Honduras Palm Oil Boom Fueling Corruption

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By Marco Echevarria

The soaring global demand for palm oil, primarily derived from oil palm fruits, has turned this commodity into a key export for Honduras, significantly impacting the country’s economy and environment. Palm oil, known for its versatility and low production costs, is extensively used in various industries, including food, beauty, and biofuel. Its affordability makes it a preferred alternative to other oils like sunflower and olive, thereby reducing manufacturing costs in the global market.

Palm oil fulfills approximately 40% of the world’s vegetable oil demand, used in food, animal feed, and fuel, with an annual production of about 210 million tonnes. Between 1995 and 2015, its production skyrocketed from 15.2 million tonnes to 62.6 million tonnes, and projections suggest it could quadruple again by 2050. Latin America, where production is expanding rapidly, contributes almost 7% to the global palm oil output.

In Honduras, the cultivation of oil palm gained momentum in 2014, following an investment of nearly $72 million in loans and grants by former President Juan Orlando Hernández to promote its growth. However, this cultivation boom has raised environmental concerns. Extensive oil palm farming, which can damage soil quality, accounts for about 4% of Honduras’s exports, primarily to the Netherlands, the United States, Italy, and Switzerland, totaling $334 million in 2021. The industry is dominated by six major companies, with two responsible for over half of the exports.

Despite the industry’s concentration, 60% of Honduras’s palm oil production is by smallholders, who sell their produce to larger corporations for refinement and export. The crop is a significant source of income for these farmers, providing consistent earnings every 15 days. The regional price for palm oil fruit varies, ranging from 2,400 lempiras per tonne in the off-season to double that amount in the summer.

Beyond the environmental implications, the palm oil industry in Honduras and across Latin America is entangled with illegal activities, including drug trafficking. According to Frances Thomson, a Latin America specialist at the Centre for the Study of Illicit Economies, Violence, and Development, agribusiness plays a crucial role in the drug economy, serving multiple purposes, including laundering and transportation.