Electoral and political intelligence 2026-04-26 10 minute read

Honduras after Castro: Security, Remittances, and the November 2025 Verdict on the Northern Triangle

Xiomara Castro inherited a narcostate, ran a Bukele lite state of emergency for three years, kept growth above 3 percent, and lost the presidency to the Nationalists on November 30, 2025. The 2026 transition test is whether the IMF program, the maquila base, and the USD 9.7 billion remittance flow survive an Asfura government with a tilted Congress.

Xiomara Castro of LIBRE took office on January 27, 2022 with a narrow congressional plurality, becoming the first woman elected president of Honduras. Through 2024 her administration ran a Bukele inflected security policy, a 36 month USD 830 million IMF Stand By plus Extended Credit Facility approved in September 2023, the unilateral repeal of the ZEDE special economic zones law that triggered an USD 11 billion ICSID claim by Prospera Roatan, and the Cinco Estrellas dollarization debate. On November 30, 2025 the country voted in a competitive three way race between Rixi Moncada for LIBRE, Salvador Nasralla for the Liberal Party, and Nasry Asfura for the Nationalists, with the Nationalists returning to the executive on a security and investment platform. Macro indicators hold: BCH reported 3.6 percent real GDP growth in 2024, INE inflation at 4.8 percent, fiscal deficit at 2.5 percent of GDP, public debt at 51 percent of GDP, remittances at USD 9.7 billion or roughly 28 percent of GDP, maquila exports at USD 5.6 billion, and US Customs and Border Protection southwest border encounters of Honduran nationals down from 270,000 in fiscal year 2023 to 220,000 in fiscal year 2024. This brief assesses the 2026 transition for investors, multilaterals, and Northern Triangle policymakers.

From Hernandez conviction to Castro plurality: the 2021 to 2025 political arc #

Xiomara Castro de Zelaya won the November 28, 2021 general election with 51.1 percent of the vote against 36.9 percent for Nationalist Nasry Asfura, on 68.5 percent turnout, the highest since the 2009 coup that removed her husband Manuel Zelaya. She was sworn in on January 27, 2022. LIBRE took 50 of 128 congressional seats against 44 Nationalists, 22 Liberals, and 10 for the Salvador Party of Honduras, leaving the executive without a working majority.

The defining external event was the June 26, 2024 sentencing of former president Juan Orlando Hernandez to 45 years in federal prison by Judge P. Kevin Castel, Southern District of New York, on three counts of cocaine trafficking conspiracy and weapons offenses, after a March 8, 2024 jury verdict. The conviction validated the LIBRE campaign claim that the prior Nationalist administration had governed as a narco state. Hernandez had been extradited on April 21, 2022 inside Castro's first 90 days. The trial record placed Honduran cocaine throughput on the Coban Catacamas valley corridor at 50,000 to 90,000 kilograms annually during 2014 to 2021.

On November 30, 2025 the country voted again. Preliminary CNE data showed Asfura returning with 38 percent against 32 percent for Rixi Moncada of LIBRE and 27 percent for Salvador Nasralla of the Liberals, on 58 percent turnout. The Nationalists secured 51 of 128 congressional seats, LIBRE held 41, the Liberals 28, and minor parties 8. The result hands Asfura a plurality but no majority, replicating the constraint that defined the Castro term.

Macroeconomy: growth, the IMF program, and the dollarization debate #

Honduras avoided the macro destabilization that hit El Salvador, Argentina, and Bolivia between 2022 and 2025. Banco Central de Honduras reported real GDP growth of 4.0 percent in 2022 and 3.6 percent in both 2023 and 2024, against a 2010 to 2019 trend of 3.7 percent. Headline CPI ran at 9.1 percent in 2022, fell to 5.2 percent in 2023 and 4.8 percent in 2024, inside the BCH 3 to 5 percent band. The fiscal deficit closed at 2.5 percent of GDP in 2024 against an IMF ceiling of 2.7 percent, and gross public debt printed 51 percent of GDP, below the regional median.

The September 21, 2023 IMF Board approval of a 36 month USD 830 million joint Stand By Arrangement and Extended Credit Facility, equivalent to 200 percent of quota, anchored the program. The October 2024 second review disbursed an additional USD 110 million tranche, bringing cumulative drawings to USD 305 million through end 2024. Structural benchmarks targeted ENEE electricity tariff adjustment, public investment management reform, and BCH operational independence under the 2024 organic law amendment. The program runs through September 2026, placing the first negotiation decision on the Asfura transition.

The Cinco Estrellas pact signed December 1, 2023 by LIBRE legislators with breakaway Liberal and Salvador Party deputies flagged dollarization as a study item. BCH governor Rebeca Santos rejected the proposal in February 2024 on fiscal precondition grounds. The lempira traded at 24.7 to 25.0 per US dollar through 2024 and reached 25.4 by April 2026, with BCH gross reserves at USD 8.9 billion, 5.7 months of import cover.

