Identifier
Created
Classification
Origin
03TEGUCIGALPA2042
2003-08-28 19:08:00
UNCLASSIFIED
Embassy Tegucigalpa
Cable title:  

Honduras: 2002 Preliminary Macroeconomic Update

Tags:  EFIN ECON EINV ETRD ELAB EAID PGOV HO 
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UNCLAS SECTION 01 OF 10 TEGUCIGALPA 002042 

SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, AND EB
LABOR FOR ILAB, ROBERT WHOLEY
STATE PASS TO USAID, USTR, EXIM, AND OPIC,
STATE PASS TO USED IDB, USED WB, USED IMF

E.O. 12958: N/A
TAGS: EFIN ECON EINV ETRD ELAB EAID PGOV HO
SUBJECT: Honduras: 2002 Preliminary Macroeconomic Update


--------
CONTENTS
--------

1-7. MACROECONOMIC OVERVIEW


8. ECONOMIC ACTIVITY


9. PRICES AND WAGES

10-12. EMPLOYMENT

13-15. BALANCE OF PAYMENTS


16. EXPORTS (PRINCIPAL EXPORTS INCLUDING MAQUILA)


17. IMPORTS


18. FOREIGN DIRECT INVESTMENT

19-21. INTEREST RATES


22. NET DOMESTIC CREDIT


23. MONEY SUPPLY


24. EXCHANGE RATE

25-28. PUBLIC SECTOR FINANCES

29-30. EXTERNAL DEBT


31. TOURISM

----------------------
MACROECONOMIC OVERVIEW
----------------------

UNCLAS SECTION 01 OF 10 TEGUCIGALPA 002042

SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, AND EB
LABOR FOR ILAB, ROBERT WHOLEY
STATE PASS TO USAID, USTR, EXIM, AND OPIC,
STATE PASS TO USED IDB, USED WB, USED IMF

E.O. 12958: N/A
TAGS: EFIN ECON EINV ETRD ELAB EAID PGOV HO
SUBJECT: Honduras: 2002 Preliminary Macroeconomic Update


--------------
CONTENTS
--------------

1-7. MACROECONOMIC OVERVIEW


8. ECONOMIC ACTIVITY


9. PRICES AND WAGES

10-12. EMPLOYMENT

13-15. BALANCE OF PAYMENTS


16. EXPORTS (PRINCIPAL EXPORTS INCLUDING MAQUILA)


17. IMPORTS


18. FOREIGN DIRECT INVESTMENT

19-21. INTEREST RATES


22. NET DOMESTIC CREDIT


23. MONEY SUPPLY


24. EXCHANGE RATE

25-28. PUBLIC SECTOR FINANCES

29-30. EXTERNAL DEBT


31. TOURISM

--------------
MACROECONOMIC OVERVIEW
--------------


1. The Honduran economy grew at a rate of 2.5 percent in
2002, similar to its 2.6 percent growth rate in 2001. Since
the population growth rate is approximately 2.6 percent,
Honduras has enjoyed essentially zero real per capita
economic growth over the last two years. Major factors
influencing the Honduran economic performance were the slow
international (especially the U.S.) economy, the continuing
coffee crisis, and low international prices for other export
products.


2. According to the Consumer Price Index, the inflation rate
in 2002 was 8.1 percent, similar to the inflation rate for
the last two years and compatible with the GOH's goal of
maintaining the inflation rate at a stable and acceptable
level. The Central Bank continued to depreciate the nominal
exchange rate of the lempira by 6 percent against the dollar
in 2002, in order to maintain purchasing power parity with
the United States. Interest rates fell by a percentage
point during the year. The minimum wage increased by 12
percent for workers in small agriculture, but approximately
nine percent for most other workers, more than compensating
for the rate of inflation.


3. Net international reserves reached USD 130.5 at the end
of 2002, USD 10 million higher than expected. This level was

equivalent to 3.8 months of imports.


4. Monetary policy was oriented to maintenance of a stable
exchange rate and to maintain a normal functioning of the
payment system. Open market operations were the principal
instruments used. The Central Bank uses an auction system
to regulate the allocation of foreign exchange.


