Foreign Direct Investment in Honduras From a Local View—Part I

Foreign Direct Investment in Honduras From a Local View—Part I
(published by HondurasWeekly.com)

By Wendy Griffin February 2015

Since before the original Liberal Reform in the late 19^th Century in Honduras, the Honduran elite has tried to woo foreign investors to come to Honduras and invest there.  Even before bananas they tried changing Honduran laws to make investments in rubber and coffee attractive to foreigners who were encouraged to relocate to Honduras through favorable policies like free land and rapid Honduran citizenship.

An early attempt  boost to the original growth of San Pedro Sula was the relocating of about 200 white Confederate families from the US South after the US Civil War  with favorable concession terms (half the people on the San Pedro City Council who signed them also had beside their name does not know how to read); however, that was disasterous for the investors as they used all their capital to plant acres and acres of the US species of cotton bushes and local army worms ate the bushes leaving only sticks as far as the eye could see. The cotton native to Honduras, which the Mayas, Lencas, and the Pech Indians used, grew on a tree.

In Trujillo I saw four main types of foreign investment. In addition to the 4 types of foreign investment noted below, Honduras also has a stock market called the Bolsa de Valores Centroamericana, and investing through the Honduran stock market will be covered in a separate article. Large scale land speculation, such as in happening in the Trujillo-Santa Fe area by such companies as Enjoi, Banana Coast, Life Style Developments and others, mostly owned by Canadians, are very new in Honduras and were not legally possible until the passing of law 90-90 under Honduran Nationalist President Callejas, and then the law had to clear the hurdles of legal cases calling the law unconstitutional.  OFRANEH’s claims published in a Honduras This Week article that declaring the 90-90 law constitutional would be like a tsunami for the Honduran Garifunas who are threatened with Model cities or ZEDE in the Puerto Cortes, La Ceiba, Trujillo-Santa Fe, Irionia-Gracias a Dios, and Bay Islands area and the Bay of Tela project near Tela has proved to be true in the intervening decade.

Small Foreign Owned Businesses

The easiest kind of direct foreign investment of foreign individuals to see in Trujillo was the starting small businesses by individual foreigners and they usually started small hotels like Casa Alemania, Casa Kiwi, Tranquility Bay, and Villa Brinkley (recently confiscated by the Honduran government for belonging to the Los Cachiros drug family who had bought it from the Brinkley family), or small restaurant/bars like Rogue’s Gallery, Gringo Bar, and Camille’s Place.

Although the land bought in the Betulia area west of Trujillo where the Crespo family had owned the land, was all torn up and a Four Seasons hotel was supposed to go in there according to the Honduran who was helping them with their permits, that was not built, and the land was reportedly bought by a Mexican drug cartel. With the land on the beach, and the road extended from Trujillo extended to Betulia, it would seem they found other uses for the land more lucrative than actually building and maintaining a hotel there.

Local Hondurans had mixed views about these foreign owned businesses, as they directly competed with bars, restaurants, and hotels owned by Hondurans. The number of local Honduran employees they added were very negligible. In Trujillo there is a high school major known as Hotelería y Turismo (Hotel Management and Tourism), but almost all graduates do not find jobs in these businesses in the Trujillo area. Most hotel owners can manage their hotels themselves with only a cleaning lady and a watchman.  The salaries paid for cooks and waitresses in Trujillo are generally below the official higher minimum wage established under President Manuel Zelaya and barely allow a person to rent a room for themselves and their two or three children and they have difficulty meeting other expenses like food, clothes, school fees and supplies.

Two: Transnational Corporations who Invest in Honduras

Another type of foreign investment are transnational corporations.  United Fruit’s worse nightmare came true. The United Fruit Company literally tore up the railroad tracks of the Truxillo Railroad and took out the bridges in the 1930’ and 1940’s so that their competitor Standard Fruit could not take advantage of the infrastructure. Instead the Honduran government with foreign assistance in the 1970’s built the highway connecting Standard Fruit’s holdings in the Aguan Valley to the port near Trujillo, Puerto Castilla, and with US assistance during the Contra War in the 1980’s made the deep water port at Puerto Castilla a world class container port. Standard Fruit, now owned by Dole, has been the principal user of that port for decades, although Honduran businessman Miguel Facusse also uses it to export palm oil, and recently a Chinese company began exporting iron ore out it.

In Trujillo, there is a whole gated neighborhood within the Garifuna neighborhood of Manuel Bonilla, known as “La Standard” which is where higher up people in Standard Fruit live and then commute to Puerto Castilla. The Puerto Castilla area is infamous for its sandfly problem, not a significant problem in Trujillo itself. La Ceiba which developed almost exclusively as a Standard Fruit town, no longer has an international seaport. The land for the “La Standard” neighborhood was not acquired from the Garifunas, but rather from the late America Hode, a woman of Palestinian descent whose husband became mayor of Trujillo with whom the Garifunas of Trujillo have had a long standing land issues with. Her family still controls many acres of fenced of lands in the increasingly crowded Garifuna neighbors west of the Cristales River.

Standard Fruit also used to control some of the coconut producing beach area west of Trujillo, for coconuts to produce oil for their La Blanquita plant in La Ceiba. Thus they appear as sellers on the deeds of land transfers of the foreigners who now own some of the land between Trujillo and Santa Fe. Standard Fruit’s “La Blanquita” factory and associated margarine, soap, oil, and vegetable shortening products,  have switched to using exclusively or almost exclusively bleached African palm oil, now grown on over 100,000 acres in Honduras.

Besides African palm, and bananas, Standard Fruit also exports pineapples out of Honduras, mostly being produced on lands near the La Ceiba airport. They also hold the license for bottling Coca Cola products in Honduras, have two beer brands sold in Honduras, were the founders of the Honduran bank,  Banco Atlantida, and the milk, milk products and orange juice products in La Ceiba --Leyde .

Standard Fruit is no slouch besides United Fruit’s vertical monopoly model, as Standard Fruit also owns a box making company in La Ceiba to pack the bananas in, they owned a plastic company to make the pesticide laden plastic sheeting which is put around the bananas (same company that makes the plastic bags Honduran milk is sold in), and they have their own shipping line, now marked Dole, which brought in many of the imports to the Trujillo area as well as provided transportation to export their products.   Most of the issues related to the problematic Honduran banana companies are well known. Some good recent books are Peter Chapman's 2007 book "Bananas: How United Fruit Changed the World" and a 2009 book by CMU professor John Solouri "Banana Cultures".

Dr. Solouri's book is especially interesting to people who study the Truxillo Railroad and the mulattos of Honduras because he tells the story of what happened to the mulatto cattle ranchers of Sonaguera when both Standard Fruit and the Truxillo Railroad wanted to open up the Sonaguerea área to intensive banana cultivation. It is an important precautionary tale to those who screw local people to open áreas up to foreign companies, who sometimes a short time later just depart again. Upon Reading the concessions recently given to foreign investors for the new Nicaraguan canal which will go through important lowland forests, disturb north south migrations of rainforest animals, and displace the Rama Indians of Nicaragua, a Costa Rica historian commented, "Didn't they learn anything from the banana company era concessions?"