HONDURAS: THE IMPACT OF COVID-19 AND OTHER SHOCKS, AND POLICY IMPLICATIONS FINAL REPORT Eugenio Díaz-Bonilla, Luis Flores, Valeria Piñeiro, y Miriam Centurión WORKING PAPER 29 JUNE 2022 CONTENTS (TOC Heading, 14pt) 1. INTRODUCTION ............................................................................................................................... 1 2. POLICY RESPONSES ...................................................................................................................... 1 2.1. General legal framework and governance ................................................................................. 2 2.2. Policy responses related to health aspects................................................................................ 3 2.3. Policy responses related to safety nets ................................................................................... 10 2.4. Policy responses related to production and employment ......................................................... 11 2.5. Costs and Financing ............................................................................................................... 14 3. EVOLUTION OF THE PANDEMIC .................................................................................................. 16 4. ECONOMIC AND SOCIAL CONDITIONS ....................................................................................... 19 4.1. Background ............................................................................................................................. 19 4.2. GDP growth ............................................................................................................................ 19 4.3. Inflation ................................................................................................................................... 22 4.4. Poverty and malnutrition .......................................................................................................... 25 5. SOME CONSIDERATIONS ABOUT THE RUSSIA-UKRAINE CONFLICT (RUC) .......................... 27 6. SUMMARY ANALYSIS OF KEY FOOD VALUE CHAINS ............................................................... 33 6.1. Corn/maize .............................................................................................................................. 35 6.2. Red beans............................................................................................................................... 40 6.3. Poultry meat and eggs ............................................................................................................ 42 6.4. Wheat ..................................................................................................................................... 45 6.5. Sugar ...................................................................................................................................... 48 6.6 Bovine meat ............................................................................................................................. 50 6.7. Some reflections about the operation of the selected value chains during the first year of the pandemic (2020) ............................................................................................................................ 53 6.8. Further considerations about the operation of the selected value chains in 2021 and early 2022. ...................................................................................................................................................... 55 6.9. Final comments ....................................................................................................................... 57 7. POLICY CONSIDERATIONS .......................................................................................................... 58 7.1 Health Issues ........................................................................................................................... 58 7.2 Poverty, Nutrition, and Social Protection .................................................................................. 59 7.3. Food value chains ................................................................................................................... 73 8. MACROECONOMIC AND FISCAL POLICY CONSIDERATIONS .................................................. 81 8.1. General considerations ........................................................................................................... 81 8.2. How can those programs be financed? .................................................................................. 82 9. CONCLUSIONS .............................................................................................................................. 88 ANNEXES ........................................................................................................................................... 93 Annex A ......................................................................................................................................... 93 Annex B ......................................................................................................................................... 95 Annex C ........................................................................................................................................... 1 About the Authors ............................................................................................................................... 1 Acknowledgments ............................................................................................................................... 1 References ........................................................................................................................................... 1 TABLES Table 1. Fiscal Expenditures for COVID-19 (% GDP) ....................................................................... 15 Table 2. GDP growth (2019-2023) ...................................................................................................... 19 Table 3. Growth rate: Index of economic activity (January 2010-April 2022) ................................ 21 Table 4. Monthly annualized inflation for products of the basic food consumption basket (average price January-May 2022 compared to January-May 2021) .............................................. 23 Table 5. Honduras: Population below poverty of line of 5.5 PPP dollars/capita/day .................... 26 Table 6. Estimate of the impact of prices on exports and imports ................................................. 32 Table 7. Products analyzed (average 2015-2019) ............................................................................ 33 Table 8. White maize .......................................................................................................................... 36 Table 9. Red dry bean value chain .................................................................................................... 40 Table 10. Poultry meat and eggs value chain .................................................................................. 43 Table 11. Wheat .................................................................................................................................. 46 Table 12. Sugar .................................................................................................................................. 48 Table 13. Bovine Meat ....................................................................................................................... 51 Table 14. Poverty and Nutrition Indicators ...................................................................................... 60 Table 15. Coverage of Social Assistance Programs ....................................................................... 62 Table 16. Adequacy of Social Assistance ........................................................................................ 63 Table 17. Impacts of social assistance programs on poverty and inequality ................................ 64 Table 18. Honduras: Social Protection and Labor Programs: Average per capita transfer (daily PPP$/person) ..................................................................................................................................... 67 Table 19. Honduras Suggestions On Possible Policy Responses And Investments To Address Current Problems .............................................................................................................................. 74 Table 20. Public expenditures in R&D as percentage of agricultural GDP (average 2010s) ......... 76 Table 21. Agriculture Orientation Index-Share of Government Expenditure ................................. 78 Table 22. Agriculture Orientation Index- Agriculture Share of Total Credit ................................... 79 Table 23. Fiscal and Debt Indicators (% of GDP) ............................................................................. 82 Table 24. Percentage of Benefits for Higher Quintiles .................................................................... 83 Table 25. Fossil Fuel Subsidies ........................................................................................................ 84 Table 26. Costs as Percentage of the GDP ...................................................................................... 85 Table 27. Importance of Crime for the Operations of Private Firms ............................................... 86 Table 28. Net Development Flows (million USD) (annual average 2015-2020) .............................. 87 CHARTS Chart 1. Stringency Index-Honduras .................................................................................................. 4 Chart 2. Changes in Mobility (Percentage from Baseline) ................................................................ 5 Chart 3. Share of people with dose of the COVID-19 vaccine per 100 people ................................. 9 Chart 4. Daily Evolution of Cases Related to COVID-19 .................................................................. 16 Chart 5.Cumulative Value of Cases Related to COVID-19 ............................................................... 16 Chart 6.Daily Evolution of Deaths Related to COVID-19 ................................................................. 17 Chart 7. Cumulative Value of Deaths Related to COVID-19 ............................................................ 17 Chart 8. Deaths per 100,000 Population ........................................................................................... 18 Chart 9. Daily deaths per million people .......................................................................................... 18 Chart 10. Index of Economic Activity (January 2010-April 2022) ................................................... 20 Chart 11. Inflation (monthly annualized values %) .......................................................................... 22 Chart 12. Nominal Exchange Rate (Lempiras/US dollar) and Real Exchange Rate (index) .......... 24 Chart 13. Honduras, Extreme Poverty (millions of people) ............................................................. 25 Chart 14. Global market share, key products 2018-2020 ................................................................ 27 Chart 15. Food and Fertilizer Indices (adjusted by US$ dollar inflation) ....................................... 29 Chart 16. One and Two-year Inflation: Food .................................................................................... 30 Chart 17. One and Two-year Inflation: Fertilizer .............................................................................. 30 Chart 18. Wheat: Inflation-adjusted price and 2-year inflation ....................................................... 31 Chart 19. Maize and Products: Imports as % of Domestic Consumption ...................................... 