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Latin American Economy & Business - September 2013 (ISSN 1741-7430)

HONDURAS: Financial fragility

In February this year, the government of Honduras successfully raised US$500m in its first international bond issue, astutely taking advantage of the (then) strong global investor appetite for emerging markets risk. The central bank has taken steps this year to strengthen the banking system, which is relatively sound, and the government led by President Porfirio Lobo has introduced a new Investment Promotion & Public Debt Rationalisation Law in order to facilitate foreign investment in key sectors such as telecommunications. Nevertheless, the government's finances remain very fragile. Following the scheduled November general elections, et second election since the June 2009 coup, it will be important for the new government that takes office in January 2013, to be seen to be taking steps to achieve a material improvement of its financial position. At the time of writing, the main left-wing candidate Xiomara Castro, wife of the ousted former president Manuel Zelaya (2006-2009), looked to be edging the race over her main rival, Juan Orlando Hernández, Lobo’s former head of congress and effective lieutenant. Like her husband Castro is proposing radical left-wing policy measures that don’t appear to sit well with fiscal probity.

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