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Miami-Honduras Annual Report: No. 6 trade partner- Apparel dominates exchange

July 27th, 2006

Free trade pact and U.S. aid could boost business with Honduras.

Although Honduras is working on ways to diversify its economy, apparel continues to dominate the country’s $3.5 billion trade exchange with South Florida, playing a role in both imports and exports.

In 2005, South Florida imported $1.8 billion-worth of goods from the Central American country, mostly articles of clothing assembled at Honduran maquiladoras. Among the Top 10 list of Miami imports, seven were apparel commodities. The non-apparel imports were insulated wire, gold bars and seafood.

During the same 12 months, South Florida exported some $1.6 billion-worth of products to Honduras, a jump of nearly 3 percent from the year before. Eight of the Top 10 commodities in the export roster were apparel industry related, led by nearly $240 million-worth of cotton.

Among South Florida imports from Honduras, T-shirts, sweaters, men’s suits and men’s shirts were the five most valuable commodities. In T-shirts alone, the Miami Customs District took in nearly $409 million in shipments, down slightly from the $412 million-worth imported in 2004.

Apparel may be a sure thing in the commodity exchange, but shipments of wires and cables were what rose the most. Those shipments skyrocketed, jumping to $100.5 million in 2005, compared to less than $11 million in 2004.

Lear Corp. has wire harness plants in five Honduran communities: Santa Barbara, Copn, Esperanza, Cortz and Lempira. Wire harnesses are electrical systems for cars, trucks and trailers. In most cases, the final destination of the harnesses is not Florida but auto plants in Michigan. Additionally, in 2004, Lear and Hyundai joined forces and created the Lear Kyunshin company that opened in San Pedro Sula and is expected to eventually employ 3,500 workers.

Gold imports from Honduras, meanwhile, plunged 14 percent to $64 million while imports of lobster, shrimp and farmed shrimp closed in on the $52 million mark, for a gain of nearly 4 percent. Imports of fish fillets also rose a dramatic 74 percent to close the year at $41 million. Cigar imports were also up, increasing 40 percent to total nearly $37 million, but imports of bananas, which are the country’s top agricultural product, fell 9 percent to $26.5 million.

Apart from textile-related commodities, the United States exported nearly $29 million in in computer parts to the Central American country, up 11 percent when compared with a year earlier. In addition, $27 million in insulated wire exports represented a 7.4 percent increase from 2004 while computer exports jumped 26 percent to surpass $24 million.

In addition to the Central American Free Trade Agreement, the United States is banking that Honduras’ economy can benefit from initiatives like the Millennium Challenge, which seeks to reduce proverty and promote economic growth among poor countries in the region. Honduras’ ambassador to the United States, Roberto Flores Bermdez, said the Millenium Challenge will provide resources for infrastructure and agricultural projects. In May 2005, for example, Honduras received $215 million for farming and road construction.

One of the infrastructure project is being done in conjunction with neighboring El Salvador. That is the 300-mile-long and four-lane-wide Canal Seco highway linking Puerto Cortes on the Atlantic Ocean with Puerto Cutuco in El Salvador. Puerto Cortes is Honduras’s biggest port and the only deepwater port in Central America.

Bermudez said the highway could ease the backlog at the Panama Canal and boost business with Florida ports.

Miami economist Manuel Lasaga said CAFTA will push Honduras to embrace global business standards. That includes the protection of copyright and patents and the use of internationalize abitration to settle business disputes. He said the result will make Honduras a more appealing investment target, and multinationals may turn to the country to develop assembly-type operations. Currently, 40 percent of all foreign investment in the country is from the United States.

The agricultural sector, especially chicken farmers, has opposed the free trade agreement, fearing it would be unable to compete against U.S. companies. The United States is one of the biggest poultry exporters in the world. Small business and producers of consumer goods also fear an influx of U.S. goods.

Although trade is important to Honduras, its relationship with the United States is also heavily dependent upon the remittances sent to the Central American country by expatriate Hondurans in the United States. Last year, $1.4 billion in remittances were sent to the country.