Honduras’ Asylum Seeking Recognition
Honduran bonds rallied as a Central American overweight with the IMF inking a 3-year $100 million facility as the new government embraced fiscal and monetary discipline despite dubious law and order progress as child immigrants continued to flee violence and an international beauty contest winner was murdered. GDP growth is forecast at 3 percent next year on US remittance and trade upswing on lower inflation at double that level with fuel price relief. The fiscal deficit should come down to 3 percent as public debt is restrained beneath 50 percent of GDP. The current account gap remains steep at 7.5 percent but an FDI and tourism campaign aims to boost coverage. Guatemala is considered a model with revenue up 5 percent on two million leisure and business arrivals, enabling higher growth through ancillary services and official debt at only 25 percent of output. Panama has kept its status as growth leader but the rate has cooled to 6 percent as public works outlays breach the fiscal responsibility law 2 percent deficit ceiling. Canal earnings rose 5 percent but the expansion is a year behind schedule and larger vessel traffic will not accelerate until 2016. The Dominican Republic’s GDP showing has been similar with remittance and visitor surges and a deal on Petro Caribe debt to Venezuela may be struck at a discount paving the way for further commercial issuance in the absence of an IMF arrangement. Gold exports have provided support after mining rules were clarified and border tensions with Haiti have eased fostering joint ventures. Costa Rica’s new administration has scrambled to regain momentum after a big computer maker closed and a 10 percent currency deppreciation against the dollar, with tax collection and better business climate key priorities. Public debt is in the 60 percent of GDP danger zone and the sovereign rating outlook is stable after investment-grade loss but dedicated buyers await bolder consolidation measures. Negative parallels are drawn with El Salvador with a steeper ratio and party gridlock unable to agree on reforms with the economy operating well under potential. Banks there criticize recent imposition of a transaction tax as upcoming legislative elections are expected to again loosen the purse strings.
In the Caribbean Jamaica’s MSCI index is off 5 percent as it too is in hock to Venezuela’s Petro Caribe within the 130 percent debt/GDP ratio. The IMF program is broadly on target but growth is just over 1 percent on flat tourism performance. International reserves jumped to $2 billion after an $800 million bond placement but the current account gap may again approach 10 percent of output without sizable direct investment gains to cover it. Barbados continues to dodge the Fund’s grip with last-gasp budget adjustments but debt is stuck at 100 percent of GDP on near recession. Local banks, insurers and pension funds must fill the hole as regional players seek other island havens.
