Business & Economics
By SUYAPA CARIAS "We call on all those involved in prime materials, coffee, shrimp, marble, wood, maquilas and other products to attend the meeting and explore the possibilities to penetrate the Chilean market."
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Businessmen will use Costa Rica summit to forge new trade ties
The meeting of the businesspeople was officially announced Tuesday (June 24) at a press conference held by representatives of the Embassy of Chile, the Foundation for Investment and Development of Exports (FIDE), the Honduran Private Enterprise Council (COHEP) and the newly-created Honduran-Chilean Chamber of Commerce. Gustavo Gonzáles, Chilean Consul in Honduras, says the meeting will gather representatives from more than 20 different sectors, including agriculture, food, liquors, wood and furniture, chemical and pharmaceutical products, infrastructure, hotels and services. He added that the Chilean government has prepared a full schedule aimed at facilitating the making of contacts and promoting trade and investment between Chile and Central America. The program will begin with a conference on investment opportunities in Central America and the Chilean model for exports and privatization. Representatives of the private sector will also meet with President Frei to discuss transportation between Chile and Central America and the exchange of trade information and business opportunities between the two regions. Gonzáles invited all Honduran businesspeople to join the mission to Costa Rica. "We call on all those involved in prime materials, coffee, shrimp, marble, wood, maquilas and other products to attend the meeting and explore the possibilities to penetrate the Chilean market." Gonzáles says trade between Chile and Central American reached $37 million in 1995. The Honduran share of this total was $3 million. "And the tendency has been growing by 70 percent over the last three years," he said. Leaders in the Honduran private sector agree that Chile's recent economic boom is worth analyzing and applying to Central American economies. FIDE executive director Norman Garcia says Chile has merged its external trade policies cleverly, maintaining even ties throughout South America and with Asia, Europe and the United States. "[Next month's] meeting will give us a chance to create strategic alliances in Central America," he says. Jorje Jarpa, vice president of the Honduran-Chilean Chamber of Commerce, says Chile's success is due mainly to the attitude of cooperation taken on by that country's different sectors. "In Chile there are no liberals, nationalists, military or ex-military. They all work together for the same purpose." One of the primary goals of the new Chamber, which was created five weeks ago, is to support the modernization of small and mid-sized businesses in Honduras. Chamber president Arturo Richmagui says the organization will play an important role in Costa Rica next months, as well as in promoting future ties between Honduras and Chile. |
Cell phones ready in August
After paying the Honduran government a $1.5 million concession last week for the right to offer cellular phone services here, Motorola says callers in Tegucigalpa and San Pedro Sula will have access to cell phones by August. Although the official rates have yet to be set, company spokesmen say cell phone users will probably pay between $0.30 and $0.35 per minute. Standard phone rates average $0.08 per minute for local calls. Government officials say much of the concession will be used to cover pay hikes for public employees and doctors, says a La Tribuna report. | |
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By MAS DINERO |
Growing in Greater Honduras
Mas just made his periodic trip to the Central Bank of Honduras to get the latest updates on the Honduran economy. These bankers keep close touch on what's happening in Honduras, and no doubt help counsel the Government on fiscal responsibility. There is some good news. Inflation is really coming down. It is higher than hoped for earlier, but still down significantly from the year before. The Consumer Price Index at May 31, 1996 was 21.3 percent higher than the same date the year before, and well below the previous year's figure of 30.8 percent. That is progress, and probably due to economic discipline on the part of the Central Bank. Many of Honduras' imports either come from the United States, or, if not (as in the case of petroleum), are priced in dollars. The dollar increased significantly versus the lempira last year. At the end of May 1996 one could buy approximately Lps. 11.2 for one dollar. A year ago, one could only buy Lps. 9.15 per dollar, thus the Lempira lost 22.4 percent of it's purchasing power in Honduras compared to the dollar. Loss of Lempira purchasing power is a significant contributor to inflation in Honduras, as import prices increase by the corresponding percentage. Petroleum and petroleum products are priced in dollars, and to add insult to injury, petroleum prices have increased markedly from an average of $22.16 per barrel in March 1995 to $25.30 per barrel in March 1996. This is a blow to the Honduran economy and the balance of payments, and has led to discussion of the possibility of fuel rationing in the halls of the Honduran National Congress. Many think Honduras may have it's own petroleum, probably in the La Mosquitia region in the Eastern portion of Honduras. This area is largely undeveloped, and environmentalists are already raising the alarm to