Honduras Security Warnings and the Risks to US Investments in Central America

The US Embassy’s May 2025 security alert for potential mass shootings in Tegucigalpa, Honduras, underscores the persistent challenges investors face in a region plagued by violence and instability. The warning, which targeted specific locations including the Elliot Dover Christian School and an unnamed mall, highlights how security risks in Central America can disrupt business operations and deter capital inflows. For investors, these threats—coupled with Honduras’s existing Level 3 Travel Advisory (“Reconsider Travel”) and its state of emergency—are critical considerations for assessing risk exposure in the region.

The Immediate Impact: Tourism and Real Estate

Honduras’s tourism sector, already reeling from its poor safety reputation, faces renewed headwinds. The embassy’s advisory, though temporary, may discourage corporate travel and leisure tourism, sectors heavily reliant on trust in local security. For instance, companies with operations in Tegucigalpa—such as hotels, real estate developers, or logistics firms—could see reduced demand or higher insurance costs. The Centro Civico, a hub for government offices and public gatherings, is emblematic of the vulnerability of civic infrastructure to violence.

Meanwhile, the broader Gracias a Dios Department, under a Level 4 Advisory (“Do Not Travel”), remains a hotspot for drug trafficking and gang activity. This area is critical for transit routes between South and North America, yet its instability deters infrastructure investment, such as ports or energy projects, which could otherwise boost regional connectivity.

Broader Regional Risks: Beyond Honduras

Honduras’s security challenges are part of a larger pattern across Central America. The Northern Triangle (Honduras, Guatemala, El Salvador) suffers from some of the world’s highest homicide rates, fueled by gangs like MS-13 and transnational drug cartels. For investors, this creates a “spillover” risk: violence in one country can destabilize entire supply chains or deter cross-border trade.

Consider the agricultural sector: Honduras is a major producer of coffee, bananas, and palm oil. Persistent violence could disrupt harvesting, transportation, or export logistics, especially if key routes are targeted. Similarly, mining investments—Honduras has significant gold and silver reserves—are vulnerable to extortion or attacks on infrastructure.

The US Response: A Limited Safety Net

The Biden-Harris Administration has prioritized pandemic-related health security, allocating over $2.8 billion since 2022 to combat threats like avian flu. However, its approach to physical security in Central America remains constrained. The embassy’s advisory relies on collaboration with Honduran authorities, but local police capacity is stretched thin. The Honduran government’s State of Exception, which suspends constitutional rights in over 75% of municipalities, has done little to quell crime and may even fuel social unrest.

For investors, this raises questions about reliance on host governments for protection. The US Consular Information Program (CIP), which issued the warning, emphasizes apolitical risk assessments, but private firms must still conduct due diligence. Insurance premiums for operations in high-risk areas are likely rising, and geopolitical risk analysts warn that Central America’s instability could outpace the region’s growth potential.

The Investment Trade-Off: Risks vs. Opportunities

Despite the risks, Central America offers opportunities for investors willing to navigate the challenges. The region’s US-Central America Free Trade Agreement (CAFTA) provides tariff benefits for manufacturers, while its proximity to the US makes it a logical base for nearshoring supply chains. Additionally, renewable energy projects—such as wind and solar farms—could thrive in Honduras’s underdeveloped energy sector, though they require robust security plans.

Yet, the Honduras warning serves as a reminder that stability is fragile. Investors should diversify geographically, favoring countries with stronger governance, such as Costa Rica or Panama, and sectors with high automation (e.g., tech parks) that reduce reliance on physical presence.

Conclusion: A Balancing Act for Investors

The US Embassy’s alert is a stark reminder that security risks in Central America remain a major hurdle for investors. While Honduras’s $21 billion GDP and strategic location offer growth potential, the costs of instability—including higher insurance, security staffing, and reputational damage—must be weighed against returns.

Data paints a cautionary picture: Honduras’s homicide rate of 29 per 100,000 people (2023) is among the world’s highest, and its economy grew just 2.3% in 2023, lagging peers like Guatemala (3.1%). For now, investors may find better risk-adjusted returns in safer markets, even if they come at higher costs. As the US State Department’s warnings make clear, security is not just a local issue—it’s a systemic risk that demands careful consideration.

In an era of geopolitical fragmentation, Central America’s allure lies in its potential—but its viability hinges on progress against the violence that keeps capital on the sidelines.