5. There was a positive flow of net transfers during the
year, due to an increase in family remittances, but the
current account showed a deficit of USD 243 million. The
commercial deficit in 2002 reached USD 1.4 billion. There
was also a decrease in direct investment and net long-term
loans to the official sector that decreased the balance of
the capital account as well.


6. During 2002, the balance of the public external debt was
USD 4.4 billion, 5.7 percent higher than the amount owed at
the end of 2001. The GOH continues its policy of taking on
only foreign concessional loans for projects of high
priority.


7. After adopting a series of austerity and tax measures,
the GOH closed 2002 with a central government fiscal deficit
of Lps. 5.7 billion (USD 345 million) which represents 5.2
percent of the GDP, down from the six percent registered in

2001. The financing of this deficit came mostly from
foreign loans.

Source: Technical Unit, Ministry of the Presidency, and BCH,
data published July 2003.
--------------
ECONOMIC ACTIVITY
--------------

8. According to GOH data, economic growth in 2002 was 2.5
percent, slightly less than the rate of 2.6 percent observed
in 2001. Honduras' growth was the highest of the Central
American countries, except for Costa Rica. The increase in
agricultural activity was 4.8 percent due to an increase in
corn production (22 percent),rice (21.2 percent),and beans
(43.8 percent). The production of banana and sugar cane
declined due to labor conflicts in one of the most important
banana producing companies and bad weather conditions that
affected sugar production in the south-central part of the
country.

GDP REAL GROWTH RATE
--------------
(Percent)

1997 5.1
1998 2.9
1999 -1.9
2000 5.2
2001 2.6
2002 2.5

GDP BY ECONOMIC ACTIVITY:
PERCENTAGE INCREASE OVER PREVIOUS YEAR
--------------

ACTIVITY
2000 2001 2002

Agriculture 11.7 -0.5 4.8
Mining 1.7 -0.8 5.0
Manufacturing Industry 5.5 5.2 2.8
Construction 1.5 -5.2 -14.6
Electric,Water,Gas 10.6 -1.8 5.6
Transp.,Storage,Commun. 5.0 5.3 3.2
Trade,Restaurants,Hotels 3.7 3.0 2.8
Financial Institutions 2.3 3.1 2.2
Housing 3.1 3.9 3.9
Public Admin. Defense 19.8 8.7 7.2
Community Services 5.1 12.6 7.2

Source: BCH, July 18, 2003.

--------------
PRICES AND WAGES
--------------


9. The end of period Consumer Price Index (CPI) rose by 8.1
percent growth during 2002, slightly lower than the 8.8
percent growth registered in 2001, continuing the declining
trend of the past four years. This result was in part
obtained by the stability of the real exchange rate, the
application of prudent monetary policy, an increased
domestic supplies of basic grains due to increases in
national production, helping to moderate food prices. There
were also informal price controls for part of the year.
Increases in gasoline prices and public transportation
offset the favorable effect of the food index.

MONTHLY CPI FOR 2001 AND 2002
--------------

END OF PCT CHANGE END OF PCT CHANGE
2001 PERIOD SAME MONTH 2002 PERIOD SAME MONTH
YEAR EARLIER YEAR EARLIER

JAN 111.1 10.5 JAN 120.2 8.2
FEB 112.5 10.3 FEB 121.5 8.0
MAR 113.5 10.2 MAR 122.2 7.7
APR 114.2 9.5 APR 123.1 7.8
MAY 115.6 9.8 MAY 123.7 7.0
JUN 116.3 9.4 JUN 125.1 7.6
JUL 116.9 9.3 JUL 126.1 7.9
AUG 117.7 9.5 AUG 126.9 7.8
SEP 118.6 10.1 SEP 127.1 7.2
OCT 118.8 9.7 OCT 127.8 7.6
NOV 119.4 9.0 NOV 128.6 7.7
DEC 119.8 8.8 DEC 129.5 8.1

Source: BCH, data published July, 2003.

CONSUMER PRICE INDEX (CPI)
--------------
(December 1999=100)

PCT
AVERAGE CHANGE
1997 77.9 20.2
1998 90.1 13.7
1999 100.0 11.6
2000 110.1 11.1
2001 119.8 9.6
2002 129.8 7.7
2003* 132.8 8.3

*Figures for 2003 are annualized to June
Source: BCH, data published July, 2003.