35 Chart 20. Price of Food Corn and Products ..................................................................................... 38 Chart 21. Ratio Corn price / Fertilizers Cost .................................................................................... 39 Chart 22. Ratio Corn Price/Oil price ................................................................................................. 39 Chart 23. Beans: Imports as % of Domestic Production ................................................................. 40 Chart 24. Price of Red Beans ............................................................................................................ 41 Chart 25. Poultry Imports as % of Domestic Consumption ............................................................ 42 Chart 26. Price of Poultry and Eggs ................................................................................................. 44 Chart 27. Ratio Poultry Price/Corn Price .......................................................................................... 45 Chart 28. Imports of Wheat and Wheat Products as % of Domestic Consumption ...................... 46 Chart 29. Price of Bread .................................................................................................................... 47 Chart 30. Imports of Sugar and Products as % of Domestic Consumption ................................... 48 Chart 31. Price of White Sugar .......................................................................................................... 49 Chart 32. Ratio of Sugar Price/Fertilizers Prices ............................................................................. 50 Chart 33. Imports of Bovine Meat as % of Domestic Consumption ............................................... 50 Chart 34. Price of Bovine Meat ......................................................................................................... 52 Chart 35. Ratio Palm Oil Price/ Fertilizer Price ................................................................................ 55 Chart 36. Ratio Banana Price/Fertilizer Price ................................................................................... 56 Chart 37. Coffee Price/Fertilizers’ Price ........................................................................................... 56 Chart 38. Social Assistance Expenditures (% GDP) ........................................................................ 61 Chart 39. Honduras: Distribution of Beneficiaries and Benefits of Social Assistance Programs (by quintiles; 2017) ............................................................................................................................ 65 Chart 40. Honduras: Incidence in beneficiaries and benefits in Cash Transfers .......................... 66 Chart 41. Public spending on social assistance programs ............................................................ 66 Chart 42. A Broader Framework for Social Assistance and Inclusions Programs ........................ 72 Chart 43. Agriculture Public Expenditure ........................................................................................ 77 Chart 44. Banking Credit ................................................................................................................... 79 BOXES Box 1. Health Measures ....................................................................................................................... 6 1 1. INTRODUCTION Two previous reports (Díaz Bonilla, Laborde and Piñeiro, 2021, and Diaz-Bonilla, Flores, Paz, Piñeiro, and Zandstra, 2021) covered the evolution and impacts of the pandemic on food systems in Honduras until the time of their writings (which together cover from the start of the pandemic in early 2020 until October 2021). This third report concludes the assessment of the impact of the COVID-19 pandemic on food systems in Honduras, recapitulating the previous ones and updating the analysis until the end of May 2022. This country and its food systems, however, have been also affected by other events since the pandemic started in early 2020, such as the tropical storms Eta and Iota in November 2020. Subse- quently, in 2021 the strong world economic rebound due to expansionary fiscal and monetary policies in the USA and other countries, generated strains on value chains, leading to increases in transporta- tion costs and the prices of food, energy and fertilizers. In the case of agricultural products, those in- creases were compounded by adverse climate events in some important producing areas, particularly in South America. Finally, the Russian-Ukraine Conflict (RUC) on February 24, 2022, has added further pressures on prices of energy, fertilizers, and some food products (such as wheat and vegetable oils). Therefore, the specific impact of the pandemic on food systems in Honduras has been interacting with the other developments mentioned. From the point of view of policymakers, they need to respond to the overall impact of the conditions affecting the population, whatever the converging main causes may be. Therefore, this final report, while emphasizing those aspects linked to the pandemic will also discuss the overall conditions in Honduras, affected by those many factors. This report is structured as follows. First, it summarizes the main policy responses, costs, and financing related to the COVID-19 shock. Second, it brings up to date the evolution of the pandemic, using differ- ent indicators. Third, it updates the evolution of key economic and nutritional variables. Fourth, there is a brief discussion of the implications of RUC for food systems. Fifth, the report continues with a more specific analysis of the evolution of some food value chains that are central to food consumption in Honduras. The next section discusses policy considerations for health, poverty and nutrition, and food value chains, in light of the updated analysis. A final section concludes. 2. POLICY RESPONSES Due to the global pandemic generated by COVID-19 the government of Honduras declared a “state of emergency” in February 2020 (“Estado de Emergencia en el Territorio Nacional a través del Decreto Ejecutivo Número PCM- 005-2020, 10 de febrero 2020). The country suffered the first confirmed COVID-19 case on March 12, 2020. The first death was registered on March 26, 2020. 2 The Government of Honduras (GoH) took a series of measures, which are presented here and orga- nized in four groups: 1.The general legal and organizational framework to confront the pandemics 2. Policies and interventions that address the health problems 3. Policies and interventions that sustain incomes and demand through social safety nets 4. Policies and interventions that operate on the supply side, focusing on production and employment They were covered in a previous report up until about October 2021. Here is a brief recap and update until the end of May 2022. 2.1. General legal framework and governance A basic requisite to confront the pandemic is to have a general legal framework for the needed policies and interventions to be defined, and a coordinating mechanism for decision-making and implementa- tion. State of Emergency As noted, the government declared the “state of emergency” relatively early on February 10, 2020. It was considerably wide in the coverage, suspending work, in the Public and Private Sector; prohibiting “events of all types and numbers of people are prohibited;” suspending the operation of public transport; suspending as well face-to-face religious celebrations; prohibiting the operation of busi- nesses including shopping centers; and closing “all air, land and sea borders in the national territory.” But at the same time, there was a large list of exceptions, as noted in previous reports. The combina- tion of strict policies but also with many exceptions and perhaps lax enforcement produced mixed re- sults. Central coordination Honduras has an emergency management system, called Sistema Nacional de Gestión de Riesgo (SINAGER), which operates as a coordinating mechanism within the public sector. On May 16, 2020, the Council of Ministers approved the Decree PCM-045-2020 that established a mul- tisectoral body integrated by the private sector, civil society, churches, academia, maquiladoras, farm- ers, and the Government, with the task of advising SINAGER about the process of opening and reac- tivating the economy. 3 2.2. Policy responses related to health aspects Health-related policies were initially discussed in three main categories: a) those designed to prevent or reduce contagions; b) those designed to track and isolate existing cases; and c) those designed to treat the sick. Later, with the development of vaccines, a fourth category of policies was included: the ad- vances in the vaccination program. Policies to prevent or reduce contagions As noted, the government of Honduras implemented a series of measures that basically closed the economy on March 16, 2020, with only essential services allowed to operate, and access to retail gro- cery stores was restricted to certain hours and depending on the day and the last digits of the docu- ment of identification. Since April and May 2020, the government started a process of re-opening some other activities includ- ing hardware stores, maquila activities, restaurants with delivery services, construction (depending on the priority of projects), and some government services. But some of these authorizations were re- versed during June 2020, due to increases in cases. Then around mid-2020, the opening of the economy would work according to a plan that divided the country into three regions, which need not to be contiguous, based on the number of confirmed cases and population sizes in the municipalities included in each region. The regions with municipalities with the fewest cases were supposed to implement a three-phase reopening (with 60 percent of workers re- turning to their jobs), while the region with most cases had implemented five phases (starting with 20 percent workers returning). The country started Phase 1 in late July (except for some municipalities that remained in Phase 0 due to high rates of incidence of COVID-19), but there have been returns to previous phases, depending on the evolution of the pandemic. The two main cities (Tegucigalpa and San Pedro de Sula) were the ones with the most restrictions. In August 2020 the government reopened national frontiers (with people entering the country having to present negative Covid test results), and in October 2020, restrictions on freedom of movement were largely lifted and the duration of the nighttime curfew was reduced. However, the national state of emer- gency remained in place for a longer time. The night-time curfew was extended in some regions in No- vember after tropical storms Eta and Iota, and since January, because of some surge in Covid cases. 4 The lifting of restrictions in August 2020 and then in early 2022 can be appreciated visually using the “stringency index” calculated by the Blavatnik School of Government of Oxford University (Chart 1).1 The chart compares the value of the index for Honduras with the median of values in the database for LAC countries and for the world. Honduras seems to have been applying stricter controls to movements and activities compared to the median of the world and LAC, even after the relaxation of measures in August 2020 and until the further relaxation in early 2022. Then the stringency index dropped below the world and LAC. But because the comparators have been also reducing their restrictions, in May 2022 Honduras was in between the stringency indices of the LAC and the world. However, the data on mobility discussed below paints a somewhat different view of the real application of those controls. Chart 1. Stringency Index-Honduras Source: authors using Oxford University “stringency index” The impact on mobility (and therefore on economic activity) of these restrictions can be seen in Chart 2. 