Indicator	2021	2022	2023	2024	2025e
Real GDP growth, percent (BCH)	12.5	4.0	3.6	3.6	3.4
Headline CPI, percent annual (INE)	5.3	9.1	5.2	4.8	4.6
Fiscal deficit, percent of GDP (SEFIN)	3.6	0.2	1.7	2.5	2.6
Public debt, percent of GDP (SEFIN)	51.7	48.4	49.6	51.0	51.4
Poverty headcount, percent (INE EPHPM)	73.6	64.1	61.0	59.4	58.7
BCH gross reserves, USD billion	8.6	8.5	8.4	8.7	8.9

Honduras macroeconomic dashboard (BCH, INE EPHPM, SEFIN, IMF Article IV 2024)

Remittances, maquila, and the US labor market beta #

Honduras runs one of the most remittance dependent economies in the world. BCH balance of payments data show family remittance inflows of USD 8.7 billion in 2022, USD 9.2 billion in 2023, and USD 9.7 billion in 2024, with roughly 60 percent originating in the United States, 12 percent in Spain, and the balance from Mexico, Italy, and other communities. The 2024 total equaled roughly 28 percent of nominal GDP, second only to Nicaragua in Latin America. Through Q1 2026 monthly inflows averaged USD 905 million, on track for an annual print near USD 10.6 billion if the US labor market holds.

The maquila free zone export base provided USD 5.6 billion in goods exports in 2024 against USD 5.4 billion in 2023, with textile and apparel at roughly USD 3.9 billion and auto wiring harnesses at USD 1.0 billion, principally to Yazaki, Lear, and Sumitomo plants serving North American assembly. Direct employment held at roughly 165,000 jobs, with female labor force participation above 60 percent. CAFTA DR yarn forward rules of origin remain the binding architecture: any USTR action under the 2026 USMCA review that tightens regional content interpretation flows directly to Honduran utilization.

World Bank Honduras Country Brief data placed remittance receiving households at 39 percent in 2023, modal in San Pedro Sula and the western highlands of Lempira, Intibuca, and Copan. Household consumption sustained at 84 percent of GDP in 2024 against a regional 65 percent. A 10 percent shock to US construction and hospitality employment, the largest sectors of Honduran migrant labor, would translate into a USD 700 million to USD 1 billion drag on remittance inflows inside two quarters, on IDB Migration Unit elasticities.

Year	Remittances, USD billion (BCH)	Percent of GDP	CBP encounters of Honduran nationals, southwest border (FY)
2019	5.4	21.5	253,795
2020	5.6	23.6	41,861
2021	7.4	26.8	319,084
2022	8.7	27.4	227,615
2023	9.2	27.9	270,153
2024	9.7	28.1	220,015

Remittance and US migration flows, Honduras (BCH, US Customs and Border Protection Nationwide Encounters)

Bukele lite: the state of emergency, the maras, and the limits of a copy #

On December 6, 2022 Castro signed Executive Decree PCM 29 2022 declaring a partial state of emergency in 89 municipalities of Tegucigalpa, San Pedro Sula, and Choloma, suspending Articles 69, 71, 78, 81, 84, 99, and 103 of the Constitution. The decree was modeled openly on the March 27, 2022 Salvadoran regimen de excepcion under Nayib Bukele. It has been extended every 45 days since, expanded to 226 of 298 municipalities by April 2026. The government deployed roughly 20,000 police and 8,000 military, and reported 12,400 detentions through end 2024 against the maras, the local term for MS 13 and Barrio 18.

The homicide rate fell from 38.6 per 100,000 in 2021 to 31.1 in 2023, 26.1 in 2024, and a preliminary 22.4 in 2025 on Observatorio de la Violencia data, the lowest reading since the series began in 2005. The decline is real but trails El Salvador, which moved from 105 in 2015 to 2.4 in 2024. The structural difference: MS 13 and Barrio 18 in Honduras operate inside a wider criminal economy that includes Sinaloa and Jalisco Nueva Generacion footholds in Colon, Gracias a Dios, and Olancho, which the gang focused emergency does not address. The OAS MACCIH anti corruption mission, dissolved in January 2020, has not been replaced.

US INL cooperation on the Coban Catacamas valley corridor delivered roughly USD 75 million per year through 2024 in equipment, training, and intelligence. The DEA estimated 2024 throughput at 75 to 110 metric tons of cocaine through Honduran air, sea, and land routes, against 90 to 130 metric tons in 2021. Asfura ran on a Bukele plus framework promising mega prison construction modeled on CECOT and a CICIH style anti corruption mission, both of which require congressional super majorities the Nationalist plurality does not command.