--------------
EMPLOYMENT
--------------


10. Employment data is collected once per year by the
National Institute of Statistics (INE) through a survey
conducted each September. The labor market was closely
linked with the economic activity of the country, which can
be observed in the stagnant behavior of the labor market.
Employment rose by only 2.3 percent, mostly representing new
labor joining the informal side of the market. There was
also a 2.7 percent increase in the economically active
population in September 2002 with respect to the same month
in 2001. Even though there was a decrease observed in open
unemployment, the increase of almost 3 percentage points of
underemployment is significant. It demonstrates that the
majority of the emerging labor force is entering the
informal part of the economy.


11. The employment level in the textile industry showed a
decrease for the second straight year. According to the
Maquila Association, in 2002 this industry had a total of
107,398 direct jobs, which means that 2,685 jobs were lost
with respect to 2001 (2.4 percent) as a result of the
closing of 13 companies.

EMPLOYENT INDICATORS
--------------

September 2001 September 2002
Urb. Rural Total Urb. Rural Total

Economically Active Population (Millions)
1.1 1.2 2.3 1.2 1.2 2.4

Working Pop. (Millions)
1.1 1.2 2.3 1.1 1.2 2.3

Open Unemployment (%)
5.5 2.4 3.9 5.9 1.8 3.8

Visible Sub-employment (%)
4.1 6.8 5.5 5.0 4.7 4.8

Invisible Sub-employment (%)
14.6 33.0 24.0 13.3 37.1 26.6

Economic Active Population with employment problems
24.2 42.2 33.4 24.2 43.6 35.2

UNEMPLOYMENT (PERCENT OF LABOR FORCE)
--------------

YEAR PERCENT

1997 Sep. 4.3
1998 Sep. 3.0
1999 Sep. 3.3
2000 N/A
2001 Sep. 3.9
2002 Sep. 3.8

Source: National Institute of Statistics, September 2002
Survey.


12. The latest revision of the minimum wage (an increase of
12 percent for workers in small agriculture and
approximately nine percent for most other workers) was
implemented in spring 2003. New negotiations will start in
November of this year for the 2004 increase.

--------------
BALANCE OF PAYMENTS
--------------


13. Net international reserves increased by USD 214.0
million in 2002 to reach USD 1.85 billion, as a result of
the positive balance in the long-term capital account of the
private sector and also due to large transfers, especially
in net family remittances, which increased 32.1 percent
compared to 2001.

14. The balance of the capital account was USD 187.8 million
that represents a reduction of 18.6 percent from 2001 caused
mainly by a reduction in direct investment and also long-
term loans to the official sector.


15. The current account deficit in 2002 was USD 243.0
million, equivalent to 3.7 percent of GDP. The current
account balance was a result of various factors: a reduction
of 0.6 percent in imports, and the increase of 3.0 percent
in overseas net transfers product of a bigger flow in family
remittances that rose from USD 533.0 in 2001 to USD 704.3
million in 2002.

CONDENSED BALANCE OF PAYMENTS (USD MILLIONS)
--------------

2000 2001 2002

TRADE BALANCE -992.5 -1,222.6 -1,200.0
TRANSFERS 746.9 929.2 957.0
CURRENT ACCOUNT -245.6 -293.4 -243.0
CAPITAL ACCOUNT 68.4 230.7 187.8
ERRORS AND OMISSIONS 123.5 62.4 118.7
GLOBAL BALANCE -53.7 -0.3 63.5
INTERNATIONAL RESERVES
(DECREASE +,INCREASE -)-118.8 -147.3 -214.0

Source: BCH. Data published July 2003.

--------------
EXPORTS
--------------


16. Honduras' export value in 2002 was USD 1.37 billion,
down by 1.5 percent from 2001. This decrease was due mainly
to lower exports of banana, shrimp, soaps and detergents
because of big price declines. In 2002, Honduras exported
USD 665.2 million to the U.S., an amount equivalent to 48.5
percent of total exports.