1 See the project by Oxford University “COVID-19 GOVERNMENT RESPONSE TRACKER” https://www.bsg.ox.ac.uk/research/research-projects/covid-19-government-response-tracker. The indicators in- cluded in the index include a) closings of schools and universities; b) closings of workplaces; c) canceling of pub- lic events; d) restrictions on gatherings (by the number of people involved); e) closing of public transport; f) stay at home requirements; g) restrictions on internal movements; and h) restrictions on international travel. 0 20 40 60 80 100 120 1/1/20 5/1/20 9/1/20 1/1/21 5/1/21 9/1/21 1/1/22 5/1/22 Stringency Index-Honduras Honduras LAC-Median World Median 5 Chart 2. Changes in Mobility (Percentage from Baseline) Source: Google COVID-19 Community Mobility Reports The data tracks mobility trends and compares them with pre-pandemic values for six categories of ac- tivities “Retail and recreation” (places like restaurants, cafes, shopping centers, theme parks, muse- ums, libraries, and movie theaters); “Grocery and pharmacy” (places like grocery markets, food ware- houses, farmers markets, specialty food shops, drug stores, and pharmacies); “Parks” (places like na- tional parks, public beaches, marinas, dog parks, plazas, and public gardens); “Transit stations” (places like public transport hubs such as subway, bus, and train stations); “Workplaces” (mobility trends for places of work); and “Residential” (mobility trends for places of residence) (see details in https://sup- port.google.com/covid19-mobility/answer/9825414?hl=en). It shows mobility compared to the previous period without COVID-19. Negative, zero, or positive values indicate that mobility for the category con- sidered was below, equal, or above, respectively, compared to the levels of the equivalent time of the year before the pandemic. Chart 2 shows the daily values of those indicators, starting with February 2020 and ending in May 2022, with the last data reported at the time of writing this report. In February 2020, when no measures of containment were in place, it is clear there were no visible changes with respect to the baseline mo- bility. In March and April, however, there was a large drop in mobility, in line with the strict lockdown conditions. Over time, and notwithstanding the continuation of apparently strict controls on mobility (as measured by the “stringency index” shown before), people started to circulate more, particularly for gro- ceries and pharmacy in general, and for the other indices around the time of end-of-year festivities in -100 -80 -60 -40 -20 0 20 40 60 80 2/ 17 /2 02 0 3/ 17 /2 02 0 4/ 17 /2 02 0 5/ 17 /2 02 0 6/ 17 /2 02 0 7/ 17 /2 02 0 8/ 17 /2 02 0 9/ 17 /2 02 0 10 /1 7/ 20 20 11 /1 7/ 20 20 12 /1 7/ 20 20 1/ 17 /2 02 1 2/ 17 /2 02 1 3/ 17 /2 02 1 4/ 17 /2 02 1 5/ 17 /2 02 1 6/ 17 /2 02 1 7/ 17 /2 02 1 8/ 17 /2 02 1 9/ 17 /2 02 1 10 /1 7/ 20 21 11 /1 7/ 20 21 12 /1 7/ 20 21 1/ 17 /2 02 2 2/ 17 /2 02 2 3/ 17 /2 02 2 4/ 17 /2 02 2 Honduras: Mobility Retail and recreation Grocery and pharmacy Residential Transit stations Parks Workplaces 6 2020. The index for groceries and pharmacy moved above pre-pandemic levels in the first quarter of 2021 and by late 2021, all indices were above the levels before COVID-19. Policies designed to track and isolate existing cases Policies about testing are usually classified into four levels: a) No testing policy; b) Only to those who (1) have symptoms and also (2) meet specific criteria (e.g., key workers, admitted to hospital, came into contact with a known case, returned from overseas); c) Testing of anyone showing COVID-19 symp- toms; d) Open public testing (e.g., “drive-through” testing available to asymptomatic people). Honduras during 2020 was in the b) category (Hale, Webster, Petherick, Phillips, and Kira (2020)). The availability of tests increased in 2021, but there was no data on the number of tests to be able to compare Hondu- ras with the LAC and the world. Policies designed to treat the sick. The government took in 2020 a series to measures to strengthen health services as shown in Box 1 (from IFPRI Policy Tracker). Box 1. Health Measures Financial support for health sector 3/23/2020 The Honduran Government has estimated an invest- ment of 25 million dollars to face the national emer- gency, aimed at reinforcing health personnel, medical supplies, and construction of 90 hospitals. Financial support for health sector 7/27/2020 The Government, through the Ministry of Health, will make a disbursement of 12 million lempiras to the Ga- briela Alvarado Hospital for its strengthening and thus provide a greater response to the demands of medical personnel and patients. Financial support for health sector 7/27/2020 Government Delivers 2 million Lempiras In Medical Sup- plies And "MAIZ" treatments for Hospital Gabriela Al- varado. MAIZ is the government treatment of treating those with moderate COVID-19 symptoms with an ex- perimental combination of microdacyn, azithromycin, ivermectin, and zinc. Financial support for health sector 7/27/2020 Five million lempiras will be delivered to the El Paraíso health region to further strengthen the health centers, as well as the acquisition of medicines, oxygen and medical supplies, the hiring of medical personnel and the assem- bly of the two triage centers in Danlí. 7 Financial support for health sector 8/7/2020 The Government has transferred more than 8 million lempiras to the mayor's office of Cedros to address the pandemic Mayor’s Office of Cedros to Attend The Pan- demic. Financial support for health sector 8/7/2020 Fuerza Honduras in the department of Olancho begins with an investment of 29,489,179.50 lempiras, distrib- uted in its 23 municipalities to open triages, hire medical personnel, biosecurity equipment, oxygen, stretchers, beds, tests, medical brigades. Health information dis- semination 3/19/2020 TIGO and CLARO will allow, for a period of 30 days, the more than 7 million users free of charge, access to navi- gate on those platforms enabled by the Government of Honduras to be informed about the evolution of COVID- 19. Health information dis- semination 4/10/2020 Transparency portal with COVID-19 information; there will be a Citizen's Accountability module. Hiring more healthcare workers 4/20/2020 Cuban doctors and nurses arrive to assist Honduran col- leagues. Importation of test kits 3/18/2020 Received reagent for 4,200 COVID tests. Importation of test kits 3/18/2020 Received 90 phlegm suction machines. Importation of test kits 5/5/2020 International Organization for Migration, working with USAID, delivered 15,000 COVID-19 tests to Honduras. Importation of ventila- tors 3/18/2020 Received 140 ventilators from Government of New York. Importation of ventila- tors 4/14/2020 Purchased 130 ventilators, 90 respirators and 90 me- chanical phlegm suckers from Partners Medical Sup- plies, Inc., in the United States, and delivered to the Min- istry of Health for distribution based on the priorities of the emergency. Importation of ventila- tors 7/3/2020 The Mario Catarino Rivas Hospital received this day 40 mechanical-pulmonary ventilators for the intensive care units of patients with covid-19, which were acquired through Strategic Investment of Honduras (Invest-H). Importation or dona- tions of PPE 4/14/2020 Acquisition of the alcohol-based gel corresponding to 317,101 gel units in 4oz presentation and 18,286 units in a gallon presentation. Importation or dona- tions of PPE 8/25/2020 WHO / PAHO Donates 1.5 million Masks and Other Supplies To Face The Pandemic. 8 Importation or dona- tions of PPE 11/4/2020 The Ministry of Health together with the Humanitarian Assistance Bureau (BHA) of the United States Agency for International Development (USAID), GOAL Hondu- ras, municipal authorities and the Metropolitan Region of San Pedro Sula today inaugurated hand washing sta- tions as part of the Community Rapid Response Project to the Covid-19 Pandemic. New facilities for care 4/14/2020 Two primary care centers acquired from DXL Enter- prises LLC New facilities for care 6/12/2020 Doctors Without Borders/Médecins Sans Frontières (MSF) starts caring for critical COVID-19 patients in Te- gucigalpa. New facilities for care 7/6/2020 Triage center enabled at Catholic University. New facilities for care 7/10/2020 Authorization of more triages and care centers in con- junction with the municipalities, churches, private sector and others "to continue facing the pandemic and rein- forcing hospitals with more equipment and supplies." New facilities for care 8/15/2020 New Triage Center Starts Operating In La Ceiba with In- vestment from Fuerza Honduras. New facilities for care 8/27/2020 With Mobile Hospitals, Honduras Will Go From 71 To 530 Intensive Care Units. New facilities for care 9/5/2020 An intensive care unit was inaugurated in the physical facilities in the Hospital de Especialidades San Felipe del Distrito Central to serve patients with complicated COVID-19 cases. 2 million lempiras donated by Govern- ment of Taiwan for infrastructure. PPE regulations/pro- duction 4/8/2020 Masks mandatory when leaving the house and inside authorized businesses PPE regulations/pro- duction 5/25/2020 Use of face masks in public compulsory; New regula- tions require all individuals to follow and implement so- cial distancing and hygiene measures in both public and private meetings exceeding five people; Penalties, in- cluding fines, community service, and/or jail time will be levied for failure to comply with the measures. PPE regulations/pro- duction 7/7/2020 Government Will Deliver 50,000 Masks to Residents of The Cerro Grande Neighborhood. PPE regulations/pro- duction 7/8/2020 Acquired with State Funds: Government Delivers Biose- curity Equipment to Hospitals and Triage Centers In The Capital. 9 Vaccination protocols 7/23/2020 Honduras ensures its access to the Covid-19 vaccine through the Gavi Covax Mechanism. Source: IFPRI COVID Policy Tracker Programs related to treatments continued in the following months. Vaccination program The next Chart 3 shows the advance in vaccinations measured as the percentage of the population with two doses. Chart 3. Share of people with dose of the COVID-19 vaccine per 100 people Source: Authors with Our World in Data In the previous report, it was argued that Honduras’ vaccination program was advancing slowly. The country began vaccinating in February 2021, later than other countries in the region and in the world. In early June 2021, Honduras had about 4% of the population vaccinated with at least one dose, clearly below the comparators: 17% at the world level and 22% in LAC. However, by May 2022 Honduras had increased the percentage of vaccinations with two doses to 54% of the population, which, although still somewhat lower than the average for LAC, is slightly above the average for lower-middle income coun- tries at the global level (Honduras’ income category). 