076 - - 1 1982 9.823 11.262 - 639 2.623 782 3.405 - ° 1983 7.840 8.640 - 506 2.280 582 2.862 1984 6.066 6.360 - 293 1.954 440 2.394 - - I I 1985 4.405 4.405 - - 1.914 302 2.216 1.202 1986 2.492 2.492 - - 1.026 176 1.073 1987 1.466 1.466 - - 977 96 1988 489 489 - - 489 I9 508 UNDISBURSEI) FROM ONE * THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUlSTANDING INCLUDING OF DEBIS YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND 1RANSFER FROM ONE CATEGORY TO ANOTHER IN THE TABLE. 3 Table 4.2: - HONDURAS p3ge 1 of PUBLIC DEBI SERVICE PAYMENTS. COMMITMENTS. DISBURSFMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL DEC. 31, 1979 PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEBT REPAYABLE IN LOCAL CURRENCY (IN THOUSANDS OF U.S. DOLLARS) TOTAL U R I N G P E R I 0 D OTIIER CHANGES YEAR DEBT OUTSTANDING AT T R A N S A C T I 0 N S D BEGINNING OF PERIOD P A Y M E N T S CANCEL- ADjuJS[- DISBURSED INCLUDING COMMIT- DISBURSE- S E R V I C E LATIONS MiNI : ONLY UNDISBURSED MENTS MENTS ------:------PRINCIPAL INTEREST TOTAL (6) (7) (8) (9) (1) . (2) (3) (4) (5) 2,340 4,889 129 - 1975 56,462 90,263 2,169 16,196 2,549 2.442 5,197 - 1,557 1976 70,110 89,754 12,217 10,326 2,755 2.773 6,648 449 173 1977 77,682 100,773 6,288 9,662 3.875 2,607 7,121 280 -2 1978 83,473 102,910 4,821 11,564 4,514 2,741 7,575 313 8 1979 90,522 102,935 5,674 8,688 4,834 1980 94,382 103.470 * * * * * * * THE FOLLOWING FIGURES ARE PROJECTED * 3.400 8,323 - -1 1980 94.382 103,470 - 2,243 4.923 3,260 8.292 - 4 1981 91.701 98.546 - 1,781 5,032 3,098 8,350 - 2 1982 88,456 93,518 - 1,614 5.252 2,956 8.796 - 3 1983 84,820 88,268 - 1,549 5.840 2,772 9,008 - -4 1984 80,532 82,431 - 955 6,236 2,555 8,755 - 5 0 1985 75,247 76,191 - 402 6.200 2,307 8,591 - 2 1986 69.453 69,996 - 301 6.284 2,093 8,090 - -2 1987 63.473 63,714 - 211 5,997 1.854 7.851 - 4 1988 57,685 57.715 - 30 5,997 1,597 7.323 - -1 1989 51.722 51,722 - - 5,726 1,379 7,136 - 4 1990 45.995 45,995 - - 5,757 1,130 5.915 - 3 1991 40.242 40,242 - - 4,785 929 5,447 - -1 1992 35.454 35,454 - - 4.518 4,383 - 3 1993 30,935 30,935 - - 3,638 745 3,673 - -2 1994 27.300 27,300 - - 3,048 625 IN THE AMOUJNT OUTSTANDING INCLUDING tJNDISBURSFD FROM ONE * THIS COLUMN SHOWS THE AMOUNI OF ARITHMETIC IMBALANCE EXCHANGE RATCS AND IRANSFER 0F- DEBIS YEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN 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, 1979 DEBT REPAYABLE IN LCCAL CURRENCY (IN THOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR MULTILATERAL LOANS 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 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, 1979 DEBT REPAYABLE IN LOCAL CURRENCY (IN THOUSANDS OF U.S. DOLLARS) TYPE OF CREDITOR BILATERAL LOANS 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 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 MFNr PRINCIPAL 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 Government Current Revenue 190.1 184.0 200.2 227.0 273.2 303.9 376.4 488.4 543.5 633.7 Current 