Honduras Perhaps the perfect example of a Central American ‘banana republic’, by the late 1920s 90 per cent of its exports consisted of bananas from the plantations of three giant US companies. At that point, the companies determined not only the country's economy but also its infrastructure, politics, and social spending. Their authority was further enhanced by the support of the US government, which frequently interfered in domestic politics (seven military interventions 1903–37). Even though they continued to retain a crucial role in domestic life, the influence of the banana companies was reduced by two central factors. First, they were hit by a slump in prices following the Great
Depression, and the spread of plant diseases during the 1930s, so that banana exports in 1942–3 stood at 10 per cent of their peak in 1929–30, with GDP in 1943 only at 36 per cent of its 1930 level. Second, the country was modernized dramatically under the government of Juan Manuel Gálvez (1949–54), when the banana companies were taxed efficiently for the first time, an independent infrastructure was established, an independent central bank was founded (1950), and sanitary works were instigated.
These policies of modernization were continued by Gálvez's three successors until they were halted in 1963 by a military whose own traditional structures had become threatened by the forces of progress. Military rule was characterized by high administrative incompetence during the 1960s, while the military itself was almost defeated in the 1968
Soccer War. Despite increasing levels of corruption during the 1970s, the economy began to show some gradual improvement. After the establishment of a Constituent Assembly in 1980, a new Constitution was passed and in January 1982 civilian rule was resumed. During the 1980s, US influence increased even further through its use of Honduras as the main refuge for the Nicaraguan Contras, and the establishment of a direct US military presence there. Virtual US domination of Honduran foreign policy was ended only towards the late 1980s, when the civilian government decided to endorse the peace plan of
Arias Sánchez in opposition to current US policy. The domestic economy was hit by the subsequent decline of US spending in Honduras. At the same time, the civilian government also became more confident against the dominant military establishment. Under the liberal president Carlos Roberto Reina Idiaquez (1994–98), compulsory military service was abolished in April 1995, while the first military officers were charged with
human rights abuses in July 1995. Honduras continued to struggle with the human rights legacy of the civil war under his predecessor, Carlos Flores Facussé. Former military generals became subject to prosecution after the Supreme Court declared in 2000 that unjustified imprisonments and capital punishment committed during the civil war was not covered by the amnesty of 1987.