ecological damage in this area should petroleum be found. Given the economic position of Honduras, it cannot afford the luxury of failing to develop petroleum reserves if this is possible. The question becomes one of developing the petroleum reserves with appropriate caution to prevent ecological damage. For those fortunate enough to have a dollar income, the past year has been one of near zero inflation. This is because the number of lempiras one can buy per dollar has increased at about the same rate as prices here in Honduras. There is no guarantee that this ratio will hold true in the future. The happiest circumstance for all would be a low rate of inflation in Honduras. Here, as everywhere, inflation hurts worst the poor who don't have much income, and the lempira income based retirees who don't have access to a rapidly escalating income. Still, inflation remains a serious concern. Although prices are about 21.3 percent higher now than last year, the inflation rate for the first five months of 1996 suggests that the decline in the rate of inflation has flattened out. The rate for the first five months was 9.3 percent (compounded), which suggests a year on year change of 23.8 percent. My guess is that it will turn out a little better than this. Petroleum prices have fallen about $1.50 per barrel in the past two weeks as the marker anticipates the reentry of Iraqui oil onto the world market. It's too early to be sure that this is a trend to lower prices, but my guess is that it is. Lower oil prices mean cheaper transportation, cheaper fertilizer and cheaper electricity, which all will help reduce inflation. Inflation tends to be high in all of Latin America, but for the first four months of 1996, the highest rate for Central America was here in Honduras. In sum, there has been progress in Honduras. Perhaps with lower oil prices (if they become reality) the rate will come down further. Real interest rates are still high; secure lempira-based investments (government bonds) are yielding about 28.5 percent and dollar investments about 11 percent, which should encourage investment. Still, any way you look at it, inflation is uncomfortable, market distorting and leads to political risk. Far better to be one of Latin America's lowest inflation economies. It seems that El Salvador is the best on this front now. Is their reorientation to a market economy -- to be the Hong Kong of Central America -- working? Stay tuned. |
| Category | Index(1) May'95 | Index(1) May'96 | Lempira Inflation | Dollar Inflation |
| Food | 708.6 | 848.3 | 19.7 | - 1.2 |
| Home | 622.7 | 769.0 | 23.5 | + 1.3 |
| Clothing | 813.8 | 961.6 | 18.2 | - 3.0 |
| Health Care | 769.1 | 945.7 | 23.0 | + 0.9 |
| Personal Care | 604.3 | 733.8 | 21.4 | - 0.4 |
| Beverages &
Tobacco | 897.7 | 1124.4 | 25.3 | + 2.8 |
| Transportation | 632.3 | 767.0 | 21.3 | - 0.5 |
| Education &
Entertainment | 792.2 | 981.4 | 23.9 | + 1.7 |
| General Index | 701.0 | 850.2 | 21.3 | -0.4 |
| El Salvador | 2.70 % |
| Nicaragua | 3.48 |
| Costa Rica | 3.65 |
| Guatamala | 4.08 |
| Honduras | 7.10 |
Goodbye one-centavo coins
Central Bank vice president Daniel Figueroa says one-centavo coins have become more of a nuisance than a convenience to Hondurans and that they will soon be out of circulation. It costs eight times more than the tiny copper coins are worth to produce them, say coin specialists. Likewise, as the national currency continues to devaluate, the CBH is considering issuing a 500-lempira bill. Currently, the largest note minted is the Lps. 100 bill, which makes payments over Lps. 1,000 a bulky affair. But don't start looking for the new bills too soon, says Figueroa. He predicts that if the 500-lempira note ever comes to pass it will be during the next administration. | ||
Striking Central Bank workers never fired
CBH president Hugo Noé Pino says the strike that stopped business at the Central Bank of Honduras for one day last week was both "unfortunate" and "illegal." Workers blocked entry to the Central Bank annex in downtown Comayagüela to protest their across-the-board transfer from the now defunct Superintendency of Banks to the new Bank and Insurance Commission. Union leaders say the transferred employees should receive severance pay, but Pino says "no one was fired. They were transferred along with their salaries and their positions." Although he failed to place an exact value on what the lost day will cost the bank, economists are talking in the millions of lempiras. Pino says the bank will take legal action if another strike is held and criticized the union for making the "unilateral" decision to stop negotiations. | ||
Budget increase covers salary hikes
The National Congress has approved a Lps. 308 million increase to this year's budget in order to cover the salary hikes recently promised to public employees, teachers and doctors. The bulk of the additional funds will come from better-than-expected tax collection methods and the reassignment of revenue from spending areas that were over-estimated when this year's budget was set last year, says a La Tribuna report. | ||
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| By MAS DINERO |
Growing in Greater Honduras