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 - 1.5 Capital 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 -192.1 External Financing (net) 13.3 34.4 19.4 18.8 46.0 86.8 70.9 85.6 163.0 143.0 Domestic Financing (net) 20.3 7.3 23.6 5.4 5.4 32.6 42.7 55.8 40.0 49.1 II. Municipalities Current Revenues 13.4 14.4 13.5 16.1 24.3 21.0 25.2 38.0 37.8 47.6 Current 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 5.8 Capital Receipts 2.8 1.8 1.0 1.0 4.3 8.3 2.4 2.3 1.3 2.4 Capital 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 -34.9 External 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 Institutions Current Revenues 17.4 15.8 33.5 43.1 59.0 77.5 103.2 117.0 159.4 177.7 Current 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 57.1 Capital Receipts 1.5 5.2 8.6 10.4 6.5 8.8 5.8 20.3 15.5 18.1 Capital 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 44.8 External Financing (net) 2.4 3.0 1.2 1.4 0.5 0.7 0.2 -0.5 -0.5 -0.5 Domestic 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 Enterprises Current 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 72.7 104.9 129.7 159.0 Current 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 87.7 125.9 136.2 160.6 Overall Deficit (-) -19.4 2.3 -3.1 -21.9 -19.0 0.1 -40.1 -55.7 -54.6 -53.4 External Financing (net) 18.4 7.0 5.4 10.8 14.4 23.1 34.4 65.3 67.5 70.6 Domestic 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 Sector Current Revenues 248.1 249.4 265.4 313.1 394.7 450.5 556.2 736.0 830.1 981.6 Current Expenditures 202.3 214.9 246.3 254.3 300.3 375.6 483.4 592.2 680.1 800.0 Current 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 94.9 161.6 193.8 226.1 350.8 424.3 472.6 Overall Deficit (-) -56.5 -43.0 -42.3 -31.2 -67.2 -113.6 -149.6 -203.1 -265.5 -277.9 External Financing (net) 34.4 44.4 26.o 32.2 61.4 111.1 125.6 153.0 235.2 213.1 Domestic 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 Em . = ...... 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 122.7 141.9 162.3 159.4 134.7 164.1 178.2 212.0 260.6 276.8 545.2 GOODS 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 50.3 DOMESTIC DEBT 3.7 7.4 5.2 5.8 6.5 7.6 9.9 13.5 14.3 18.3 20.6 EXTERNAL 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 91.7 TO PRIVATE SECTOR 7.2 0.0 5.3 5.0 10.6 2.8 8.4 6.5 9.4 9.8 8.6 To PUEL.ENTERPRISES 0.0 0.9 1.4 0.0 0.0 2.8 0.0 0.3 0.0 0.0 0.0 TO AUTON.INSTITUTIONS 10.4 8.8 9.5 9.0 17 6 32.0 32.3 37.2 56.6 71.4 78.1 To MUNICIPALITIES 0.5 0.8 0.2 0.0 0.1 0.0 0.0 0.0 0.1 0.1 0.1 ABROAD 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 87.2 120.9 173.9 158.3 172.0 FINANCIAL (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 0.4 To PUBL ENTERPRISES & AUTON.INSTITUTIONS 5.6 6.6 8.4 12.6 17.8 25.2 21.8 36.0 40.2 38.2 49.9 10 MUNICIPALITIES 0.9 0.3 1.0 0.5 0.5 5.1 2.4 2.1 1.3 1.8 4.1 TO 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 PROJECTIONS 1978 1979 1980 1981 1982 1983 1984 1985 I. Infrastructure 270 261 312 319 374 464 4.88 407 Transport 173 160 127 115 145 156 i3 149 