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

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS 2. private sector companies that operate without employ modern standards of corporate governance. That said, recent policy reforms, including the strengthening of the financial regulator, have lowered risk premium. The Central Bank of Honduras manages exchange rate policy and regulation. Its operations impose no real encumbrances on trade. a. Central Bank Operations That Support Trade Facilitation ♦ Currency exchange occurs at numerous institutions, including banks, currency exchanges, and hotels. ♦ Currency exchange operates at rates that are highly competitive, and fees for wiring money abroad are less than 10 percent of the amount of money to be wired. ♦ The dollar is fairly tradable in the market, although not as widely used as in Nicaragua or Guatemala. The national supporting institutions that facilitate trade-related finance are relatively weak. Honduras has no government-sponsored export credit agency. As noted, Hondurans do receive benefits from the Central American Bank for Economic Integration. One BCIE program involves awarding credits to traders for circulating and fixed capital. BCIE targets economically viable projects and exporting companies to upgrade regional export capacity. The main supporting institution for securing money flows, the Financial Crimes Enforcement Unit, is working to more effectively address money laundering. It is early in the development of this capacity, but it appears that the institution is working hard on this critical issue. In 2004 a number of cases were been brought and won against money launderers. The other institutions that address illegitimate financial flows, i.e., banks, regulator, and prosecutors, are perceived as cooperative. E. Central Bank ♦ The institution has sufficient capacity to administer the exchange rate function. D. SUPPORTING INSTITUTIONS SOCIAL DYNAMICS The soc ial dynamics of trade-related money flows are relatively poor. Lack of access to trade finance credit is a serious issue in Honduras and receives a good deal of attention at all levels. The government, banks, smaller exporters, and potential traders are all interested in and focused on the need for change. However, the solutions are difficult and structural, and the dynamics do not appear to favor real change in the near term. The issue of money laundering also receives attention at many levels. The government has been working to improve its capacity to deal with the problem through passage of legislation and establishment of appropriate institutions and processes. The private sector, in turn, has been responsive in implementing its responsibilities, such as know-your-customer regulations. XIV-3
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS F. ♦ RECOMMENDATIONS Improve access to credit for SMEs seeking to do business as importers and exporters. Although there are basic tools for conducting exchange of payment for trade (i.e., letters of credit), trade and financial institutions should develop strategies to more effectively extend credit to reliable small and medium-sized traders. A robust trading system gives SMEs the ability to finance their export and import activities, but the current system often requires smaller traders to self-finance their activities. This reality imposes serious costs on importers and exporters, making them less competitive. Strategies to pursue include such activities as: – Establishing guarantee funds that offer credit to exporters for fewer guarantees than are currently demanded – Developing associations/cooperatives among producers for pooling resources and risks to enable acquisition of lower cost credit – Increasing importers’ and exporters’ understanding of existing bank instruments through seminars and training. XIV-4
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