Mas just made his periodic trip to the Central Bank of Honduras to get the latest updates on the Honduran economy. These bankers keep close touch on what's happening in Honduras, and no doubt help counsel the Government on fiscal responsibility. There is some good news. Inflation is really coming down. It is higher than hoped for earlier, but still down significantly from the year before. The Consumer Price Index at May 31, 1996 was 21.3 percent higher than the same date the year before, and well below the previous year's figure of 30.8 percent. That is progress, and probably due to economic discipline on the part of the Central Bank. Many of Honduras' imports either come from the United States, or, if not (as in the case of petroleum), are priced in dollars. The dollar increased significantly versus the lempira last year. At the end of May 1996 one could buy approximately Lps. 11.2 for one dollar. A year ago, one could only buy Lps. 9.15 per dollar, thus the Lempira lost 22.4 percent of it's purchasing power in Honduras compared to the dollar. Loss of Lempira purchasing power is a significant contributor to inflation in Honduras, as import prices increase by the corresponding percentage. Petroleum and petroleum products are priced in dollars, and to add insult to injury, petroleum prices have increased markedly from an average of $22.16 per barrel in March 1995 to $25.30 per barrel in March 1996. This is a blow to the Honduran economy and the balance of payments, and has led to discussion of the possibility of fuel rationing in the halls of the Honduran National Congress. Many think Honduras may have it's own petroleum, probably in the La Mosquitia region in the Eastern portion of Honduras. This area is largely undeveloped, and environmentalists are already raising the alarm to ecological damage in this area should petroleum be found. Given the economic position of Honduras, it cannot afford the luxury of failing to develop petroleum reserves if this is possible. The question becomes one of developing the petroleum reserves with appropriate caution to prevent ecological damage. For those fortunate enough to have a dollar income, the past year has been one of near zero inflation. This is because the number of lempiras one can buy per dollar has increased at about the same rate as prices here in Honduras. There is no guarantee that this ratio will hold true in the future. The happiest circumstance for all would be a low rate of inflation in Honduras. Here, as everywhere, inflation hurts worst the poor who don't have much income, and the lempira income based retirees who don't have access to a rapidly escalating income. Still, inflation remains a serious concern. Although prices are about 21.3 percent higher now than last year, the inflation rate for the first five months of 1996 suggests that the decline in the rate of inflation has flattened out. The rate for the first five months was 9.3 percent (compounded), which suggests a year on year change of 23.8 percent. My guess is that it will turn out a little better than this. Petroleum prices have fallen about $1.50 per barrel in the past two weeks as the marker anticipates the reentry of Iraqui oil onto the world market. It's too early to be sure that this is a trend to lower prices, but my guess is that it is. Lower oil prices mean cheaper transportation, cheaper fertilizer and cheaper electricity, which all will help reduce inflation. Inflation tends to be high in all of Latin America, but for the first four months of 1996, the highest rate for Central America was here in Honduras. In sum, there has been progress in Honduras. Perhaps with lower oil prices (if they become reality) the rate will come down further. Real interest rates are still high; secure lempira-based investments (government bonds) are yielding about 28.5 percent and dollar investments about 11 percent, which should encourage investment. Still, any way you look at it, inflation is uncomfortable, market distorting and leads to political risk. Far better to be one of Latin America's lowest inflation economies. It seems that El Salvador is the best on this front now. Is their reorientation to a market economy -- to be the Hong Kong of Central America -- working? Stay tuned. |
Striking Central Bank workers never fired
CBH president Hugo Noé Pino says the strike that stopped business at the Central Bank of Honduras for one day last week was both "unfortunate" and "illegal." Workers blocked entry to the Central Bank annex in downtown Comayagüela to protest their across-the-board transfer from the now defunct Superintendency of Banks to the new Bank and Insurance Commission. Union leaders say the transferred employees should receive severance pay, but Pino says "no one was fired. They were transferred along with their salaries and their positions." Although he failed to place an exact value on what the lost day will cost the bank, economists are talking in the millions of lempiras. Pino says the bank will take legal action if another strike is held and criticized the union for making the "unilateral" decision to stop negotiations. | |
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Budget increase covers salary hikes
The National Congress has approved a Lps. 308 million increase to this year's budget in order to cover the salary hikes recently promised to public employees, teachers and doctors. The bulk of the additional funds will come from better-than-expected tax collection methods and the reassignment of revenue from spending areas that were over-estimated when this year's budget was set last year, says a La Tribuna report. |
Popular U.S. talk show host Kathie Lee Gifford was recently castigated in the U.S. press for manufacturing her popular line of clothing using child labor in a Honduran maquila. |
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