Telecommunications 29 10 8 12 22 38 4o 45 Energy 47 66 162 185 200 263 297 205 Urban Development 21 25 15 7 7 7 8 8 II, Productive Sectors 31 42 73 79 100 94 138 302 Agriculture 20 21 25 25 35 40 50 - Forestry 6 16 44 52 63 52 86 235 COHDEFOR (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 97 122 114 Education 11 12 17 20 25 28 30 35 Health 27 34 37 38 35 57 78 82 Housing 5 4 5 5 8 9 10 12 Social Welfare and 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 9,833 Public Fixed Investment/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 PROPOSEDFIXE0 PUBLIC INVESTMENTPLAN BY PROJECT. 1981-1985 (MILLIONS OF CURRENTLERPIRASI PROJECT IONS -981-5 1901 "98 198; 1984 1985 PROJECT FOREIGN T.IAL TOTAL TOTAL TOTAL TOTAL TOTAL FINANCING FOREIGN FOREIGN FOREIGN FOREIGN FORTIGN FAREIGN AGENCY/1 LOCAL LOCAL LOCAL LOCAL LOCAL LOCAL INFRASTRUCTURE 2052 319 37A 360 488 407 ...... 165~~~~~~~lAB230 27R 339 4 R 567 03 9 125 143 120 POWER 1(50 lS 200 263 297 205 859 (Al 150 300 220 140 291 44 50 63 77 57 I EL CAJON .2,S.8 872 103 125 I8R 267 (93 9,10.11 648 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 10 22 3 4 4 S 6 7 OTHER 6 4 2 - - S 3 2 - - - TRANSPORT ITOTALI 708 15 145 ISA 143 149 ...... ~~~~ ~ ~~~~~~~~~498RN III (03 99 2I0 29 34 47 S0 50 A ROADS 481 91 95 95 100 100 32 09 a8 59 00 07 152 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-COPANRUINMS S 4 4 4 AGUAN6VALLEY ROADS A2 6 6 - - 3 3 - - . - S OLANCHOPRIMARY ROADS 2 56 32 24 - - - 49 27 22 7 5 2 - - - 6 OLANCHOSECONUARY 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 12 3S 8 10 7 6 7 23 4 5 5 4 5 8 MAINTENANCE 1.3 38 a 13 5 6 6 20 3 8 6 (2 5 S 2 - - 9 OTHER CONSTRUCTION 163 2 13 39 52 57 lIT I 10 20 30 42 44 1 3 II '4 IS 10 IMPROVEMENTAND 97 I 16 29 26 25 REHARILITAT'ON 45 7 163 12 12 52 - 9 60 I 13 1/ FOREIGN FINANCING AGENCIES 1RRO. 2C1=ID 3 USAIO .-CIDUA 5CABEI E6GECRANGDVERN.ENT 7EXUIM 80A0 OF JAPAN 8.0ECF 9 SUPPLIERS CREDITS l0.OPEC, I ICIC 12.CARE 13=YNICTF S140ISSGOVERNMENT C SAEEC IN-IFAD 17*iAO 18'EOC 19.0E1W 84AN. IN SAME CASES INDICATED AGENCYMAY FINANCE ONLY PART OF A PROJECTOR PROGRAM SOURCE CONSUPLANE. AGENCYAND l8RD ESTIMATES D . o f - .4 -F a n. . i D oS S * . 3 - - o - 4 zo°f, A 1. A. - - 5 f_ _ _;8 rS -_- . -. . ... }. . Z.. . j ..-...... 2 § uM u ' i . :~~~~~~~~~~~* <_6sss-|0 >b u s.o ~ ° uu.u u_ 8°°°°.n° ?'1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2 *0 .4 S 0 4 . -. , . u u . u4 q . .o + J@ u; @ wSwvo u b ux 00oo oou uXu'II°- ...... SelIeN I5INdJP8.O Nl1016 .NA110 111 se/Nt 161361511151051 I 5]w 31113516 N IW 1361Y0R ±05.a1 OJL O J; 19 133N1C. 33_I3AW 56 16'.', 53351101.1 BOee.CI 535'1 5363-01 $lOSeS NNo.r JO IN;t M1001 ±13.110001.AO sytcesi-, 6NN15661161.3S530.N I 3t5.N 1015*I 011611.6 tOl.t 03160* 63161.35t11Xt1t1Itl1I I.31.3e6 /1 NI C C S~~~~~~~~~~~~~~~~~~~~~~~00- -,S)^3 t.1 C0It 301±N' iS 06'11DI5J IeJ I0 S S t .. .N__I g, - . NI tC II C I C C S IS ee0IS003S N C cs C ,1 151nD3 011t AZ39~~~~~~~~~~6611_N -~~~~~~~~~~~~~~~~~~~~~~~~~~OWI Z 1 - 1 -~ ~ 1 t 1.81 NI1 1, 1~* - I N101 - 0 1 I S * S N N N ~g 01.603 A10005 -~ , ~ NoI SueztS 510016$SO s,* It - Is, leesI 0o11500 NIO NI -I N N NS ,, 51 IC 0I 0111 1 ^ 1SDX 1 1 ~~~~1CI 0, SC GC , 91 3c ,,3;z * $103~~~~~~~~~~~~~~~~~~~~~~OI11NN01/80IN t - . N N 6.