Trade and Commercial Law Assessment - Honduras - Economic ...

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS k. Automation would expedite acceptance and release of merchandise, and would decrease the need for an onsite Customs presence. ♦ Operators must employ full-time Customs officers, even through Customs staff are occupied only 20–50 percent of the time. ♦ All told, the costs and delays associated with Customs processing have severely affected warehouse businesses. For the past 6 years, warehouse profits have been declining because Customs restrictions have been driving business away. Despite having the lowest costs in the region, Honduran warehouse operators can no longer compete. Efforts to lobby for the required reforms within the Ministry of Finance and the Central Bank have failed. The industry is still operating within the confines of an unchanged 1967 law. As a result, this critical private supporting institution is in danger of disappearing. The transportation industry generally provides an adequate service at a reasonable rate for the Honduran trading community. According to transportation officials, the focal point for sea transportation is Puerto Cortez, which handles 90 percent of Honduran vessel traffic. Approximately 30 carrier lines, including 10– 12 major international containerized carriers and small bulk carrier lines, call at the port. In total, about 150 calls per month are made through this facility, with a minimum of one call per day to and from the southeast coast of the United States. The major carriers all have terminals within the port limits. Although security is good within these areas, theft has occurred when containers are drayed outside these areas for examinations. As a result, carriers now demand a letter of transfer with receipt. If the cargo is not returned within 24 hours, the carrier checks on its status. In addition, containers are left off wheels at night to make theft more difficult. The trucking industry falls into two distinct groups: five major operators handle about 40 percent of the trade, with the remainder covered by small owner-operators. The Cámara de Transporte de Carga de Honduras (CATRACHO) is Honduras’s major trucking association, representing 70 percent of the industry through its 1,700 company members. Each carrier has its own arrangement with the trucking companies. Some run their own operations, others use the major trucking companies, and some deal exclusively with the small owner-operator businesses. Most require that the vehicles be in good condition and no older than 6 to 10 years. ♦ Transport Industry—Vessel Carriers and Truckers 1) Transport Industry Operations That Support Trade Facilitation High-quality, sufficient service is available to the trade through the vessel carriers calling at Puerto Cortez. These international carriers meet industry standards regarding security and operate efficiently within their private terminals at the port. ♦ An excellent partnership exists between the carriers and the trucking community. Most carriers compensate partially for rising fuel costs. Carriers dealing with small companies will finance the maintenance of a fleet, secure fuel at reduced costs, and provide insurance, deducting small amounts from each payment to cover these expenses. No interest is charged for these services. XI-27
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS E. ♦ Drivers are subject to screening to decrease theft and corruption, which increases security. The Center of Criminal Investigation within the Ministry of Security performs background investigations on all candidates for an operator’s license. Thirty candidates were denied licenses last year as a result of these checks. One carrier requires truckers to take a polygraph every 4 months. This carrier reports no loss of merchandise since this program was initiated 4 years ago. ♦ Security of transport is a major issue and adds significantly to the cost of moving merchandise. Approximately 80 percent of cargo moves involve additional security measures, including armed guards (which cost $45–50 per load) and continual monitoring of each shipment in transit (at a cost of $10–20 per move). These fees are now routinely incorporated into the general tariff of the carrier. Cargo does not move by road after 6 p.m. As a result of these private initiatives, security is improving, but at significant cost to the trader. ♦ 2) Transport Industry Issues to Address ♦ Rising fuel costs are a major problem for the trucking companies. Honduras has high prices, at $2.25 per gallon at the time of this report. Diesel fuel is $.56 cheaper in Guatemala and $.43 cheaper in El Salvador. ♦ The Honduran trucking fleet is in poor condition. Only 20 percent of the fleet is rated as very good, while 50 percent is merely acceptable and 30 percent is in poor condition. The number of “poor” trucks continues to increase because of various factors, which include prohibitively high interest rates (between 26 percent and 36 percent) for financing new purchases, a low profit margin (between 7 percent and 10 percent) due to oversupply in the market, and rising fuel costs. ♦ Intentional overloading of containers and open trucks have caused damage to the highways. There is no fear of penalty—if these activities are detected, bribes will permit loads to proceed. Carriers and truckers have a poor working relationship with the port authority, a public agency. Improvements in operations or resolution of problems are achieved slowly. Most port authority management personnel are political appointees who lack experience in and knowledge of port operations. SOCIAL DYNAMICS The working relationship between the executive branch and private industry is currently good, in fact, the best it has been in a long time. President Maduro is generally pro-business and a free trade ad vocate. The executive maintains a dialogue with the private sector for input into policies. One of the successes resulting from this cooperation was the institution of a reformed, more transparent government procurement program 2 years ago. To date, this effort has resulted in a savings of more that $7 million within one agency. Despite these initiatives, the government is viewed by the private sector as not active enough in modernizing and pursuing reforms that would make Honduras more competitive. Although there seems to be a political will to change, not enough urgency is attached to reform. As a result, XI-28
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