EXPORTS (FOB, IN USD MILLIONS)
--------------

TO PCT OF
TOTAL U.S. TOTAL

1995 1,220.2 608.2 49.8
1996 1,316.0 612.4 46.5
1997 1,445.7 666.2 46.0
1998 1,549.9 686.0 44.2
1999 1,164.4 572.4 49.1
2000 1,436.0 604.2 45.4
2001 1,391.0 607.6 45.3
2002 1,370.7 665.2 48.5

Source: BCH. Data published July 2003.
Note: Figures do not include exports of apparel and other
manufactures in the maquila sector.

BANANA EXPORTS
--------------

YEAR REVENUE VOLUME AVG. UNIT PRICE
(USD MILLIONS) 40 LBS BOX (USD)

1998 219.6 28,234 7.78
1999 38.1 6,750 5.64
2000 124.2 20,686 6.01
2001 204.2 25,487 8.01
2002 172.4 23,453 7.35
COFFEE EXPORTS
--------------

YEAR REVENUE VOLUME PRICE VOLUME PRICE
(USD MILL) 60KG BAGS (USD) 46KG BAGS (USD)
1998 429.8 2,330 184.49 3,039 141.44
1999 256.1 1,986 128.92 2,591 98.84
2000 339.4 2,903 116.90 3,787 89.63
2001 160.7 2,391 67.20 3,119 51.52
2002 182.5 2,711 67.32 3,536 51.61
OTHER IMPORTANT EXPORTS
--------------

WOOD
--------------
YEAR REVENUE VOLUME PRICE
(USD MILL) (FT) (USD)

1998 17.1 25,540 0.67
1999 27.5 38,168 0.72
2000 33.5 44,179 0.76
2001 33.9 44,026 0.77
2002 33.7 43,205 0.78

GOLD
--------------

YEAR REVENUE VOLUME PRICE
(USD MILL) (OZ.T) (USD)

1998 0.0 0.0 0.0
1999 0.0 0.0 0.0
2000 6.3 24 260.32
2001 63.8 244 261.68
2002 80.5 265 303.89

SILVER
--------------

YEAR REVENUE VOLUME PRICE
(USD MILL) (OZ. T) (USD)

1998 7.8 1,525 5.14
1999 5.4 1,085 4.94
2000 8.3 1,733 4.77
2001 7.9 1,846 4.26
2002 5.1 1,165 4.39

ZINC
--------------

YEAR REVENUE VOLUME PRICE
(USD MILL) (LBS) (USD)

1998 36.3 85,659 0.42
1999 50.2 94,786 0.53
2000 54.5 97,396 0.56
2001 38.5 101,334 0.38
2002 29.0 93,556 0.31

SUGAR
--------------

YEAR REVENUE VOLUME PRICE
(USD MILL) (KILOS) (USD)

1998 10.2 21,033 0.48
1999 5.3 10,509 0.50
2000 7.8 25,499 0.31

2001 30.4 160,083 0.19
2002 17.5 97,066 0.18

Source: BCH. Data published July 2003.

MAQUILA EXPORTS (USD MILLIONS)
--------------

VALUE PERC.
GROWTH

1999 2,158.30 -
2000 2,361.80 9.43
2001 2,343.60 -0.77
2002 2,439.40 4.09
2003* 994.60 10.73
* (Figures for 2003 are up to May)
Source: Honduran Maquila Association

--------------
IMPORTS
--------------


17. In 2002 the value of imports FOB totaled USD 2.8
billion, a decrease of 0.1 percent over 2001. In 2002,
Honduras imported USD 1.2 billion from the U.S. equivalent
to 40.7 percent of total imports.
IMPORTS (CIF, in USD MILLIONS)
--------------

FROM PCT OF
TOTAL U.S TOTAL

1995 1,642.7 705.2 42.9
1996 1,840.0 857.6 46.6
1997 2,148.6 1,033.0 48.0
1998 2,534.8 1,177.3 46.4
1999 2,676.1 1,182.7 44.1
2000 2,854.6 1,220.2 42.7
2001 2,983.9 1,281.7 42.9
2002 2,976.3 1,213.1 40.7

Note: Figures do not include imported goods for the maquila
sector.