~~~~~~~~~~~~~~~~~~~~~t1135361,3e t t t C C I 5.513 50WNI10] 10±NI N2H C , C C OC6 - ±° 5-A *t* -l6 IIat 1160 0 6 11 .~~~~~~ ...... NI~~~~~i*01A^ ± )P3dA 313,jU AI311 X1 1 51 SI I I 161. seeN e~~ SCCe I ICI eels- eoool_sNC± PAGE A OF 5 TAILS 5 5 HCCIAs rARotsiO riotS PALIC INVIST(NIEN PLN BY PROAiSCT. g9I7. 0X9 luuxmS FE1I1f C'0RE'Stl SI 4111LItUROtmi IWAS OF Lj"pjo&SW; t ON ------...... ~~~~~~~~~~~~~...... ------POOjECTIOUS essI-St *S98 912 1902 i99A ISaAC? jaSM~~~~~~~roine TOTAL 'OVAkL ITOTL 7905 PIWA&CSIft ITOTAL TOTAL TOTAL Pt0EtOft FOaftI0O FORaION rtineI FOrEISg roSMios AGENCY fs LOCAL LOCAL LoCal LOCAL LOCAL LOCAL ...... - - ...... ------I------...... - - -...... PRODLCTIVE SECTOS ' 772 7') too ------04 739 302 j~~~~~~40 4a Be S 79 f rZ 30033 42 *O 59 120 ORAICULTURE - 219 2s 25 40 - - - 600 173 so e5 IT II 25 33 - 109 72 1i 21 25 33 1 INtSTlAT,IONw a - 2 - ' ' 2 EtlEF1510"~~ 4 ~ ~ ~ ~~~~ 3 - 2 COIFTROL Ao E0AOICaTIOpd - 2 - 7 7- CATTLE DISEASE CA?L aegseEEst - ,2jt - '^ - - 3. SISAl. otvtLopWEW - 1,,1 Id 1 2 4 eU%APE-StA. RAIARA - - 2 7 1 SETsYgNItOION 4 4 (IPRODEROI - - I - 1 - * SI"OKA CONIQOL 5 - - 7 I - - - -. o MECHIANIZATION A t 2 3 2 - ~ ~ ~~-9 7 2 2 2 S. SMALL IRRIOAPTIO. WAS - - 0 7 7 3 2 2 - S 1 1 1 2 2 t AI'ItAN fISgiwfC 2,11 - 2 2 - - 22 * ~ ~-* ~ ~ ~~ 7Iii- 9. AOlAIlAN REfOfs p,O.J(CS - - 2 4 e I, 2 2 t 4 *o0 I RaOATgs tAI rDFLOQ -- 2 £ COhITROL t 2 5 AREA$ *S II 1t5(0gR RaE0I 7T carpet - 30 3 , 23S5 2 ^~~~~~~~~~~~~~~~~~ ~ 2Ua S -9TaHuE 9 j3 A4. RIRAL STORIIOUSES * - - 2 t^BDFtATOtY~~ ~ ~1. ~4 ~~, - IS. TIE AC H IN G C N E A. . LASOSATORN - o - - 22 - 1 -WRCe 34NSUPtf*tE -ztiENCf tl7RD esT-D s12 22 - II - - ~~ ~~~~~29 iF%OREIGN FINANJCIPU AGENC,ES. fBO .O tAO .IA SCR! 6GRB 1 OEMOT lEESRWO AA AOC~. 'OSU9EDC ER C6OANk0OPCIM IPCt 2-AE' 3.IJNICAEr. 'ER"'gSOOVERIaENy 7-E*ii gofAWG, ti-tao 70'Egu RAIa: N SOME JPN ~~E~~. CASES- 1"OICATI5a A0ENCv NAOVERNMENTY AW O d RJC O EOA SOURCEAOEIA(yCOAISIIPLANE SIC (RIo flfl1AMfArIfA DOLy ARrOF ;SgEC - 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 90TOTAL FINANCING 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~~~ ~~~31 ~~~40 ~~~~~~~~0435 S4 144 R84 21 23 17 32 SI I COMAYAGUA REFORESTATION 2 21 3 5 5 4 4 FR 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 20S 163 - 4 5 3I 123 FOR 2 3 21 52 TOURISM 1o 2 2 2 2 2 3 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 ...... ~~~~~~~~~~~10SF1S0 (73 206 250 302 F! FOREIGN FINANCING AGENCIES 11IBRDO, 211IOP 3ClUSAO 4=CInA SCA8ET" 6-GERMANVGOVERN ENT., 7,EXIM BANK OF JAPAN B.OECF. 9.SUPPL IE6S CREDTS" 0.PC F O. 2CAR FUICEF. _F'SWISSGOVERNMENT 6IFAO-SEC 17.