91.1 82.4 82.0 81…80.4 78… 77.4 70.9 70.6 69.8 65.9 61.4 54.6 54.0 53.0 52.350.8 50.3 47.1 46.3 40.2 39.8 33.9 23.4 1.1 58.3 77.6 53.1 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Ch ile U ru gu ay Ar ge nt in a Pe ru Co st a Ri ca Ec ua do r Br az il N ic ar ag ua Pa na m a Co lo m bi a El S al va do r M ex ic o Do m in ic an R ep ub lic Ho nd ur as Ba rb ad os Be liz e Tr in id ad a nd T ob ag o Bo liv ia Pa ra gu ay Gu ya na Su rin am e Ba ha m as Gu at em al a Ja m ai ca Ha iti Av er ag e LA C U pp er M id dl e In co m e Lo w er M id dl e In co m e People fully vaccinated (%) (latest value until May 20, 2022) 10 2.3. Policy responses related to safety nets These are basically policies and interventions oriented to sustaining incomes and crucial expenditures of vulnerable populations, separate from the productive activities discussed in the following section. The main programs in this category in Honduras included the following: 2 *Cash transfers (conditional and unconditional). Honduras created a “Bono Unico” targeting independ- ent workers who would become “new poor’ because of the pandemic. It was a one-time payment of Lempiras 2,000 (somewhat more than USD 80) using a card (e-transfer); it excluded public employees and pensioners who received support through other programs. The existing cash-transfer program (“Bono Vida Mejor”) was also reinforced, expanding it to rural areas. Other programs included cash transfers to those needing to repatriate bodies of relatives that died due to COVID. *In-kind transfers. There have been several programs of distribution of in-kind food and some hygienic products, as part of Honduras Solidaria, the School Feeding Program, and also distribution to elderly in nursing homes, by the Secretaría de Desarrollo e Inclusión Social (Sedis) and the Secretaría de Edu- cación. *Access to public services. The National Telecommunications Commission (CONATEL) issued a mora- torium on suspensions for fixed and mobile telephones, mobile and residential internet services in the country during the COVID-19 pandemic; it allows more flexible payment options. *Health insurance. The government issued a decree to ensure that workers had access to health care benefits through the Honduran Social Security Institute (IHSS) even when contributions are suspended due to the suspension of work. Also, a fund was created to support the "Plan para la Promoción Soli- daria y del Auxilio Recíproco" to increase social protection coverage and access to essential services, particularly for people in vulnerable conditions. *Social security contributions. The Private Contribution Scheme (RAP) was supposed to offer its affili- ates advances related to the values they have in their Individual Capitalization Account, based on the certification by the companies affected. Also, there was a moratorium on the collection of worker and employer contributions. 2 Based on the World Bank report on “Social Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measures.” “Living paper” version 15 (May 14, 2021.By Ugo Gentilini, Mohamed Almenfi, John Blomquist, Pamela Dale, Luciana De la Flor Giuffra, Vyjayanti Desai, Maria Belen Fontenez, Guillermo Galicia, Veronica Lopez, Georgina Marin, Ingrid Veronica Mujica, Harish Natarajan, David Newhouse, Robert Palacios, Ana Patricia Quiroz, Claudia Rodriguez Alas, Gayatri Sabharwal, and Michael Weber 11 The government also enacted in March 2020 a freezing of prices of basic products and personal and household hygiene and health products. Later it instituted maximum prices for 30 products of the basic food basket; this program was discontinued in 2021. 2.4. Policy responses related to production and employment Here the focus was on policies and initiatives oriented to maintaining production and employment, which sustain the supply side of the economy. But, to the extent that those productive activities gener- ated incomes, they also contributed to strengthening the demand side of the economy. Credit and banking facilities and regulations3 Some of the measures implemented were the following, mainly through BANHPROVI (a public bank, that operates as a “first- and second-floor” institution) which was authorized “to take measures to guar- antee financing to facilitate access to the productive sectors and to promote risk management and/or refinancing and readjustment of debts to natural or legal persons who are debtors of the financial sys- tem belonging to them”: *As part of that broad mandate BANHPROVI implemented the following initiatives: a) provided different levels of guarantees to cover potential losses on new loans to SMEs and other companies (valued at 1.1 percent of GDP); funding came from CABEI, the Central American public regional bank; b) allo- cated liquidity for about 0.9 percent of GDP to finance loans to SMEs and other sectors affected by the pandemic; funding was also from CABEI; c) created a rediscount facility funded with accumulated prof- its of the bank for loans restructured as a result of the pandemic (0.7 percent of GDP); d) announced a 3-month moratorium on service of its bank loans (which covered about 5 percent of total bank credit to the private sector) and later reprogrammed the loans in the case of borrowers that had been affected longer-term in their payment capacity; and e) made available to banks 200 million lempiras (about 8 million USD) to reactivate the construction industry. *The government also decreed different schemes of temporary debt service relief to companies and in- dividuals with incomes affected by the pandemic, which financial institutions must comply with. These debt service relief was to be extended without penalties or impact on credit classification. *There were expanded credit options through Crédito Solidario and the Entrepreneurship Service (SENPRENDE) to serve 5,000 entrepreneurs. 3 The list of programs comes mainly from the IMF and IFPRI COVID policy trackers. Guarantees and monetary programs are different from the fiscal measures shown later in Table 1. 12 * The government announced financial support for private companies. About 3,000 million lempiras (or some 120 million USD) was supposed to be available to lend for small companies of less than 10 work- ers to allow employers to provide salary payments during this emergency period. Monetary policy In 2020 and 2021 the Central Bank of Honduras cut the policy rate several times starting in February 10 by 25 basis points to 5.25%; after the first deaths and with the beginning of the lockdown, it cut it a fur- ther 75 basis points to 4.5% on March 24; and on August 3, a further cut of 75 bps, to 3.75%. It contin- ued cutting the policy rate in December 2020 and January 2021, for a cumulative cut of 225 bps (and now is 3%). The Central Bank also expanded liquidity through different mechanisms by about 3.5 per- cent of GDP (IMF, Policy Tracker). Employment. There were several measures to support employment and wages. Some of those included: *Wage support/subsidies. Through the “Ley De Auxilio Al Sector Productivo y a Los Trabajadores Ante Los Efectos de la Pandemia Provocada por el Covid-19 – Decreto 33-2020” it was instituted a “Solidar- ity contribution to the temporary maintenance of jobs and income for workers during the validity of the national emergency.” The main objective has been to maintain jobs and the sustainability of companies, “in order to mitigate any measure that leads to the definitive termination of employment contracts and closure of companies during the validity of the national health emergency.” Workers who were subject to a suspension of contracts due to force majeure derived from the National Health Emergency would receive a temporary solidarity contribution (up to a certain limit), financed in different ways by the gov- ernments, the private sector and the Private Contribution Scheme (RAP in Spanish). *Other measures related to labor markets included the following: a) employers were allowed to grant on account of vacations, the days that workers do not show up to work in their ordinary day due to the State of National Health Emergency; b) the GoH provided training for employment in a variety of activi- ties (such as tourism, administration, information and communication technologies), office automation and entrepreneurship; c) authorization of teleworking for employees of public and private entities; and d) authorization to employers and workers to use holidays and vacations, with guarantees that holidays recognized in the Labor Code be accepted and paid during the time of national emergency. Agriculture. The sector received special attention. *Early on it was declared that the food-producing sector and the food agribusiness were a national pri- ority. The "Food Security and Sovereignty Assurance Program" was created under the Secretary of 13 State in the Agriculture and Livestock Offices (SAG) with the purpose of achieving an “orderly” system of national food production, with registration and traceability of the farms and the categorization of na- tional and foreign producers. *BANHPROVI made available lines of credit to banks, cooperatives, microfinance companies and rural savings banks, so that they could process the applications for a special agricultural credit program. *There was a special allocation of 200 million lempiras (about 8 million USD) to provide technical assis- tance to producers of the Dry Corridor. *A Productive Solidarity Bonus was granted to 190,000 small producers planting beans, corn, rice, veg- etables, fruits, and other products. *A registry of ejidal, fiscal and national lands was created under the Secretary of State in the Offices of Agriculture and Livestock to monitor the effective use of the land and ensure the land was available to national producers for food production. • A single permit was established for the operation during the pandemic of agricultural production pro- jects, food collection and distribution centers and economic agents in the food supply chain. •The Honduran Institute of Land Transport was directed to authorize all pending resolutions and per- mits for transportation of food products within 10 business days. • The obstruction of public roads that impeded the passage of workers from the agro-industry and the food supply chain was prohibited. *The National Congress approved a decree authorizing the National Development Bank Agrícola (BANADESA) to grant to farmers whose farms were auctioned since 2005, the first purchase option to that land. The producers would also receive credit under favorable conditions to reactivate their produc- tive units. Tax changes The government of Honduras implemented a variety of tax changes to support firms and households affected by the pandemic. The “Law of Assistance to the Productive Sector and Workers Faced with the Effects of the Pandemic Caused by Covid-19 (Decree 33-2020) determined the extension of terms and additional relief in terms of tax obligations. The law was approved in March 2020. An extension was granted to taxpayers cate- gorized as small and medium taxpayers and to natural persons and independent professionals for the presentation and payment of a variety of taxes from 2019. The extensions varied by taxes and by the 14 dates due, but many were moved to June and then some extended further to August, October and De- cember, depending on when they were due in 2020. For taxpayers who kept their employee payroll respecting the payment of wages and rights, an addi- tional 10% was recognized as a deductible expense for the 2020 fiscal period. Other measures include a) small and medium taxpayers who submitted a declaration and payment by April 30, 2020, would get a discount of 8.5%; and b) some procedural lenience to those that were not in compliance or missed deadlines; c) taxpayers who did not operate within the months decreed as a state of emergency were granted an extension of the deadlines for filing and paying the VAT return. Finally, the Legislative Decree Number 85-2020 established facilities for the payment of Municipal Taxes, authorizing the municipalities to grant discounts (up to 10%) for prompt payment of the taxes on goods and on real estate of the year 2020, and some postponement for the dates of payments under certain conditions. Other measures There were other measures aimed at simplifying administrative procedures such as the implementation of electronic commerce mechanisms and electronic signature authorization to import raw materials and supplies in free zones; the recognition of the electronic signature and certificates of foreigners; and the celebration of contracts and commercial business through virtual mechanisms during the quarantine. Trade There was a temporary export ban on certain dried leguminous vegetables, including specifically red beans. The export of red beans had been controlled since the price increase of 2016. As one of the top food items of the basic consumption basket, every shipment of beans outside of Honduras requires an approval letter by the Minister of Agriculture. The complete ban was discontinued early on, even before the ETA and IOTA storms. However, every time there is a climate alert (drought or excessive rain), the ministerial authorities do not process requests for exports. In the period from August 2019 to August 2021 only 68MT of red beans appeared to have been shipped by sea (see the previous report). 