--------------
FOREIGN DIRECT INVESTMENT
--------------


18. According to Central Bank data, FDI flows in Honduras
in 2002 totaled USD 143 million. The U.S. continues to be
the dominant source of FDI in Honduras with investment in
2002 reaching an estimated USD 54,500.0 million, or 38.1
percent of total FDI in Honduras. These totals do not
include the accumulated investments in the maquila industry,
which is considerable.

FOREIGN DIRECT INVESTMENT BY COUNTRY OF ORIGEN
-------------- --
(US THOUSANDS)

1999 2000 2001 2002

United States 113,855.1 64,240.6 52,600.0 54,500.0
El Salvador 13,907.7 7,878.8 9,240.0 11,798.0
Guatemala 3,354.5 11,084.8 10,847.0 6,046.0
Costa Rica 6,442.5 21,186.6 24,106.6 9,831.5
Panama 19,474.8 15,099.7 18,088.0 8,795.0
Mexico 4,612.9 -138.8 207.0 223.0
Spain 5,884.3 7,784.5 9,784.5 5,390.0
United Kingdom 2,567.4 14,956.7 4,289.0 4,790.0
Switzerland 6,948.1 -4,050.9 -1,250.0 543.0
Italy -3,606.0 13,624.8 7,624.0 6,175.0
Germany 156.7 218.6 188.6 219.0
Japan 124.0 0.0 1,150.6 1,188.2
Canada 55,099.6 36,057.9 15,057.0 18,115.0
Other Countries 8,515.6 94,056.3 43,068.9 15,246.9

Total 237,337.2 281,999.6 195,001.2 142,860.6

ACCUMULATED INVESTMENT IN TEXTILE INDUSTRY 2001
-------------- --
(Information for 2002 is not available yet)

AMOUNT PCT OF
(USD MILLIONS) TOTAL

Honduras 670.1 47.1
U.S 370.2 26.0
Korea 145.5 10.2
Hong Kong 43.8 3.1
Taiwn 55.2 3.9
China 33.8 2.5
Singapore 18.8 1.3
Canada 49.2 3.5
Colombia 2.0 .1
Barbados .1 0.0
Co-investment 32.9 2.3
-------------- -------------- -------------- Total
1,421.6 100.0

Source: BCH. Data published July 2003.

--------------
INTEREST RATES
--------------


19. In 2002, nominal interest rates declined slightly, due
in part to the Central Bank's monetary policy, which
included the elimination of the obligatory investment
requirement to the financial system, providing more
liquidity and resources for the productive sector.


20. In December 2002, the average nominal interest rate in
local currency for new loans was 20.9 percent and for long
term deposits was 12 percent, which represents a reduction
of 1.3 and 2.1 percentage points respectively compared to
the end of 2001 averages.


21. The average nominal interest rates on new operations in
foreign currency - loans and deposits at the end of 2002 -
- were 9.4 percent and 2.6 percent respectively which means
a reduction of 2.5 and 2.1 percentage points compared to the
end of 2001 averages. This decrease is directly related to
the continued reduction of interest rates internationally.

ANNUAL INTEREST RATES -FINANCIAL SYSTEM
--------------
(Weighted averages, local currency)

YEAR LENDING DEPOSIT

1998 30.80 16.00
1999 29.53 15.04
2000 24.67 12.23
2001 23.23 11.76

2002
JAN 23.20 11.44
FEB 23.16 11.36
MAR 23.18 11.35
APR 23.18 11.13
MAY 23.02 11.13
JUN 23.05 11.03
JUL 22.90 10.52
AUG 22.74 10.15
SEP 22.54 10.02
OCT 22.21 9.86
NOV 22.22 9.78
DEC 22.11 9.57

Source: BCH. Data Published July 2003.

--------------
NET DOMESTIC CREDIT
--------------


22. Domestic credit flows of the financial system (private
and public sectors),increased by seven percent with respect
to 2001, closing at Lps. 31.4 billion (USD 1.85 billion).
Credit to the public sector declined by 10 percent, while
loans for the private sector grew by eight percent. In 2002,
the majority of loans from banks to the private sector were
for real estate investments (23 percent),followed by
manufacturing industry (15 percent),domestic trade and
consumption (13 percent),and agriculture and services (10
percent).

