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View of Tegucigalpa, Honduras, from a rooftop. View of Tegucigalpa, Honduras, March 25, 2014 (Flickr photo by Nan Palmero, CC BY 2.0).

Why Honduras Remains Latin America’s Most Unequal Country

Friday, Jan. 6, 2017

Editor’s note: This article is part of an ongoing WPR series on income inequality and poverty reduction in various countries around the world.

Honduras is the most unequal country in Latin America and the sixth most unequal country in the world, according to World Bank statistics. The poverty rate currently stands at 64.5 percent, while 42.6 percent of Hondurans live in extreme poverty. In an email interview, Jake Johnston, a research associate at the Center for Economic and Policy Research, discusses income inequality and poverty in Honduras.

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WPR: What is the rate of income inequality in Honduras, what are the latest trends in terms of widening or lessening inequality, and what are the main factors driving income inequality?

Jake Johnston: Inequality, as measured by the Gini coefficient—a ratio of income distribution within a country where 0 represents perfect equality and 1 perfect inequality—had been experiencing a steady decline when, in 2009, President Manuel Zelaya was ousted in a military coup. In the years that followed, those gains were quickly erased. By 2013, that trend appeared to have turned around, and the Gini coefficient began decreasing, but more recent information suggests another reversal. While the most recent data on the Gini coefficient is only from 2014, household per capita income data from Honduras shows big gains for the richest segment of the country in 2016. The top 20 percent saw their incomes increase by more than 8 percent, while those in the bottom 20 percent saw a decrease of 7.4 percent.

There are myriad factors that drive inequality, but there is little question that the government’s austerity efforts over the past years have contributed to the problem. As part of an economic reform program supported by the International Monetary Fund, the Honduran government significantly cut spending in 2014 and 2015. Though the program does call for a floor on social spending, at just 1.6 percent of gross domestic product, it’s far too low given the immense needs of the population. Further, a regressive tax reform implemented in late 2013 certainly impacted those on the bottom end of the income spectrum.

WPR: What are the political and socio-economic implications of income inequality and poverty in Honduras?

Johnston: Honduras remains one of the poorest and most unequal countries in Latin America, and also one of the most violent. With economic doors closed, many of the poorest and most excluded in society have turned to crime, while many more have simply left the country, seeking opportunity elsewhere. This vicious cycle of poverty, exclusion, violence and migration will no doubt have political implications. Hondurans are likely to demand a government more responsive to their needs that will begin to address the deep economic inequalities that have plagued the country for decades.

WPR: What policy measures are in place to address inequality and poverty in Honduras, how have they evolved recently, and how important of an issue is income inequality to politicians and the general public?

Johnston: In theory, there are conditional cash transfer programs and a basic social safety net; however, in practice these programs have done little to alleviate suffering at the bottom end of the income spectrum. In fact, under President Juan Orlando Hernandez, fiscal austerity has actually led to cuts in other key social spending categories. While the government has spent lavishly on military and police forces embroiled in human rights abuse allegations, the poorest appear to largely have been forgotten. Zelaya, who was one of the few presidents who took concrete measures to lift up the most vulnerable and oversaw a massive increase in the minimum wage, was overthrown by the military with the support of the country's political and economic elite in 2009.

Widespread repression of human rights activists, environmental and indigenous rights leaders, and others who represent the most excluded and poorest segments of society indicates the level of interest the current Honduran government has shown toward addressing the country’s fundamental economic inequities. Unfortunately, internationally backed development initiatives such as the Alliance for Prosperity appear to simply reinforce the economic model that has produced such profound inequality.

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