Honduras inclusive growth diagnostic
- Published by
- USAID
This diagnostic applies the Hausmann-Rodrik-Velasco (HRV) growth diagnostic methodology - drawing on national and international datasets and two stakeholder workshops - to identify what is constraining private investment and inclusive growth in Honduras.
Three binding constraints are identified: low human capital, a burdensome regulatory environment and crime and insecurity.
On human capital, low educational attainment and rising underemployment coexist with the highest returns to schooling of any comparator country, signalling acute undersupply of skilled workers.
On regulation, complex tax administration, opaque customs procedures and a large informal sector impose heavy costs on formal firms.
On crime, direct security costs equal 11.7 per cent of sales and violence levies an estimated 13 per cent of GDP.
The underlying syndrome across all three is inadequate public service delivery: poor public-private coordination, weak accountability and limited political will for reform. High emigration and remittance dependence reinforce a self-reinforcing low-growth equilibrium.
Recommendations cover education reform, government digitisation and improved transparency.