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 Increase 1980 1980 1981 over initial 1980 budget Legislative - 4.8 11.7 3.17 Judiciary 10.5 10.5 10.9 o.4 Electoral Tribunal 4.0 7.4 14.0 10.0 Presidency 30.9 43.6 27.1 _3. Interior 15.0 15.4 18.8 3.8 Foreign Affairs 10.3 11.0 11.0 0.7 Defense 90.3 118.1 90.3 - Economy 13.1 13.2 13.7 0.6 Finance 34.8 49.3 33.8 -1.0 Attorney General 0.4 0.4 0.5 -0.1 Education 176.2 181.1 214.9 38-7' Health 124.6 146.9 149.2 24.6 Culture and Tourism 10.0 11.0 8.7 -1.3 Labor 26.4 26.5 26.6 0.2 Public 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 -8.6 Public Debt 168.6 174.6 212.7 44.1 Central 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 EMPLOYMENTAND SALARIES, 1972-80 1972 1973 1974 1975 1976 1977 1978 1979 1980 Annual Annual Annual Increase Increase Increas 1975/72 1978/75 1980/78 Permanent Employees (number) Higher levels 61 48 52 54 25 25 25 25 26 N.R N.R N.R Executive personnel 139 151 152 151 237 240 208 229 218 N.R N.R N.R University level prof,-,sionals 965 1,061 1,263 1,378 1,997 2,184 2,362 2,533 2,729 12.6 19.7 7.5 Technicians 2,786 2,605 3,093 3,359 2,177 2,321 2,913 3,101 3,401 6.4 -4.6 4.7 Teaching personnel 10,999 11,076 12,385 12,685 14,680 15,429 16,550 17,358 7,226 4.9 9.4 -0.4 Administrative personnel 3,862 4,132 4,466 4,586 5,694 5,882 6,581 7,602 8,100 5.9 12.8 3.2 Police 696 696 545 619 539 530 561 694 701 N.R N.R 0.5 Laborers 1,044 1,175 1,324 1,424 1,208 1,239 1,331 1,370 1,372 10.9 -2.3 0.1 Service 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 4.2 Real 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 -8.6 Total 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 N I 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 . 458.9 NET IMF POSITION - - - 15.1 -41.2 -39.4 -38.6 -10.0 15.3 15.4 SHORT-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 86.6 103.8 110.1 164.1 185.5 CRED. TO REST or PUB. SECT. 4.6 5.9 6.7 10.5 9.4 -5.8 -24.2 0.8 -11.3 11.6 OFFICIAL CAPITAL & RESERVES -63.9 -71.3 -82.1 -90.7 -107.0 -123.5 -145.0 -163.6 -186.1 -222.2 CREDIT 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 3.6 CREDIl TO PRIVATE SECTOR 347.3 369.0 413.4 507.5 581.1 697.0 837.2 1.036.1 1,198.7 1,356.2 SUBSCRIPTIONS TO INT'L AGENCIES. NET 13.0 10.8 11.6 13.5 22.8 27.6 25.2 25.7 23.4 32.4 UNCLASSIFIED ASSETS. NET 69.1 71.4 82.2 95.2 101.8 159.2 207.2 189.8 213.8 280.7 1 INTERBANK 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 NONBANK FINANCIAL INTERMEDTARIES - - 2.5 4.8 7.2 7.7 8.2 8.2 8.6 9.0 FOREIGN LIABILITIES (M<) 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. 410.7 474.7 545.5 CURRENCY IN CIRCULATION ;i5.1 78.4 88.1 110.0 106.3 113.1 169.1 188.9 209.6 263.7 SIGHt DEPOSITS 86.2 93.2 107.6 132.0 138.4 153.0 190.4 221.8 265.1 281.8 OUASI-MONEY 167.4 192.7 219.8 265.5 287.1 331.0 398.5 522.7 663.6 724.9 TIME AND SAVINGS DEPOSITS 126.7 146.5 164.1 199.4 209.6 233.2 285.8 371.1 463.4 501.2 SPECIALIZED SAVINGS 17.5 17.5 18.6 19.8 22.5 25.9 30.3 34.7 39.1 42.5 DEPOSITS IN FOREIGN EX. 10.6 13.7 18.8 19.0 20.6 27.5 33.9 42.4 56.9 53.6 BONDS 7.0 7.7 12.4 20.3 25.2 28.2 32.1 54.3 78.1 102.0 OTHER 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 