The overall performance of the Honduran economy remained closely tied to banana prices and production from the 1920s until after the mid-century because other forms of commercial export agriculture were slow to emerge.

As a result of the reduction of regional trade barriers and the construction of a high common external tariff, some Honduran manufactured products, such as soaps, sold successfully in other Central American countries.

Although bananas are less subject to the vagaries of international markets than coffee, natural disasters such as Hurricane Fifi in 1974, drought, and disease have appeared with a regular, albeit random, frequency to take their economic toll through severely diminished harvests.

The government's daunting task then became how to create an economic base able to compensate for the withdrawal of much United States assistance without becoming solely dependent on traditional agricultural exports.

Like most of Central America, Honduras in the 1990s began to woo foreign investors, mostly Asian clothing assembly firms, and it held high hopes for revenue to be generated by privatizing national industries.

Honduran president Rafael Leonardo Callejas Romero, elected in November 1989, enjoyed little success in the early part of his administration as he attempted to adhere to a standard economic austerity package prescribed by the International Monetary Fund (IMF) and the World Bank.

However, reaching those goals required policies that moved away from balancing the budget, lowering inflation, and reducing the deficit and external debt to attract investment and stimulate economic growth.

Funds from the multilateral lending institutions, which eventually would help fill the gap left by the reduction of United States aid, were still under negotiation in 1989 and would be conditioned first on payment of arrears on the country's enormous external debt.

Cutting the size of the public sector workforce, lowering the deficit, and enhancing revenues from taxes—as mandated by the multilateral lending institutions—were consistently his biggest stumbling blocks.

Other factors contributing to the job scarcity were limited land, a reluctance on the part of coffee growers to invest while wars destabilized the region, and a lack of credit.

Honduran urban employment in the early 1990s has been characterized by underemployment and marginal informal-sector jobs, as thousands of former agricultural workers and refugees have moved to the cities seeking better lives.

The governments provided most guarantees for loans to a strong but patronage-dominated and somewhat corrupt public sector that included recipients of graft extracted from foreign and domestic investors, and to costly state-developed enterprises.

By 1989 and the election of president Rafael Leonardo Callejas Romero, however, a heavy toll had been taken by regionwide economic recession, civil war in neighboring countries, the drying up of most external credit, and capital flight equaling more than $1.5 billion.

Callejas began to shift economic policy toward privatizing government-owned enterprises, liberalizing trade and tariff regulations, and encouraging increased foreign investment through tax and other incentives.

But the deficit decrease was mostly an accounting device because it resulted from the postponement of external payments to the Paris Club debtors and eventually would be offset by pressure to raise public investment.

Hundreds of small manufacturing firms, the traditional backbone of Honduran enterprise, began to go out of business beginning in the early 1990s, as import costs rose and competition through increasing wages for skilled labor from the mostly Asian-owned assembly industries strengthened.

Asian-owned export assembly firms (maquiladoras), operating mostly in free zones established by the government on the Caribbean coast, attract thousands of job seekers and swell the populations of new city centers such as San Pedro Sula, Tela, and La Ceiba.

As a continuing part of the social pact, and even more as the result of a fierce union-government battle, President Callejas announced in 1991 a 27.8 percent increase over a minimum wage that the government had earlier agreed upon.

In the late 1980s and early 1990s, however, the CGT leadership developed close ties to the National Party of Honduras (Partido Nacional de Honduras—PNH), and several leaders served in the Callejas government.

As a result of favorable weather and market conditions beginning in 1995, however, the agricultural sector grew at a rate of 2.6 percent annually, slightly above the average for Latin America during that period.

These figures are impressive yet reflect production losses suffered by banana producers and the withholding of coffee exports from the market in an effort to fight steep price declines.

While the total value of export merchandise fell in 1990 and 1991 and had still not recovered in 1993 to its 1989 level, the overall agricultural sector output has grown somewhat because of growth in the sale of winter vegetables and shrimp.

Some development experts argue that government protection of corn, bean, and rice production by small farmers is a futile effort in the long-term goal of poverty reduction.

Sales of refrigerated meat were the third or fourth highest source of export earnings in the mid-1980s, but like other Honduran agricultural products, beef yields were among the lowest in Central America.

The dairy industry was further handicapped by the difficulties of trying to transport milk over poor roads in a tropical country, as well as by stiff competition in the domestic market from subsidized foreign imports, mostly from the United States.

Corporate shrimp farmers then began to move their operations farther inland, leaving local shrimpers to contend with diminished natural supplies on the mosquito-infested coast.

Squatters have consistently used land suitable only for forests to grow scantyield food crops; large tracts have been cleared for cattle ranches; and the country has gravely mismanaged its timber resources, focusing far more effort on logging than on forestry management.

Honduran domestic manufacturers also suffered from increased Central American competition resulting from a trade liberalization pact signed in May 1991 by Honduras, El Salvador, and Guatemala.

Foreign tourists are attracted to Honduras by the Mayan ruins in Copán and coral reef skin-diving off the Islas de la Bahía (Bay Islands).

Dole Food Company and Chiquita Brands International together have invested heavily in Honduran industries as diverse as breweries and plastics, cement, soap, cans, and shoes.