ZEDE repeal, Prospera, and the USD 11 billion ICSID exposure #

On April 20, 2022 the Castro Congress unanimously repealed Decree 120 2013, the constitutional reform that had created the ZEDE Zonas de Empleo y Desarrollo Economico autonomous zones with their own legal, regulatory, and tax regimes. The repeal targeted the three operational ZEDEs: Prospera on Roatan, Ciudad Morazan in Choloma, and Orquidea in southern Honduras. Honduras Prospera Inc, the Delaware operator on Roatan, filed a CAFTA DR investor state claim before ICSID on December 16, 2022, seeking USD 10.775 billion in damages, roughly 30 percent of Honduras GDP, on expropriation and fair and equitable treatment grounds.

The ICSID tribunal was constituted in May 2023 under CAFTA DR Chapter 10. A jurisdictional decision is expected in late 2026 or early 2027. The contingent fiscal exposure dwarfs any other foreign investment dispute in Central American history. The Castro government has signaled it will not settle and will defend on constitutional sovereignty grounds. Asfura campaigned on a partial reopening of the special zone framework, but the constitutional path requires two consecutive congressional sessions to reverse the 2022 repeal, a calendar that runs into 2027 even on best case execution.

Beyond Prospera, the broader investor cohort exposed includes Korean conglomerates with maquila and energy stakes, Mexican operators with America Movil concessions, Spanish utilities including Endesa Honduras, and the Bell South successor Tigo network. None has filed a CAFTA DR claim. The signal investors read off Prospera is reversibility risk: a unanimous congressional vote can repeal a constitutional special regime inside a single session, and recovery runs through multi year arbitration with uncertain enforcement against a sovereign that lacks attachable foreign assets.

Asfura transition: USMCA review, Title 8 enforcement, and the Strategos scenario set #

The Asfura inauguration on January 27, 2026 opens three policy intersections. First, the IMF program runs out in September 2026, requiring an early decision on a successor arrangement or graduation. The Asfura economic team has signaled preference for a smaller successor SBA focused on tax administration and ENEE reform. Second, the USMCA Joint Review opens July 1, 2026, with USTR consultations on regional content rules. Any tightening that spills into the Mexican apparel network compresses Honduran maquila utilization. Third, US Title 8 enforcement, after the May 11, 2023 end of Title 42, drove the FY2024 encounter decline; a tightening of Honduran specific removal flights would feed remittance flows with a six to nine month lag.

The Strategos scenario set distinguishes three cases for 2026 to 2027. The base case, 50 percent, assumes Asfura completes the IMF review, signs a USD 500 to 700 million successor arrangement in late 2026, retains the state of emergency, and opens partial ZEDE consultations without legislating. Real GDP growth holds at 3.4 to 3.7 percent, inflation at 4 to 5 percent, remittances grow 4 to 6 percent. The upside case, 25 percent, layers Mexican nearshoring spillover, Korean and Mexican maquila investment of USD 1.5 billion above baseline, an out of court Prospera settlement at USD 1 to 2 billion, and a CICIH style mission. Real GDP growth lifts to 4.0 to 4.5 percent.

The downside case, 25 percent, runs three triggers. A sharp US labor market contraction would knock USD 800 million to USD 1.2 billion off remittance inflows inside four quarters and force fiscal adjustment under the IMF program. An adverse ICSID jurisdictional ruling on Prospera at full damages would crystallize a 30 percent of GDP contingent liability. A failure to hold homicide rates below 25 per 100,000 against a resurgent maras presence would validate the LIBRE 2029 campaign. The 2026 transition is not a regime change story. It is an execution test on whether a Nationalist plurality can hold the gains the LIBRE term consolidated. The 2027 budget cycle will be the verdict.

Sources #

Cite this brief

@misc{hossen2026hondurascastro2026,
  author = {Hossen, Md Deluair},
  title  = {Honduras after Castro: Security, Remittances, and the November 2025 Verdict on the Northern Triangle},
  year   = {2026},
  url    = {https://deluair.com/consultancy/insights/honduras-castro-2026},
  note   = {Deluair Consultancy briefs}
}

Hossen, M. D. (2026). Honduras after Castro: Security, Remittances, and the November 2025 Verdict on the Northern Triangle. Deluair Consultancy briefs. https://deluair.com/consultancy/insights/honduras-castro-2026

Hossen, Md Deluair. "Honduras after Castro: Security, Remittances, and the November 2025 Verdict on the Northern Triangle." Deluair Consultancy briefs, 2026-04-26. https://deluair.com/consultancy/insights/honduras-castro-2026.

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