CREDIT TO 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 0.0 COFFEE 15.7 19.1 16.0 14.4 21 9 23.8 40.9 60.8 61.7 87.7 TOBACCO 5.4 5.0 5.8 6.0 7.4 0.0 0.0 0.0 0.0 0.0 COTTON 8.6 8.6 10.4 10.1 13.0 10.4 10.6 16.8 18.9 21.2 SUGARCANE 5.2 6.1 5.7 7.5 7.4 0.0 0.0 0.0 0.0 0.0 GRAINS 9.2 10.7 11.5 13.7 18.5 31.5 33.0 31.2 38.0 41.6 OTHER 8.5 8.9 8.9 12.1 13.3 45.2 54.9 68.3 82.1 87.6 CATTLE 42 0 47.7 56.3 68.6 76 3 79.6 76.8 74.0 74.8 78.8 FISH 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 82.7 101.3 118.6 136.6 166.9 201.4 233.6 243.7 MINING 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 45.8 OTHER 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 91.1 101.7 127.1 134.1 165.4 TRANSFERS 10.8 11 7 14.4 26.7 27.3 32.9 36.3 43.2 53.0 63.0 OTHER 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 African Corn 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 58 1961 5,351 1,026 284 949 453 13,032 1,235 9,300 78 375 76 1962 6,296 1,112 318 1,005 5..,* 11,986 1,303 14,275 231 381 82 1963 6,127 1,142 298 1,060 617 11,764 1,349 14,518 292 421 62 1964 7,013 1,184 313 1,134 602 12,400 1,367 14,664 432 474 82 1965 7,564 1,208 329 1,281 722 19,010 1,521 16,202 708 520 85 1966 7,423 1,193 213 1,162 701 24,265 1,578 19,764 688 511 66 1967 7,263 1,179 268 1,207 666 26,551 1,640 20,232 630 500 95 1968 8,006 1,242 292 1,351 857 28,804 1,817 21,858 531 626 90 1969 7,416 1,273 223 1,203 717 26,711 2,012 23,180 489 666 92 1970 7,772 1,292 217 1,057 784 27,469 1,827 24,338 196 717 87 1971 7,918 1,321 421 1,204 848 33,645 1,930 26,088 126 944 65 1972 7,979 1,341 522 1,097 890 30,729 2,081 28,650 142 1,042 67 1973 7,726 1,340 423 923 1,111 30,207 2,254 26,860 268 1,123 79 1974 7,902 1,401 438 1,141 1,083 25,029 2,108 30,782 328 1,092 102 1975 7,563 1,333 487 1,048 1,199 17,329 1,830 32,738 321 1,087 114 1976 8,332 1,519 502 948 1,176 23,867 2,094 33,517 193 1,036 129 1977 7,327 1,346 385 950 1,127 26,902 2,066 41,107 437 1,180 149 1978 7,632 1,351 501 980 1,483 27,153 2,023 44,464 699 1,281 150 1979 8,217 1,357 534 968 1,599 32,235 2,061 53,833 466 1,390 177 1980 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 1,723 1961 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 1 1970 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 3,231 1973 1,321 791 17,801 83,574 52,060 5,542 207,496 96,850 1,148 3,560 1974 1,640 766 15,933 90,535 50,632 5,059 246,238 89,276 1,134 4,334 1975 1,745 810 16,596 90,211 51,021 6,377 294,719 90,709 1,070 4,513 1976 1,877 836 15,010 98,235 51,592 5,501 319,441 69,890 1,301 5,006 1977 2,302 1,053 15,194 107,568 59,234 5,805 439,039 92,598 1,561 5,636 1978 2,490 1,143 15,556 108,508 72,005 6,455 477,788 105,568 1,613 5,861 1979 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 Fixed Value 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 ier Employees 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 7054 20-49 197 6,298 124,356 31,339 93,017 74.8 62,958 4,945 319,584 2.00 9997 50-99 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 Fixed Value 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' Exemption Employees Firms ment ('000 L.) ('000 L.) ('000 L.) Ratio ('000 L.) (L.) (L.) Ratio '----1000L.