2.5. Costs and Financing The different fiscal measures mentioned above are estimated to have increased the public budget defi- cit of the Non-Financial Public Sector to 4.6% of GDP in 2020, when in 2019 the budget was almost in balance (IMF, Fiscal Monitor, 2022). The additional spending related to the pandemic is estimated in 2.3% of the GDP, allocated as shown in Table 1. 15 Table 1. Fiscal Expenditures for COVID-19 (% GDP) Total Health Non-health Honduras 2.3 0.9 1.4 Average LAC 3.8 0.8 3.1 Median LAC 3.1 0.5 2.7 Average Developing Countries 3.9 0.9 2.9 Median Developing Countries 2.9 0.6 2.1 Source: authors with data from IMF Covid19 policy tracker In total COVID-related additional expenditures (health and non-health) in Honduras were below the av- erage and median for developing countries and LAC. But this was related mostly to non-health expendi- tures, while health ones were above LAC expenditures, and above the median for developing countries. The non-health expenditures included temporary unemployment benefits to formal workers (0.6% of the GDP), food aid to poor families (0.2%), cash transfers to informal workers (0.4%), plus others (0,2%). It is estimated that there has been a decline in taxes because of the economic recession (1.5% of GDP), plus the reductions approved by Congress (corporate income tax for about 0.5% of GDP; tempo- rary VAT exemptions for medical supplies for about 0.1% of GDP; and the one-off income tax credit of 10 percent of salary expenses for companies maintaining pre-crisis employment levels) (IMF, Policy tracker). Part of these additional fiscal costs were supposed to be covered by reassigning nonpriority spending. But other part was financed by additional borrowing. Congress approved additional public borrowing in the amount of 2,500 million dollars in 2020-21 (or about 10% of GDP), increasing the Non-Financial Public Sector deficit to 4% and 3% of GDP in 2020 and 2021, respectively. Later in November 2020, the fiscal deficit limits were increased to 5% and 4% of GDP in 2020 and 2021. After tropical storms Eta and Iota, the maximum deficit was further increased to 5.6% in 2020, but it was maintained to 4% for 2021. But in May 2021, allowed deficits were revised up by Congress to 5.4% and 2.3% percent of GDP in 2021 and 2022 respectively, before returning to the 1% deficit in 2023 (see Section 8 for more details). The Central Bank of Honduras also increased liquidity through different measures (plus reducing the interest rates as discussed before) to help finance the additional lending mentioned in previous sec- tions). The IMF estimates that direct liquidity operations (by April 2021) represented 2.1% of GDP, with 1.2% in guarantees and 0.9% in other operations. 16 The fiscal stimulus, financed through increased indebtedness and money printing, has been a neces- sary policy response to expand health services and investments and to avoid a larger breakdown in economic activity and social conditions. 3. EVOLUTION OF THE PANDEMIC Since the beginning of the pandemic and until late May 2022 there have been almost 425,000 con- firmed cases of COVID-19 and close to 11,000 deaths (see Charts below). Charts 4 and 5 show the evolution of daily COVIC-19 cases and the cumulative value of those cases. Then Charts 6 and 7 show the evolution of daily deaths related to COVID-19, and the accumulated number of deaths. Chart 4. Daily Evolution of Cases Related to COVID-19 Source: Our World in Data  Chart 5.Cumulative Value of Cases Related to COVID-19 Source: Our World in Data 17 Chart 6.Daily Evolution of Deaths Related to COVID-19 Source: Our World in Data Chart 7. Cumulative Value of Deaths Related to COVID-19 Source: Our World in Data After several waves of different intensity in 2020 and 2021, the evolution of daily cases and deaths showed a significant decrease by May 2022. The decline may be the result of several factors, such as improvements in diagnosis and treatments, some increases in herd immunity, and that after late start, the program of vaccination has been advancing. Chart 8 shows the indicator of death per 100,000 population in Honduras and compares it with the world and Latin America and the Caribbean (LAC). 18 Chart 8. Deaths per 100,000 Population Source: Our World in Data Honduras has one of the lowest levels in LAC of accumulated deaths as a proportion of the population (measured by 100,000 people in the Chart); the indicator is below the average for the region and high- income countries, but it is clearly above the average for upper and lower-middle-income countries. Chart 9 shows the evolution of deaths per million compared to South America, the world, and lower- middle-income countries. The deaths have been declining and currently (late May 2022) Honduras shows the lowest coefficient of daily deaths as proportion of its population. Chart 9. Daily deaths per million people Source: Our World in Data 639 311 301 282 278 273 262 249 226 207 204 199 188 185 167 165 156 153 108 102 98 63 40 20 7 4 188 198 100 39 0 100 200 300 400 500 600 700 Pe ru Br az il Ch ile Ar ge nt in a Tr in id ad a nd T ob ag o Co lo m bi a Pa ra gu ay M ex ic o Su rin am e U ru gu ay Ba ha m as Ec ua do r Pa na m a Bo liv ia Be liz e Co st a Ri ca Gu ya na Ba rb ad os Ho nd ur as Ja m ai ca Gu at em al a El S al va do r Do m in ic an R ep ub lic Ve ne zu el a Ha iti N ic ar ag ua LA C- Av Hi gh in co m e U pp er m id dl e in co m e Lo w er m id dl e in co m e Total Deaths per 100,000 (until May 20, 2022) 0 2 4 6 8 10 1/1/20 5/1/20 9/1/20 1/1/21 5/1/21 9/1/21 1/1/22 5/1/22 Death per Million Honduras World South America Lower middle income 19 4. ECONOMIC AND SOCIAL CONDITIONS 4.1. Background Before the pandemic the economy of Honduras was growing above the average for LAC as a whole: about 1.8% annual growth in GDP per capita between 2010-2019. During the same period inflation (measured by the consumer price index) was about 4.6% annually. The country has multiple strengths, such as a strategic location, a growing industrial base, an open economy with diversification of exports, and a young and growing population. On the other hand, even previously for COVID-19 the country faced high levels of poverty: somewhat more than 50% of the population at 5.5 USD PPP/capita/day (average last 5 years before 2020), compared to about 24% for LAC; it is also highly unequal; suffers from high levels of violence (more than 41 homicides per 100,000 inhabitants in 2017), and is very ex- posed to adverse natural events and climate change (World Bank, 2020 https://www.worldbank.org/en/country/honduras/overview). Honduras is also very dependent on remit- tances (close to 20% of the GDP on average in the 2010s), with emigration pushed by inequality, cli- mate shocks, and violence. In the next sections there is a brief discussion of some key economic and social variables during the pandemic. 4.2. GDP growth Table 2 shows the actual rates of the total GDP growth in 2019 and 2021, and the estimates by the IMF in 2022 and 2023.4 Table 2. GDP growth (2019-2023) Real GDP (% growth) Average 1980-2018 2019 2020 2021 2022 2023 3.4 2.7 -9.0 12.5 3.8 3.5 Source: Authors with data from WEO/IMF 4 In the first report (Díaz-Bonilla, Laborde, and Piñeiro, 2021) we presented simulations for 2020 to 2023 using the MIRAGRODEP model with epidemiological adjustments (see that report for more details). The simulations in- cluded three scenarios: optimistic, intermediate, and pessimistic. They were performed around October 2020, with the information available at that time, and without including governments’ policy responses. The average of IFPRI projections for 2020 were more optimistic because they were done before hurricanes Eta and Iota hit Honduras almost back-to-back in early and mid-November 2020. 20 The pandemic and the measures related to mobility, along with the two hurricanes in 2020, impacted very negatively the economy: the economy contracted that year by about 9% (-8.96%, without round- ing) in total GDP and -10.4% in GDP per capita. However, it has rebounded strongly in 2021 and it is projected to revert to the previous growth trend in 2022 and 2023 (which is different from the trend in levels). Therefore, although the GDP per capita in 2021 had not recovered the level before the pan- demic, it is projected that in 2022 it would go above that value.5 Chart 10 shows the evolution of the Honduran economy since 2010 until the last data from the Central Bank (April 2022). The columns indicate the level of the index of economic activity, while the line shows the monthly rate of change compared to the equivalent month the year before (i.e., is the annual rate of change for that month). Chart 10. Index of Economic Activity (January 2010-April 2022) Source: Authors with data from Banco Central de Honduras The large decline in economic activity started in March and reached the lowest point in April. After the decline in economic activity in the first part of 2020, from which the country was recovering, there is a 5 In the first report (Díaz-Bonilla, Laborde, and Piñeiro, 2021), even though as noted the decline simulated for 2020 was smaller than the one that took place, the projections estimated that by 2022 total GDP would have been above the pre-pandemic level by 2022. This is different than recovering to the level of GDP that would have ex- isted if the pandemic would have never happened. To get to that counterfactual level the economy would have to grow for a period faster than the previous growth trend. -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 0.0 50.0 100.0 150.0 200.0 250.0 300.0 Monthly Index of Economic Activity Annual Percentage Change 21 second drop in November because of the hurricanes Eta and Iota. Then there has been a strong re- bound in 2021 and a return to more moderate growth lately. Table 3 shows the growth rates from the same index of economic activity but disaggregated by produc- tive sectors. Data for 2022 are the average growth rates for the period January to April 2022 (the latest data as of this writing), compared to the same period of 2021. Table 3. Growth rate: Index of economic activity (January 2010-April 2022) Agricul- tura, Ga- nadería, Silvicul- tura y Pesca Mi- nas y Can- teras Indus- tria Man- ufac- turera Elec- tri- cidad y Agua Construc- ción Comer- cio Hoteles y Res- tau- rantes Transporte y Alma- cena- miento Correo y Teleco- munica- ciones Inter. Fi- nanciera, Seguros y Fondos de Pensiones Otros Ser- vicios 2/ 2020 -5.8 -19.2 -15.2 -4.6 -24.9 -12.2 -47.0 -17.3 4.0 -0.6 -12.9 2021 0.6 18.6 21.3 10.4 17.6 15.9 61.8 12.9 1.8 16.2 4.7 2022 3.3 3.3 6.9 4.1 9.1 5.5 34.3 14.0 2.5 15.6 -8.9 Source: Authors with data from the Banco Central de Honduras All sectors, except Telecommunications (which in fact increased its activity due to the pandemic), de- clined in 2020 compared to the equivalent month the year before. Agriculture had been relatively less affected than other sectors during the first months of the pandemic, but in November 2020 it suffered the negative impact of the back-to-back hurricanes, and the impact carried over to 2021. As expected, due to the nature of the policy responses to the pandemic (quarantines and lockdowns, mainly in face-to-face activities), the declines were particularly deep in Hotels and Restaurants during 2020. Other sectors that were badly hit include Construction; Mining; Transportation; and Other Ser- vices. But those sectors also rebounded strongly in 2021 and maintained their strength during early 2022. Agriculture appears to be recovering from the previous cumulative impacts of the pandemic and climate events.6 6 From the sectoral point of view, the previous IFPRI simulations showed that the agricultural sector would have been less affected than industry and services, which is what eventually happened. However, the hurricanes men- tioned before, hit Honduras by the end of the year, causing agriculture to close 2020 in worse shape than pro- jected initially. Also, the simulations suggested a slower growth of the agricultural sector in 2021 compared to the other sectors, which is what happened. 