60% of Public Investment in Honduras Depends on International Cooperation: Julio Raudales

by | Jan 24, 2025 | FDI Latin America

Honduran economist Julio Raudales recently described Foreign Minister Enrique Reina’s statements as “careless.” Reina claimed that the temporary suspension of U.S. cooperation affects the private sector and NGOs more than the central government. Raudales emphasized that international resources finance 60% of Public Investment in Honduras.

“What the Foreign Minister said is careless and shows how little understanding some officials have about crucial aspects of the country,” Raudales stated. The former president of the Honduran College of Economists (CHE) highlighted the importance of external resources allocated to projects that drive national development.

“This is such an important issue for the country that 60% of our public investment program is funded by international cooperation,” Raudales said, referencing institutions such as the World Bank (WB), the Inter-American Development Bank (IDB), the Central American Bank for Economic Integration (CABEI), the European Union, and now the Development Bank of Latin America and the Caribbean (CAF). These resources are vital for sustaining public investment in Honduras and ensuring key infrastructure and development programs remain viable.

Raudales also criticized the decision to transfer the management of international cooperation from the Ministry of Planning to the Ministry of Foreign Affairs, a change made during the 2014–2022 administrations under former President Juan Orlando Hernández. “There was an institutional breakdown in the management of cooperation,” he said, recalling that since the 1960s, cooperation programs had been managed by the Superior Council of Economic Planning (Consuplane), later by the Ministry of Planning (Seplan), and in the 1990s by the Technical Secretariat for International Cooperation (Setco).

Now, with the Ministry of Foreign Affairs in charge, Raudales argues, “international cooperation has become a matter of bureaucracy rather than understanding the country’s development process within the framework of international cooperation. We must pragmatically accept that many of our development programs are funded by international resources,” he insisted. These resources play a fundamental role in Public Investment in Honduras, allowing the country to achieve progress in areas it otherwise could not finance.

He added that in large countries like Spain, Germany, Canada, and the United States, international cooperation is managed through foreign ministries because it is considered a policy tool. However, in Honduras, it is more of a development tool.

Fostering Dialogue with the U.S.

For her part, Lidia Fromm, former Director General of International Cooperation, said the government must establish an open dialogue with the United States, understanding that the country will review its cooperation commitments over the next 90 days.

“It’s important to consider who the Secretary of State is—Marco Rubio, the son of Cuban migrants—and I believe there is an opportunity for us, as Latin Americans and as a U.S. ally, to send messages and reach agreements that benefit us as a nation,” she said.

Fromm stressed that the impact of the U.S. pause in cooperation with countries like Honduras should not be minimized, as it ultimately affects not only NGOs and the private sector but also the beneficiaries of their programs and public sectors.

“A key feature of U.S. cooperation is its significant work with municipalities, which is commendable since it’s uncommon. If we lose that cooperation, municipalities will also be affected,” she pointed out. The loss of such cooperation would have a cascading effect on Public Investment in Honduras, particularly at the local level.

Consequences of Foreign Aid Suspension

Amparo Canales, former president of the CHE, emphasized that U.S. cooperation complements state actions in various areas, meaning that the beneficiaries of these projects will also be negatively affected.

Canales also recalled that during Donald Trump’s first term, several important projects were canceled, such as those related to climate change and the Governance in Ecosystems, Livelihoods, and Water (GEMA) project. Such suspensions highlight the precarious reliance of Public Investment in Honduras on external funding.

Analyzing the Impact of Cooperation

Ricardo Matamoros, Director of scientific research at the National Autonomous University of Honduras (UNAH), also emphasized that the country’s international resources complement its efforts to lead projects and advance its development agenda. However, interpreting Foreign Minister Enrique Reina’s statements, Matamoros suggested that the minister might have meant that the three-month suspension of U.S. cooperation has a minimal impact on the central government but is more significant for assistance to other sectors of the country.

Matamoros further noted the need to analyze the long-term impact of foreign cooperation, adding that this is not the first time the U.S. and other donor countries have suspended aid to Honduras. This dependency underscores the critical relationship between foreign aid and Public Investment in Honduras, directly influencing the nation’s development trajectory.

According to Foreign Minister Enrique Reina, U.S. cooperation over the last four years amounted to approximately $700 million, most of which was channeled through NGOs and the private sector.

Conclusion

In conclusion, Honduras’s development relies heavily on international cooperation, which funds 60% of public investment in Honduras. The suspension of U.S. aid poses significant risks to municipalities, NGOs, and public programs critical for the country’s progress. While government officials debate the immediate impact of such measures, experts agree that losing these resources will have long-term implications on Public Investment in Honduras and the overall well-being of its citizens. Reassessing institutional management and fostering diplomatic relations with donor nations remain crucial for ensuring continued development funding.