Honduras is the second largest Central American country. With its extraordinary biodiversity, the nation has built an agricultural sector that is both highly productive and resilient. Despite being a key trading partner for the United States, China, Mexico and other Central American countries, economic uncertainty from government policies and legislation has threatened key trading relationships.

In 2024, the central bank’s tight monetary policy caused major disruption to business operations, which spurred a reluctance in investment spending, mainly from U.S. businesses. “As a result of the Honduran government’s desire to maintain a consistent exchange rate with the dollar, the Central Bank of Honduras has repeatedly used reserves to convert lempiras to keep the economy functioning, drawing down national reserves from more than six months of import coverage to slightly more than four over the course of two years,” reads a U.S. Department of State report.

That same year, Honduras withdrew from The International Centre for Settlement of Investment Disputes (ICSID), the world’s leading institution devoted to international investment dispute settlement. This decision was prompted by alleged procedural mismanagement of the ICSID, the commencement of nine ICSID arbitrations against Honduras since the election of former President Xiomara Castro and additional notices of dispute served on Honduras that have not yet led to arbitration proceedings, according to Impakter. “The Honduran government’s decision to denounce the ICSID Convention was also influenced by the need to avoid international liability and the exhaustion of local remedies, as stipulated by Article 26 of the ICSID Convention,” the report reads.

On Mar. 6, Honduran President Nasry Asfura, signed the ICSID Convention to reverse the 2024 withdrawal and boost investor trust. “By rejoining ICSID, Honduras adopts globally recognized international standards for the resolution of investment disputes. This does not weaken the country; it strengthens it. It places us within the framework of predictability that international markets value and that investors require,” said Asfura during the signing ceremony, per the World Bank Group.

Today, the Honduran economy is experiencing moderate growth with a projected 3.4% to 3.5% growth rate driven by agriculture, manufacturing and remittances. Despite the progress, businesses are still recovering from years of uncertainty. In February, customers paid an average of 25 days beyond terms, according to credit professionals surveyed in FCIB’s Credit and Collections Survey.

Of those trading in Honduras, 67% noted an increase in payment delays, while 33% saw that they stayed the same. All respondents confirmed that payment delays are primarily the result of foreign exchange rates, central bank issues and cultural norms and customs.

To minimize risk exposure, respondents advised knowing your customer, including their culture and any governmental challenges. “Provide bilingual documentation, in English and Spanish, to reduce misunderstandings,” one respondent wrote. “Trade finance tools, such as credit insurance, letters of credit (LCs) or documentary collections, are instrumental when dealing with new or higher-risk customers,” wrote another.