22 4.3. Inflation Chart 11 shows the annual rate of inflation for the consumer price index (CPI), by month, compared to the equivalent month of the previous year, both total and for food products. Chart 11. Inflation (monthly annualized values %) Source: authors with data from Banco Central of Honduras Total inflation is obviously more stable than food inflation. The initial recession related to the pandemic forced a deceleration in overall consumer prices: inflation that was around 4% in annualized terms, dropped to around 3.4% in May-June but then started to increase in the second half of 2020, reaching an annualized rate of 5.3% in December 2020. After that, inflation had been oscillating between 4-5%, about the range of the last decade or so, until January 2022. Since February 2022, however, there has been an acceleration of inflation reaching about 8% in May 2022 (latest data as of this writing). Food inflation moved in the opposite direction with small increases at the beginning of the pandemic, and subsequent drops until mid-2021. Food prices started to climb in the second half of 2021, with the global acceleration in prices resulting from the large fiscal stimulus in the US and other developed countries (a demand push), combined with adverse climate events in important food exporters, strains in logistic chains, and the closing of China because of COVID-19 (supply constraints). Table 4 shows the average of monthly annualized inflation for a variety of food items of the basic con- sumption basket. The data for 2022 is the average price during January-May 2022 compared to the same period of 2021. -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 Ja n- 18 M ar -1 8 M ay -1 8 Ju l-1 8 Se p- 18 No v- 18 Ja n- 19 M ar -1 9 M ay -1 9 Ju l-1 9 Se p- 19 No v- 19 Ja n- 20 M ar -2 0 M ay -2 0 Ju l-2 0 Se p- 20 No v- 20 Ja n- 21 M ar -2 1 M ay -2 1 Ju l-2 1 Se p- 21 No v- 21 Ja n- 22 M ar -2 2 M ay -2 2 Inflation (% annualized) Food and Non Alcoholic Beverages Total 23 Table 4. Monthly annualized inflation for products of the basic food consumption basket (average price January-May 2022 compared to January-May 2021) Products of Basic Food Basket 2020 2021 Early 2022 1. Arroz 3.7 3.0 8.9 2. Maiz Desgranado 2.6 -2.6 22.2 3. Pan Molde 3.9 4.0 10.0 4. Tortilla de Maiz 2.3 1.3 5.5 5. Costilla de Cerdo 3.2 10.0 6.8 6. Costilla de Res 2.9 3.4 10.6 7. Pollo limpio 3.4 3.1 8.5 8. Tajo de Res 1.6 1.7 8.4 9. Pescado Blanco 5.3 12.3 10.6 10. Huevos de Gallina 15.2 -5.0 11.7 11. Leche en Polvo 2.4 4.2 7.9 12. Leche Pasteurizada 5.6 2.3 9.8 13. Queso 1.3 2.6 10.8 14. Aceite Vegetal 5.7 5.6 15.3 15. Manteca Vegetal 4.5 5.0 22.5 16. Matequilla Crema 2.5 3.3 11.4 17. Banano 5.1 6.5 13.2 !8. Naranjas 7.1 10.5 1.1 19. Plátano 10.8 6.9 -0.2 20. Cebolla -3.6 -3.2 2.3 21. Frijoles Rojos 16.6 -4.2 18.2 22. Repollo 17.3 7.4 7.8 23. Tomate Manzano 2.1 -4.8 -3.7 24. Papa Blanca 10.9 -5.0 -9.0 25. Yuca 10.6 0.9 4.5 26. Azúcar Blanca 4.4 0.4 4.4 27. Café 3.2 0.5 34.1 28. Sal 3.2 10.5 13.6 29. Salsa de Tomate 3.4 6.0 7.7 30. Refresco embotellado 4.8 5.4 7.4 Source: authors with data from the Banco Central de Honduras 24 During 2020 prices 12 items were above 4.5% (the average total inflation 2010-2021), one declined in price (onions) and 19 stayed below average total inflation. In 2021, food inflation declined further with only 11 items above 4.5%, 6 declining in prices, and 15 below the period average. However, in the first quarter of 2022, food inflation, that as mentioned started to accelerate in the second half of 2021, jumped further: 24 items were above 4.5% (and 22 were above the projected total inflation for 2022 by the IMF), while only 3 had negative inflation and 5 stayed below the 2010-2021 average. Therefore, while the pandemic and even combined with the hurricanes did not have a large impact on food prices, the recent evolution of world prices particularly after RUC appears to have a more sustained impact on the cost of food. In analyzing the impact of the pandemic on food consumption it is also important to consider the ex- change rate, given that most of the food products are tradeable internationally. Chart 12 shows the nominal exchange rate (Lempiras per US dollar) and an index of the real exchange rate (RER) against the US dollar (with base in 2010=100). An increase (decline) of the RER implies that the country’s ex- ports of goods and services are more (less) competitive in international markets. The last number in the Chart corresponds to 2021. Chart 12. Nominal Exchange Rate (Lempiras/US dollar) and Real Exchange Rate (index) Source: Authors with data from WDI/World Bank Data from the World Bank shows a gap in the 1990s. The nominal ER rate is on the left axis (looking from the reader) and the RER is the broken line measured on the right axis. After the strong devalua- 24.0 97.2 60 70 80 90 100 110 120 130 140 0 5 10 15 20 25 30 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 20 10 20 12 20 14 20 16 20 18 20 20 Nominal Exchange Rate (L/USD) and Real Exchange Rate (Index 2010=100) Nominal ER Real ER 25 tion in the 1990s that placed the RER about 30-40% above the pre-1990s level (and therefore becom- ing more competitive internationally), it declined to the levels of the 1970s and has remained relatively stable (the nominal ER appears to have been adjusting with the inflation differential against the US dol- lar). 4.4. Poverty and malnutrition In the previous IFPRI reports we presented simulations for 2020 to 2023 using the MIRAGRODEP model with epidemiological adjustments, performed around October 2020, with the information availa- ble at that time, and without including governments’ policy responses. Chart 13 shows the estimated evolution of extreme poverty (at 1.9 PPP dollars/capita/day) using IFPRI’s model. Chart 13. Honduras, Extreme Poverty (millions of people) Source: authors based on MIRAGRODEP Extreme poverty was estimated to increase to more than 2 million people in 2020 or somewhat more than 400,000 persons above the about 1.59 million that were calculated to be in that category in 2019. Then with the recovery, it was considered that the number of extreme poor would drop to between 1.71 and 1.61 million people (optimistic and pessimistic scenarios respectively) in 2021 and to between 1.66 and 1.61 million people (optimistic and pessimistic scenarios, respectively) in 2022. Therefore, the number of people in extreme poverty was estimated to remain even in 2022 above the 2019 levels. 1.59 1.59 2.02 2.02 1.71 1.61 1.66 1.61 1 1.2 1.4 1.6 1.8 2 2.2 U Shape V Shape No-Covid19 2020 2021 2022 26 A more recent report of the World Bank (2021b) estimates the difference in what would have been the poverty levels at 5.5 PPP dollars/capita/day (a higher poverty line than the one used in the mentioned IFPRI’s simulations) during 2020, considering the situation without and with policy responses. Table 5 shows the number of the poor population at that poverty line in 2019, and the range of esti- mates in the cases of no policy response, and with such responses for 2020. There are no projections for 2021 or 2022. Table 5. Honduras: Population below poverty of line of 5.5 PPP dollars/capita/day 2019 2020. No policy response 2020. With policy re- sponse Number (millions) 4.78 5.54 5.50 Change in numbers (mil- lions) 0.76 0.72 Source: authors with data from Annex 8 World Bank 2021 The policy response is estimated to have marginally reduced the number of additional poor generated by the pandemic (40,000 fewer persons).7 Those numbers suggest a longer-lasting effect on poverty from COVID-19 even after the strong rebound of 2021 and the expected growth in 2022. The simulations in the previous reports also compared changes in consumption, measured against a baseline without COVID-19. Food consumption in 2020 was estimated to decline compared to the baseline without the pandemic, but the drops were projected to be larger in products such as dairy, meat, fruits, vegetables, and pulses, compared to grains and sugar. This suggested a reallocation of consumption towards less healthy diets. The simulation for 2021 consumption of most products still 7 The previous report (Díaz-Bonilla, Flores, Piñeiro, and Zandstra, 2021) presented results from 2020 high-fre- quency telephone surveys implemented by the World Bank in many countries in the world, including Honduras (https://www.worldbank.org/en/programs/lsms/brief/lsms-launches-high-frequency-phone-surveys-on-covid-19). It was shown that the number of people suffering from food insecurity problems declined from the first wave of sur- veys to the last one (in August). The surveys indicate that by June 2020, about 20% of the respondents have gone at least one day without food due to lack of money, about double (40%) were hungry but did not eat be- cause of lack of money, and about 55% ran out of food due to lack of money (the questions are in inverse relation to the degree of hardship with not eating for a whole day the worse condition). The other question about being able to access staple foods (which more than 90% of the respondents said they were able to do) indicates that the problems were not related to supply issues but rather demand problems for lack of money. In any case, the percentages of households with food problems dropped in the next survey of August 2020 but still, some 12-15% went without eating for a whole day. There are no additional surveys for Honduras after August 2020.. If the per- centages of August 2020 are extrapolated to the total population, the percentage in August of people not eating for a whole day would represent about 1.2-1.5 million people, and the number of people that were hungry would have been about 2.5 million, bracketing the numbers simulated for extreme poverty projected in the previous re- port and shown in Chart 11 (it should be noted that the poverty line is the one that allows food consumption for the minimally accepted levels of energy). 27 showed declines compared to the baseline. In summary, it was noted then that the simulations sug- gested both a decline in food consumption and a shift in composition towards less adequate diets con- tinuing in 2021. All this means that the previous problems of poverty and related deficiencies in nutrition in Honduras have been deepened by the pandemic and that even more powerful policy interventions will be needed soon. Furthermore, the impact of RUC must be considered (see next section). 