NET INTERNAL CREDIT (MILLIONS OF LEMPIRAS)
--------------

2000 2001 2002 PERC. PERC.
CHANGE CHANGE
2001 2002
INT.CREDIT 25,025.9 29,412.2 31,422.6 18.0 7.0
PUBLIC SEC. 11,358.4 -11,395.3 -12,499.8 0.0 -10.0
PRIVATE SEC. 36,384.3 40,807.4 43,922.4 12.0 8.0

--------------
MONEY SUPPLY
--------------


23. Money supply growth in 2002 was 11.3 percent, 1.6
percent less than December of 2001. Local currency
deposits, foreign currency deposits and circulating
currency, increased by 11.9 percent, 11.3 percent and 7.2
percent respectively.

MONETARY AND CREDIT INDICATORS
--------------
(PERCENTAGE GROWTH, DEC. OF EACH YEAR)

2000 2001 2002

DOMESTIC CREDIT 21.8 15.8 5.1
PRIVATE SECTOR 12.2 10.7 6.1
LOCAL CURRENCY 14.7 13.4 6.8
FOREIGN CURRENCY 5.4 2.9 4.0
PUBLIC SECTOR 4.6 0.6 -8.8
CENTRAL GOVERNMENT 20.6 35.6 5.7
REST OF PUBLIC SEC.-21.3 -36.7 -16.1

MONEY SUPPLY 17.1 12.9 11.3
IN LOCAL CURRENCY 16.6 8.3 11.3
CURRENCY 0.4 9.3 7.2
DEPOSITS 19.7 8.1 11.9
IN FOREIGN CURRENCY 18.6 26.3 11.3

MONETARY INDICATORS
--------------
(MILLIONS OF LEMPIRAS, DEC. OF EACH YEAR)

PCT CHG PCT CHG
2000 2001 2002 2001 2002

MONEY (M1) 10,942.9 11,514.8 13,191.6 5.0 15.0
MONEY (M2) 33,482.0 36,314.1 40,444.9 8.0 11.0
MONEY (M3) 43,924.5 50,115.3 56,733.0 14.0 13.0

--------------
EXCHANGE RATE
--------------


24. The annual depreciation of the Lempira with respect to
the dollar in 2002 was 6.3 percent, changing from Lps.
15.9197 to the dollar at the end of 2001 to Lps. 16.9233 to
the dollar at the end of 2002.

ANNUAL AND MONTHLY EXCHANGE RATES
(BANK SELL RATE, LEMPIRAS/USD)
--------------

END OF YEAR ANNUAL
PERIOD AVERAGE DEVALUATION
(PERCENT)

1998 13.92 13.54 5.4
1999 14.66 14.35 5.0
2000 15.31 15.01 4.39
2001 16.05 15.65 5.14
2002 16.92 16.47 6.30

--------------
PUBLIC SECTOR FINANCES
--------------


25. The Central Government fiscal deficit at the end of 2002
was Lps. 5.849 billion (USD 345.7 million),equivalent to
5.4 percent of GDP, lower than the 6 percent observed in

2001.


26. The 2002 central government deficit was mainly financed
through domestic financing (66.2 percent of total) compared
to foreign financing (33.8 percent). Regarding domestic
financing, it is important to point out that most of the
resources were obtained through transfers from Hondutel (the
State-owned telephone company) of Lps. 2.485 billion (USD
146.8 million) equivalent to almost 60 percent of the
required resources. This source of funds is now basically
exhausted.


27. During 2002, tax collection increased to Lps. 17.3
billion (USD 1.021 billion) equivalent to 16.0 percent of
GDP, slightly lower than the 16.2 percent reached in 2001.
Tax income increased by 7.4 percent (in nominal terms) with
respect to 2001, compared to a 10.0 percent increase in

2000. The decrease in tax income occurred primarily in the
first semester of 2002 and was largely counterbalanced in
the second semester as a result of the administrative
measurements adopted by the application of the new law of
Financial Equilibrium approved by Congress in May 2002. Part
of the declines in the first semester were attributed to
falling income from oil taxes due to oil prices and part
from scheduled declines in some import duties as a result of
trade and regional integration agreements.

