HNL (Honduran Lempira)

What Is the HNL (Honduran Lempira)?

The Honduran lempira (HNL) is the official currency of the Republic of Honduras. It is made up of 100 centavos, and the symbol L often represents the currency. The lempira gets its name from the 16th-century indigenous Honduran ruler who fought against Spanish rule.

As of December 2020, 1 HNL is equal to approximately USD $0.04, and has been steadily losing value against the U.S. dollar over the past decade.

Key Takeaways

  • The Honduran Lempira (HNL) is the official currency of Honduras, first issued in 1931 when it replaced the Honduran peso at par.
  • The currency is free floating against other currencies, where it has steadily declined against the U.S. dollar from around $0.06 to around $0.04 over the past 5 years.
  • Today, Honduras remains dependent on exports of commodities like bananas, leaving its economy vulnerable to natural disasters.

Understanding the Honduran Lempira

The Honduran lempira was first introduced into circulation in 1931 as a replacement for the Honduran peso at par. Coins appeared first in 1931 and paper currency followed in 1932. The Honduran monetary system had evolved to its current form by 1950, with the establishment of the Central Bank of Honduras along with the nationalization of the Honduran payments system.

Though the National Congress of Honduras declared the Honduran Lempira to be the official currency before 1950, it was not until the founding of the central bank that the government was able to institute it as a monetary standard. Before this event, there were only two Honduran banks, and the majority of the country’s population had little access to financial services. To improve security, a 20-lempira note, printed on polymer began circulation in 2010.

The Central Bank of Honduras manages the Honduran currency and issues banknotes in denominations of 1, 2, 5, 10, 20, 50, 100, and 500 lempiras. The bank also issues coins in denominations of 5, 10, 20 and 50 centavos.

History and Hardships for the Honduras and the Lempira

The Republic of Honduras, located in Central America, was home to many ancient cultures, including the Maya. Many of the cultural practices of these ancient peoples blended with that of the Spanish Conquistadors beginning in the 16th century. During the Spanish conquest, silver mining was pivotal to the life of the native populations, and later, to the slaves brought in to replace the Hondurans lost to sickness and brutality.

The nation gained independence from Spain in 1821 and has a long history of political instability that continues to this day. It continues as one of the poorest countries in the Western Hemisphere. In fact, Honduras is the source of the term "banana republic," which was coined by the American writer O. Henry in a 1904 short story based on his experiences while living in Honduras. The term has come to describe a politically unstable country with an economy dependent on exports of a few resources, like bananas, as has long been the case with Honduras. The nation's chief economy is agriculture, and much of the rural population are poor subsistence farmers. 

Honduras’ first major export was not fruit, but silver, which accounted for 55% of the country’s exports in the 1880s. The most prominent company to operate in Honduras during the 19th century was New York and Honduras Rosario Mining Company, which owned several productive silver mines. Bananas grew in importance starting in the 1910s, and by 1929, Honduras was exporting $21 million worth of the fruit annually.

Throughout the 1940s, 1950s, and 1960s Honduras struggled with several internal crises, a military coup, and border disputes with neighbor El Salvador. These problems led to financial hardships for the people and the country. However, a new constitution and general elections in the 1980s brought hopes of prosperity. These hopes were dashed in 2009 when a coup transferred power, and the world responded by condemning the action. 

Today, Honduras remains dependent on exports of commodities like bananas, and this agricultural focus leaves the national economy vulnerable to the effects of natural disasters. Deforestation from logging is causing soil erosion, and mining operations have polluted the nation's largest source of fresh water, Lake Yojoa. 1974’s Hurricane Fifi and 1998’s Hurricane Mitch are examples of natural disasters which severely affected the country’s banana harvest, and therefore the entire Honduran economy. In recent years, the government has tried to promote economic growth through privatization and free trade agreements, although Honduras remains one of the world’s poorest countries.

According to World Bank data, Honduras is a low middle-income economy. The country experiences a 4.37% annual inflation rate and has a gross domestic product (GDP) growth of a 2.65%, as of 2019, which is the most current year of available data.

Article Sources
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