5. SOME CONSIDERATIONS ABOUT THE RUSSIA- UKRAINE CONFLICT (RUC) As mentioned before, in addition to the impact of the pandemic and the adverse climate events, since February 24, 2022, the world is feeling the impact of the Russia-Ukraine Conflict (RUC). As a back- ground to additional comments later in the analysis of some food value chains, here some basic infor- mation is presented. Chart 14 shows the importance of Ukraine and Russia in some key agricultural products. Chart 14. Global market share, key products 2018-2020 Source: Laborde 2022 28 Both countries combined represent about 12% of the traded calories at the world level, mainly related to wheat, sunflower and sunflower oil, and to lesser extent corn (maize) and barley. While Russia ap- pears to continue to be trading these products, Ukraine has been more affected. Also, Russia represents 15% of the market of nitrogenous fertilizers, 14% of phosphates, and 19% of potash (to which it can be added the 18% of Belarus as this country has been involved in the war). Further, Russia accounted before the war for 13% of global oil production and 11% of its trade, about 17% of gas production and some 19% of exports (considering LNG plus what is transported by pipe- line). Prices of different commodities were increasing before RUC, due to the strong acceleration of the world economy in 2021 (it grew 4.8% per capita that year, the highest rate in the World Bank database start- ing in 1960), a product of the expansionary fiscal and monetary policies followed until recently by many large countries, climate events in some key agricultural producers, and lockdowns in China related to concerns about COVID19. Then the war, as it happened in the past with other conflicts such as Korea, Yom Kippur, and Iran-Iraq, led to a further spike in commodity prices. Next Charts focus on food and fertilizers, presenting two views: one in levels adjusted by overall infla- tion (“real” prices) and the other as a change in nominal prices (inflation). Chart 15 shows the indices for food and fertilizers calculated by the World Bank, adjusted by the US inflation (i.e., the purchasing power of the US dollars, with base-year 2010, and ending in May 2022). 29 Chart 15. Food and Fertilizer Indices (adjusted by US$ dollar inflation) Source: authors with World Bank “pink sheet” database; and US CPI The inflation-adjusted index for fertilizers (broken line) has increased significantly in the last months, although, with the deflator utilized in the charts above,8 it is still below the peaks in 2008 and in the mid- 1970s. In the case of food (solid line), the increase has been smaller, with about the same levels of 2008 and 2011, but clearly below the real prices of the 1970s.9 Charts 16 (food) and 17 (fertilizer) show now the rate of increase in one-year (broken line) and two-year (solid line) windows for the same food and fertilizer indices but in nominal terms (i.e., not adjusted by purchasing power of the US dollar). 8 Besides using US consumer inflation, another deflator commonly used is what is sometimes called the “manu- facturing unit value,” which reflects the export price of industrial countries. Obviously, different deflators may give different results. 9 A comparison of the 2008 price spike with the 1970s can be found in Diaz-Bonilla, 2010. A discussion of the different indicators that can be utilized to analyze the evolution of prices is in Díaz-Bonilla, 2015 and Díaz-Bonilla, 2016. 30 Chart 16. One and Two-year Inflation: Food Source: authors with World Bank “pink sheet” database Chart 17. One and Two-year Inflation: Fertilizer Source: authors with World Bank “pink sheet” database -50 0 50 100 150 200 19 62 M 01 19 62 M 11 19 63 M 09 19 64 M 07 19 65 M 05 19 66 M 03 19 67 M 01 19 67 M 11 19 68 M 09 19 69 M 07 19 70 M 05 19 71 M 03 19 72 M 01 19 72 M 11 19 73 M 09 19 74 M 07 19 75 M 05 19 76 M 03 19 77 M 01 19 77 M 11 19 78 M 09 19 79 M 07 19 80 M 05 19 81 M 03 19 82 M 01 19 82 M 11 19 83 M 09 19 84 M 07 19 85 M 05 19 86 M 03 19 87 M 01 19 87 M 11 19 88 M 09 19 89 M 07 19 90 M 05 19 91 M 03 19 92 M 01 19 92 M 11 19 93 M 09 19 94 M 07 19 95 M 05 19 96 M 03 19 97 M 01 19 97 M 11 19 98 M 09 19 99 M 07 20 00 M 05 20 01 M 03 20 02 M 01 20 02 M 11 20 03 M 09 20 04 M 07 20 05 M 05 20 06 M 03 20 07 M 01 20 07 M 11 20 08 M 09 20 09 M 07 20 10 M 05 20 11 M 03 20 12 M 01 20 12 M 11 20 13 M 09 20 14 M 07 20 15 M 05 20 16 M 03 20 17 M 01 20 17 M 11 20 18 M 09 20 19 M 07 20 20 M 05 20 21 M 03 20 22 M 01 One and Two-year inflation: Food 2-year inflation 1-year inflation -100 0 100 200 300 400 500 600 19 62 M 01 19 62 M 11 19 63 M 09 19 64 M 07 19 65 M 05 19 66 M 03 19 67 M 01 19 67 M 11 19 68 M 09 19 69 M 07 19 70 M 05 19 71 M 03 19 72 M 01 19 72 M 11 19 73 M 09 19 74 M 07 19 75 M 05 19 76 M 03 19 77 M 01 19 77 M 11 19 78 M 09 19 79 M 07 19 80 M 05 19 81 M 03 19 82 M 01 19 82 M 11 19 83 M 09 19 84 M 07 19 85 M 05 19 86 M 03 19 87 M 01 19 87 M 11 19 88 M 09 19 89 M 07 19 90 M 05 19 91 M 03 19 92 M 01 19 92 M 11 19 93 M 09 19 94 M 07 19 95 M 05 19 96 M 03 19 97 M 01 19 97 M 11 19 98 M 09 19 99 M 07 20 00 M 05 20 01 M 03 20 02 M 01 20 02 M 11 20 03 M 09 20 04 M 07 20 05 M 05 20 06 M 03 20 07 M 01 20 07 M 11 20 08 M 09 20 09 M 07 20 10 M 05 20 11 M 03 20 12 M 01 20 12 M 11 20 13 M 09 20 14 M 07 20 15 M 05 20 16 M 03 20 17 M 01 20 17 M 11 20 18 M 09 20 19 M 07 20 20 M 05 20 21 M 03 20 22 M 01 One and Two-year inflation: Fertilizers 2-year inflation 1-year inflation 31 In general terms, in both the case of food and fertilizers, the one and two-year jump in prices is im- portant, but they are still below similar events in 2008 and the mid-1970s. Chart 18 shows the inflation-adjusted price of wheat (solid line; on the left axis from the reader) and the 2-year nominal inflation (broken line; on the right axis from the reader). Chart 18. Wheat: Inflation-adjusted price and 2-year inflation Source: authors with World Bank “pink sheet” database; and US CPI In the previous cases of price spikes, as shown in all charts, the inflation-adjusted price levels and the rate of change of nominal prices (inflation) tended to stabilize and then decline. Although the evolution of those prices must be continuously monitored, history suggests the need to avoid drastic policy reac- tions as if the prices were to stay high forever (or even worse, as if they would continue to keep in- creasing). Table 6 presents a preliminary calculation of the potential impact of changes in prices on different ex- ports and imports of agricultural products from Honduras in 2022, compared with the year 2020. We are using the 2-year inflation for May 2022 in each group of products, based on the World Bank “pink sheet” database for all products, except for the groups of meat and dairy which use data from FAO Food Price Indices. For wheat and corn (and products) we use the inflation for the primary product, and for oilseeds and products, we use the change in soybean oil. In the case of the rest of agricultural ex- ports, we use the 2-year inflation from the World Bank aggregate index for agricultural products, but for -100 -50 0 50 100 150 200 250 300 0 200 400 600 800 1000 1200 19 60 M 01 19 61 M 03 19 62 M 05 19 63 M 07 19 64 M 09 19 65 M 11 19 67 M 01 19 68 M 03 19 69 M 05 19 70 M 07 19 71 M 09 19 72 M 11 19 74 M 01 19 75 M 03 19 76 M 05 19 77 M 07 19 78 M 09 19 79 M 11 19 81 M 01 19 82 M 03 19 83 M 05 19 84 M 07 19 85 M 09 19 86 M 11 19 88 M 01 19 89 M 03 19 90 M 05 19 91 M 07 19 92 M 09 19 93 M 11 19 95 M 01 19 96 M 03 19 97 M 05 19 98 M 07 19 99 M 09 20 00 M 11 20 02 M 01 20 03 M 03 20 04 M 05 20 05 M 07 20 06 M 09 20 07 M 11 20 09 M 01 20 10 M 03 20 11 M 05 20 12 M 07 20 13 M 09 20 14 M 11 20 16 M 01 20 17 M 03 20 18 M 05 20 19 M 07 20 20 M 09 20 21 M 11 Wheat: inflation-adjusted price and 2-year inflation Real price wheat Inflation 2 year 32 the rest of agricultural imports, we apply the World Bank aggregate index for food products, which is higher than for agriculture (that asymmetric valuation may be underestimating the additional value of exports and overestimating the increase in the costs of imports, but it is applied here as a conservative approximation). Table 6. Estimate of the impact of prices on exports and imports 2020 2022 million USD 2-year infla- tion (%) Increase in value Banana 252.8 12.8 32.4 Coffee 980.2 73.8 723.4 Palm Oil 330.2 197.8 653.2 Subtotal 1563.3 1409.0 Rest of Agricultural Exports 1032.8 64.5 666.2 Total Agricultural Exports 2596.1 2075.1 Wheat and products 206.6 153.8 317.7 Corn and products 173.0 139.6 241.4 Oilseeds and Products 205.0 186.6 382.6 Rice 132.7 nil 0 Meat and products 161.2 28.4 45.8 Dairy and products 119.8 39.1 46.9 Subtotal 998.3 1034.4 Rest of Agricultural Imports 941.9 86.2 811.9 Total Agricultural Imports 1940.1 1846.3 Fertilizers 155.0 230.8 357.7 TOTAL 2095.1 2204.1 Source: authors with data from FAOSTAT, World Bank “pink sheet.” Fertilizers are from COMTRADE 2018-2019 Honduras is a net exporter of agricultural products (and of food products), and while there have been price increases on imported products, the prices of exported ones have also gone up. Therefore, it is important to see the total effect, and not only the potential negative impact of higher food import prices. The three main products (about 60% of the exports) would increase in value by about 1.4 billion USD just through the price effect and considering all agricultural exports (which, as mentioned, are estimated at a lower inflation rate than imports), the value increase in 2022 would be about 2.1 billion. The costs of food imports also increase, but the total jump (about 1.8 billion USD) is less than the increase in the value of exports. Therefore, for agricultural/food products the net effect of the price changes for Hondu- 33 ras may well be positive. However, once the additional cost of fertilizers is considered then the net ef- fect is negative by about 129 million USD (2075.1 million USD minus 2204.1 million USD). Further, these calculations do not consider the impact on the trade balance of energy prices, which would cer- tainly be negative for Honduras. Therefore, on the production side, it is important to follow the evolution in the market of fertilizers, where the overall impact so far has been on prices rather than availability (more details are in the anal- ysis of specific value chains below). On the consumption side, the fact that food prices of export and imports are increasing implies that there would be a negative impact on consumers (as different from the mildly positive effect on Honduras’ trade balance), particularly the poor and vulnerable. This nega- tive impact must also be monitored and countered with stronger social assistance programs (see the section on Policy Conclusions). The final effect will also depend on how the growth and trade effects translate into employment and income. This analysis would require a specific simulation with an econ- omy-wide model of Honduras, including other international developments, such as the evolution of re- mittances, which have been growing. This exercise is not attempted here. 6. SUMMARY ANALYSIS OF KEY FOOD VALUE CHAINS This section includes a more detailed analysis of some food value chains, to determine whether the pandemic and the policies applied to control it, may have affected those products. At the same time, as noted in the introduction, the country has been hit by hurricanes Eta and Iota, and, recently, it is feeling the impact of RUC. Therefore, the narrative includes references to those other developments as well. The focus is on seven products: maize, beans, poultry meat and eggs (updating the analysis in the pre- vious report), plus sugar, wheat and products, and bovine meat (which were added to this report). Table 7. Products analyzed (average 2015-2019) Calories (kcal/capita/day) % Total Proteins (g/cap- ita/day) % Total Maize and products 740.8 27.9 19.3 31.3 Beans and pulses 110.8 4.2 7.2 11.7 Poultry 95.2 3.6 7.1 11.6 Eggs 15.4 0.6 1.2 1.9 Sugar 445.8 16.8 0.0 0.0 Wheat and Products 269.4 10.1 6.9 11.2 Bovine meat 29.8 1.1 3.0 4.8 34 Subtotal 1707.2 64.2 44.7 72.6 Other 951.0 35.8 16.9 27.4 TOTAL 2658.2 100 61.6 100 Source: authors with FAOSTAT database Table 7 shows the importance of those products in food consumption in Honduras, using calories (kcal/capita/day) and proteins (grams/capita/day): they represent about 64% of the calories and 73% of the proteins in the consumption of that country. The food value chains analyzed were selected both be- cause of the importance in the diet, but also because they have a large domestic primary production component, except for the case of wheat which is basically imported. Still, some food value chains ap- pear more relevant than others: for instance, corn and beans, a typical diet in the country, represents close to a third of the calories and about 43% of the proteins consumed in Honduras. In what follows there is a description of the value chains selected and the channels