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Honduras INDUSTRY
Manufacturing
The country's manufacturing sector was small,
contributing only
15 percent to the total GDP in 1992. Textile exports,
primarily to
the United States, led the Honduran manufacturing sector.
The
maquiladora, or assembly industry, was a growth
industry in
the generally bleak economy. Asian-owned firms dominated
the
sector, with twenty-one South Korean-owned companies in
export
processing zones located in the Río Sula valley in 1991.
The
maquiladoras employed approximately 16,000 workers
in 1991;
another nine firms opened in 1992. Job creation, in fact,
is
considered to be the primary contribution of the assembly
operations to the domestic economy. The export textile
manufacturing industry all but wiped out small, Honduran
manufacturers, and food processors, whose goods were
historically
aimed at the domestic market, were also adversely
affected. The
small Honduran firms could not begin to compete with the
assembly
industry for labor because of the maquiladoras'
relatively
high wage scale of close to US$4 per day. Small firms also
found it
increasingly difficult to meet the high cost of mostly
imported
inputs. Membership in the Honduran Association of Small
and Medium
Industry (Asociación Hondureña de Empresas Pequeñas y
Medianas)
declined by 70 percent by 1991, compared to
pre-maquiladora
days, foreshadowing the likely demise of most of the small
shops.
Honduran domestic manufacturers also suffered from
increased
Central American competition resulting from a trade
liberalization
pact signed in May 1991 by Honduras, El Salvador, and
Guatemala.
Overall, the Honduran manufacturing sector has mimicked
other
sectors of the economy--it is mostly noncompetitive, even
in a
regional context, because of insufficient credit and the
high cost
of inputs. Relatively high interest rates and a
complicated
investment law have also inhibited the foreign-dominated
manufacturing sector from taking off.
The government-sponsored Puerto Cortés Free Zone was
opened in
1976. By 1990 an additional five free zones were in
operation in
Omoa, Coloma, Tela, La Ceiba, and Amapala. A series of
privately
run export processing zones were also established in
competition
with the government-sponsored free zones. These privately
run zones
offered the same standard import-export incentives as the
government zones. Most of the government and privately run
zones
were located along the Caribbean coast in a newly
developing
industrial belt.
Firms operating outside of the special "enterprise
zones"
(either privately run, export-processing zones or
governmentsponsored free zones) enjoy many of the same benefits as
those
operating within the zones. The Honduran Temporary Import
Law
permits companies that export 100 percent of their
production to
countries outside the CACM countries to hold ten-year
exemptions on
corporate income taxes and duty-free import of industrial
inputs.
Analysts continue to debate the actual benefits of the
shift
away from the import-substitution industrialization
(ISI--see Glossary)
policies of the 1960s and 1970s toward a new
focus on
free zones and assembly industries in the 1990s. Critics
point to
the apparent lack of commitment by foreign manufactures to
any one
country site or to the creation of permanent
infrastructure and
employment. They question whether new employment will be
enough to
offset the loss of jobs in the more traditional
manufacturing
sector. A value of US$195 million to the Honduran economy
from
assembly industries in 1991--when the value of clothing
exports was
greater than that of coffee--was a compelling argument in
favor of
the shift, however.
Data as of December 1993
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