---- ('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 15,741 20-49 95 3,151 80,929 20,551 53,794 66.4 41,423 6,522 436,031 2.02 261 2,923 30,768 50-99 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 Total Industry 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 23.3 Beverages 1,332 1,211 1,337 1,715 2,272 9.0 6.2 5.8 6.o 6.2 Tobacco 296 290 897 1,646 2,039 2.0 1.5 3.9 5.8 5.6 Textiles 325 1,239 1,215 1,802 2,379 2.2 6.4 5.3 6.3 6.5 Apparel 1,184 1,317 1,854 2,220 2,616 8.0 6.8 8.1 7.8 7.1 Footwear 592 500 301 570 651 4.0 2.6 1.3 2.0 1.8 Furniture 444 403 468 690 1,387 3.0 2.1 2.0 2.4 3.8 Printing 740 1,211 1,148 1,428 1,447 5.0 6.2 5.0 5.0 4.0 Other 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 33.7 Lumber products 2,664 5,146 4,218 5,089 6,415 17.9 26.5 18.4 17.8 17.5 4 Paper products 95 403 473 742 649 o.6 2.1 2.1 2.6 1.8 Leather 104 130 233 275 500 0.7 0.7 1.0 1.0 1.4 Rubber and Plastic Products 296 202 689 873 1,381 2.0 1.0 3.0 3.1 3.8 Chemicals and Pharmaceuticals 978 1,069 1,258 1,185 1,550 6.6 5.5 5.5 4.1 4.2 Non-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 - 89 - 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 23.4 Beverages 57.7 58.3 55.7 Tobacco - 37.9 29.8 17.4 Textiles - 49.9 48.4 57.7 Apparel - 96.8 95.9 77.1 Footwear - 65.2 30.4 32.3 Furniture - 45.0 42.2 36.6 Printing - 91.7 98.8 97.7 Other - 92.5 64.2 72.7 Intermediate Goods 42.3 67.8 73.6 89.9 Lumber products - 3.0 3.6 3.7 Paper products - 99.9 99.7 99.4 Leather 43.31 59.7 79.1 Rubber Products - 79.3 82.5 91.1 Chemicals - 80.2 94.3 79.1 Non-metallic Minerals _ 56.o 22.3 24.5 Petroleum 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'stica y Censos and CONSUPLANE. - 90 - 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 57.8 449.1 Seafood 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 54.9 175.2 Knitwear 3213 54.4 162.2 Meat 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 105.8 122.2 Baking products 3117 35.0 116.7 Textile products,excluding apparel 3212 35.6 84.2 Plastics 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 16.4 Animal and vegetable oils 3115 1.4 6.4 Non-alcoholic beverages 3134 12.7 6.4 Machinery and equipment for industry 3824 1.6 5.2 Agricultural machinery and equipment 3822 3.8 3.3 Pulp 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 3530 Petroleum 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 equipment exceot electrical 3829 8.9 _ Electrical machineryand equipment 3831 3,9 _ Radios, TV and other electrical consumer 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 -27.3 Industrial chemicals 3511 2,6 -33.9 Wood containers 3312 1.8 -29.8 Fertilizers 3512 0.7 - 8.6 Pharmaceuticals 3522 0.3 -13.7 Lumber products 3311 5.2 - 2.1 Tires 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