through which the pandemic have impacted those products, and some references to other climatic and geopolitical events. Each food value chain includes a discussion of the evolution of prices in domestic markets. Fi- nally, there are some policy considerations. Section 7 includes additional policy conclusions for agri- food systems in Honduras. Although food and agricultural production has been relatively less affected during the pandemic (because the government protected those operations), it was affected by the hurri- canes in 2020, and now the increases in the prices of some food products and fertilizers need to be also considered, as briefly discussed before and in the following subsections. Differentiating the effects of those events is a difficult task, considering that they overlapped in the pe- riod under consideration. Nevertheless, this report provides an outline of specific policies and timelines. This brief description of the target value chains in Honduras focuses on the most affected functions of each value chain by COVID-19. These functions are access to inputs and technologies dealing with production conditions and limitations induced by social distancing and other infection prevention prac- tices. Other areas shocked by the pandemic are demand and changes to commercialization schemes as well as support services. The value chains analyzed showed what actors have undergone to procure inputs, deal with labor re- strictions due to social distancing, and adjust to the shocks on the shifting demand. They faced the im- mediate impact of the declaration of a national state of emergency. But, as weeks and months passed by, value chain operators became more adept at dealing with the difficult conditions. Overall, the news has been relatively more positive for the production of basic food staples under study compared to other sectors. Although the impact on tourism, maquila and other areas of the economy 35 was devastating for jobs and for the population living in poverty, food production and consumption eventually stabilized. Still, the information collected in this paper with respect to the value chains ana- lyzed is not definitive considering that even though the pandemic has been receding, the overall impact has been also compounded by climatic events and the RUC. Continuous collection of field data and in- terviews with GoH officials and the private sector and closer observation of trade flows concerning im- ported inputs, grains and feed would be needed. 6.1. Corn/maize It is necessary to distinguish white maize that is for human consumption mainly in tortillas from yellow maize used as animal feed. The area planted with the latter is limited and the domestic use is from the imported product. White maize is produced by a variety of farmers, but most of them are subsistence farmers. Next Chart 19 shows the percentage of imports over domestic consumption of maize and products. However, it does not distinguish between white and yellow maize, and the Chart also includes maize products. Source: authors with FAOSTAT data In what follows the analysis is focused on the white corn food value chain, considering that the yellow one is mostly imported (see Table 8). . Chart 19. Maize and Products: Imports as % of Domestic Consumption 40.4 49.0 40.6 38.4 40.0 50.9 51.9 43.3 53.9 58.3 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Maize and products 36 Table 8. White maize Va lu e C ha in F un c- tio n Critical value chain characteristics COVID-19 effect (March 2020-Present) Climate Change Extreme Events Effect (Eta and Iota from Novem- ber 2020-May 2021) Fertilizer Crisis Ef- fect (February 2022 to Present) In pu t s up pl ie s an d pr od uc tio n Harvested white maize areas amount to 332,760 ha and 500,000 MT per year distributed in the main producing departments (Olancho, Yoro, Santa Bárbara and El Paraíso). Smallholder farmers have traditionally shown low productivity averaging 2.5MT/ha. In general, small farmers cultivate less than 5ha and contribute 41% of the national production. Most of this pro- duction comes from low-fertility, mar- ginal lands cultivated with family labor. After decades of development of certi- fied varieties by DICTA in collabora- tion with CIMMYT, it is reported that nearly 98% of the cultivated area is not with certified seed of improved va- rieties (DICTA 2020). Inputs such as certified seed, fertilizers and pesticides increased on average 10-15%. Other imported inputs such as plastic bags, paper bags and post- harvest treatments for seed increased in price and were not available for months. Fear of not finding cer- tain products in the usual 1-2kg features led to more purchases in bulk. This is the case of special pesti- cides and related in- puts such as roda- mina, a coloring agent in seed treatment. In general, 2020 was a good year for maize production thanks to a well-distributed rain pattern along the agri- cultural year. The Honduran In- stitute of Agricul- tural Marketing (IHMA) issued new purchase orders for seed and grain until early 2021 in response to the af- termath of Eta and Iota. Ammonium nitrate, a major synthetic ferti- lizer formula recom- mended at a rate of 238kg/ha, increased circa 100% as a re- sult of RUC. Urea, another common fertilizer formula in- creased circa 150%. Honduras is the only country in Central America that has measured the im- pact on fertilizer prices on planted area contraction. A 26.3% reduction with respect to the 2021 planted area of maize was reported by the GoH Tech- nical Unit for Food and Nutrition Secu- rity (UTSAN, 2022). The study is based on a sample of households produc- ing less tan 3.5ha, representing 56% of the maize household farming units. From this proportion of farmers, 5.8% de- cided not to plant maize while 19.4% will plant only 50% or less that their tra- ditional annual area. C om m er ci al iz a- tio n Most of the maize is sold to intermedi- aries, but some 100,000 small produc- ers are organized in 20 farmer associ- ations grouped affiliated to the Hondu- ras Coordinating Council of Farmer Organizations of Honduras When the market ex- periences higher than normal demand, the pressure on quality goes down. There have not been many No data available yet for the 2022 first production season. 37 (COCOCH) and the National Confed- eration of Paysans (CNC). An addi- tional 20,000 farmers are organized in the National Federation of Farmers and Ranchers of Honduras (FENAGH) and PROGRANO with a planted area of 84,600 hectares (numbers vary 5- 10% more or less per year). Honduras is not self-sufficient in maize. According to FENAGH, Hondu- ras consumes 1.3M MT of maize of which about 800,000 MT are imported. complaints about qual- ity. In other words, the market is more tolera- ble in terms of quality. R et ai l Because of this chain’s vertical disin- tegration with informal contracts, it is not possible to define a single way of retail. Vertical integration from produc- tion to consumer is found in the maize flour value chain led mainly by Mexi- can company MASECA which oper- ates in Guatemala and Honduras. Given the disinte- grated nature of this chain (except for maize flour for tortilla), there is little infor- mation gathered at the producer level in addi- tion to the price in- crease to consumers (see later). In addition, Honduras enacted this govern- mental decree to mini- mize the effects of the pandemic on the poor- est sectors of the pop- ulation: Decreto Nº 31-2020 ─ Ley especial de acele- ración económica y protección social frente a los efectos del coronavirus COVID- 19.Date of text: 13 March 2020 Source: Authors Chart 20 shows the evolution of prices for corn for human consumption (per pound; on the left axis from the reader) and corn tortillas (per unit; on the right axis). 38 Chart 20. Price of Food Corn and Products Source: authors with data from the Banco Central de Honduras The chart shows that the consumer price of these key products had increased about 11.6% (corn fresh) and about 6.5% (the tortilla per unit) between January 2019 and January 2022, before the start of the RUC. Up to that point. the increase was below total accumulated inflation (measured by the overall consumer price index) which was about 15.4%. Therefore, even with the pandemic the inflation-ad- justed price for these products had in fact declined until just before the RUC. However, since the latter event the price of fresh corn jumped 29.3% between January and May 2022, for an accumulated of 44.3% since January 2019, being now clearly above the accumulated inflation for the same period, which was 19.9%. This was reflecting the impact of the global geopolitical turmoil on world food prices. In the case of tortillas, the price increase was smaller: 11.5% between January and May 2022, for an accumulation of 18.7% since January 2019. This means that until May 2022 at least, the price increase of tortillas in Honduras had remained below overall inflation. It remains to be seen when the processed product catches up with the jump in the price of the raw material. Another point to be considered for the supply of corn is the impact of the price of fertilizers and of en- ergy on production costs. An indicator is the relation of the price of the product compared to the price of fertilizers and of energy. If the ratio goes down it means that the input (fertilizers or energy) is getting more expensive compared to the price of the product, signaling a cost push, and, potentially, leading to a reduction of profit margins. However, as there are other components of production costs, these ratios give only a partial idea of the pressure on profit margins. Further, in the case of white corn, the use of fertilizers and energy inputs may be marginal. 7.72 1.65 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 4 5 6 7 8 9 10 Ja nu ar y M ar ch M ay Ju ly Se pt em be r N ov em be r Ja nu ar y M ar ch M ay Ju ly Se pt em be r N ov em be r Ja nu ar y M ar ch M ay Ju ly Se pt em be r N ov em be r Ja nu ar y M ar ch M ay 2019 2020 2021 2022 Maize and Products Maiz Desgranado Tortilla de Maiz 39 The next Charts 21 and 22 present those ratios using world prices for yellow corn (which may not track the domestic price of white corn in Honduras). Chart 21. Ratio Corn price / Fertilizers Cost Source: authors with World Bank “pink sheet” database Chart 22. Ratio Corn Price/Oil price Source: authors with World Bank “pink sheet” database The ratio of the price of corn to fertilizers is close to the low values of 2008 and it is clearly below the long-term average, signaling a cost pressure. In the case of oil, it is declining but above the average 0 1 2 3 4 5 6 7 8 19 60 M 01 19 61 M 10 19 63 M 07 19 65 M 04 19 67 M 01 19 68 M 10 19 70 M 07 19 72 M 04 19 74 M 01 19 75 M 10 19 77 M 07 19 79 M 04 19 81 M 01 19 82 M 10 19 84 M 07 19 86 M 04 19 88 M 01 19 89 M 10 19 91 M 07 19 93 M 04 19 95 M 01 19 96 M 10 19 98 M 07 20 00 M 04 20 02 M 01 20 03 M 10 20 05 M 07 20 07 M 04 20 09 M 01 20 10 M 10 20 12 M 07 20 14 M 04 20 16 M 01 20 17 M 10 20 19 M 07 20 21 M 04 Ratio of price of corn to cost index of fertilizers maize/fert 0 2 4 6 8 10 12 19 80 M 01 19 81 M 03 19 82 M 05 19 83 M 07 19 84 M 09 19 85 M 11 19 87 M 01 19 88 M 03 19 89 M 05 19 90 M 07 19 91 M 09 19 92 M 11 19 94 M 01 19 95 M 03 19 96 M 05 19 97 M 07 19 98 M 09 19 99 M 11 20 01 M 01 20 02 M 03 20 03 M 05 20 04 M 07 20 05 M 09 20 06 M 11 20 08 M 01 20 09 M 03 20 10 M 05 20 11 M 07 20 12 M 09 20 13 M 11 20 15 M 01 20 16 M 03 20 17 M 05 20 18 M 07 20 19 M 09 20 20 M 11 20 22 M 01 Ratio of price of corn to price of oil maize/oil 40 since the 2000s. The charts suggest the need to continue monitoring the impact of fertilizer and energy prices on production costs. 6.2. Red beans Chart 23 shows the percentage of imported beans (and pulses) in domestic consumption. Basically, Honduras consumption of these products depend on domestic production, but as noted later, in some cases there is a component of imports