28. Total expenditures of the Central Government were Lps.
26.773 billion (USD 1.6 billion) which were 4 percent higher
than to 2001, due to the increase of 10.7 percent in current
expenditures and a reduction of 12.6 percent in capital
expenditures. The increase in current expenditures was due
to a 16.7 percent increase in salaries (primarily teachers).
There was a decrease of 4.7 percent in goods and services
expenditures as a result of the measures taken by the
government to control public sector expenditures, and a law
approved by Congress in May 2002 to control expenditures.

CENTRAL GOVERNMENT FINANCIAL ACCOUNT
--------------
(MILLIONS OF LEMPIRAS)

2000 2001 2002*

TOTAL INCOME 16,753.0 19,752.0 20,924.1
CURRENT INCOME 15,861.5 17,981.6 19,785.8
TAX INCOME 14,620.3 16,083.1 17,278.2

CURRENT EXPENDIT. 15,559.0 18,390.4 20,355.7
EXPENDITURES 12,687.3 14,830.3 16,282.4
SALARIES 7,943.0 9,966.0 11,628.1
NET INTERESTS 2,306.4 2,128.9 2,046.9

SAVINGS 302.5 -408.8 -569.9

NET TOTAL EXPENDIT. 21,769.2 25,734.8 26,773.6

SAVINGS (+),DEFICIT (-)
-5,016.2 -5,982.8 -5,849.5

FINANCING 5,016.2 5,982.8 5,849.5
NET FOREIGN FINANCE
2,296.9 3,394.5 1,978.6
NET DOMESTIC FINANCE
2,719.3 2,588.3 3,870.9

(*Preliminary figures)
Source: Ministry of Finance
Exchange rate Dec. 2002 Lps. 16.92 to USD 1.00

--------------
FOREIGN DEBT
--------------


29. Honduras's foreign debt, which is held by the official
sector, Central Bank and private sector (financial and non-
financial) in the year 2002, was USD 4.963 billion, up 3.2
percent (USD 155.7 million) from 2001; mainly due to the
U.S. dollar devaluation with respect to other currencies
that are the components of the baskets of the international
lending institutions, since net flows (reimbursements minus
capital payments) increased only by USD 10.2 million. The
relation of the total debt to the GDP in 2002 was 75.6
percent, very similar to 75.1 percent in 2001.


30. Foreign debt service in 2002 was USD 583.5 million, USD
466.0 million of capital and USD 117.5 million in interest.
In 2002, under the HIPC initiative, Honduras was scheduled
to receive total debt relief of USD 48.8 million. Of this
relief, USD 35.5 million are resources to be used for the
financing of the Poverty Reduction Strategy. Honduras has
not yet reached the HIPC completion point.

HONDURAN FOREIGN DEBT (IN USD MILLIONS)
--------------

TYPE OF CREDITOR PERC. 2000 2001 2002

MULTILATERAL 63.7 3,069.4 3,118.3 3,162.2


BILATERAL 30.0 1,357.1 1,414.6 1,487.5

COMERCIAL 6.3 279.5 275.1 314.0

TOTAL 100.0 4,706.0 4,808.0 4,963.7

TOURISM

31. Tourism is one of the priority sectors for the GOH,
which hopes it will generate a substantial number of jobs
and economic growth. The three project goals are the
Caribbean Creation, a Mayan Route and Nature Adventure.
Each of these projects contain several smaller clusters of
projects. The Caribbean Creation involves encouraging
tourism development in the Bay Islands and the northern
coast of Honduras, focusing on beaches and reefs. The goal
is to increase to one million tourists and USD 500 million
income in foreign exchange. The second project is a
complete Mayan Route from Copan to other archeological sites
and will involve visitors from cruise ships flying to Copan.
The third project is marketing and developing eco-tourism on
the north shore, national parks and in the Copan Ruins area.

TOTAL VISITORS FOREIGN FOREIGN
(THOUSANDS) EXCHANGE EXCHANGE
INCOME OUTFLOW
(USD MILLION) (USD MILLION)

1999 428.1 195.0 94.0
2000 688.4 259.8 106.7
2001 672.0 274.6 156.6
2002 788.1 341.5 N/A

Source: Ministry of Tourism.

PALMER