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

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS XV. SUPPORTING INFRASTRUCTURE A. I NTRODUCTION Infrastructure is an important component of a well-developed trading community. Without it, a region would find it impossible to participate in the world of international trade. Thus, implementation of a highly efficient, user-friendly infrastructure system, offering cost-effective and reliable services, is easily recognized as a competitive advantage. In a broader context, there is a direct link between economic growth and infrastructure quality. Implementation and administration of a high-quality infrastructure system reduces costs, expands market reach, and induce s demand for increased services. Within the context of CAFTA and its participating countries, regional competitiveness is an emerging theme, with infrastructure playing an important role. Honduras’s stock of trade infrastructure presents two pictures, depending on one’s perspective within the country. Honduras enjoys two primary production/consumption zones: one located within the nation’s capital, Tegucigalpa; the other along the nation’s Atlantic coast at Puerto Cortez/ San Pedro Sula. These locations present a stark contrast to each other with regard to installed capacity, infrastructure quality, and overall effectiveness. Installed infrastructure in the Tegucigalpa consumption/production zone suffers from capacity constraints and poor service quality, ult imately hurting the nation’s overall competitiveness. In contrast, installed infrastructure within the Puerto Cortez/San Pedro Sula consumption/production zone benefits from relatively thoughtful planning and targeted investment, providing a comparatively solid competitive environment. That said, it is important to note that the nation’s overall stock of trade infrastructure suffers from organizational issues that prevail across the nation. These issues include a high level of direct government involvement in implementing and operating many of the nation’s key infrastructure components. Road differences in capabilities and service levels exist between the various infrastructure components and within individual sectors. Exhibit 1 presents a summary assessment and key findings for Honduras’s individual infrastructure components. Infrastructure Overall Component Assessment Roadways Less Competitive Exhibit 1. Summary Infrastructure Assessment Findings Key Positive Aspects Key Negative Aspects • User fee–based maintenance program • Strategic planning initiatives for key transportation corridors • Pavement systems in generally good condition • High capacity corridor at San Pedro Sula • Increasing incorporation of safety considerations within cross-section design • Ability to secure foreign financing for major projects XV-1 • Incomplete allocation of maintenance funds • Under capacity along key corridors • Dense traffic conditions within city limits • Under capacity overpasses and bridge structures • Incomplete network upgrades
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS Infrastructure Overall Component Assessment Key Positive Aspects Key Negative Aspects Seap orts Competitive • Dedicated facilities by cargo Airports Competitive 1 / Less Competitive 2 type • Availability of moderate modern handling equipment • Recent ISPS certification— strict access control • Broad capacity expansion capability • Recent privatization of airport operations • High-quality passenger and cargo terminals at San Pedro Sula (SPS) • SPS—Significant growth potential Railroads Unavailable • No railway service is currently provided Border Competitive • Existing dedicated facilities Crossings • Future removal of border crossing requirements Electricity Less Competitive Telecom/IT Less Competitive • Private sector cogeneration plants • Government consideration of privatization of electric company • Recent initiatives to expand fixed-line services through private sector participation • Future expiry of national telecommunications company exclusivity clauses • Private sector mobile communications market Assessment Scale • Agility of implementing institution hampered by government organization and fiscal control • Incomplete capital projects • Just-in-time departure demands of industry • Quality/Capacity of airport infrastructure mixed • Teguc—very limited growth potential • No railway service is currently provided • Customs Union initiatives have precluded investment • Limited information technology (IT) coordination • Off-property traffic congestion • Government-run monopoly entity • High technical/nontechnical distribution losses • High dependence on fossil fuel thermal generation plants • Lack of recent investment in maintenance and expansion • Government-run monopoly entity • Low historical investment in infrastructure • High government dependence on revenues from telecommunications company • High cost of international calls • Low teledensity • High subsidy rate for local/national calls from international rates. • Poor service quality Highly Competitive Deployed systems exhibit high quality in both fixed assets and operations, are uniformly deployed nationally, and have significant opportunities for growth Competitive Deployed systems adequately meet market demands, may exhibit potential inconsistencies nationally, an d have opportunities to maintain service levels over time through thoughtful capital planning and implementation Less Competitive Deployed systems currently suffer from proble ms inhibiting efficient trade Developing Systems have only recently been deployed providing very limited existing service capabilities, and consequently are immeasurable Unavailable Systems are not deployed 1 San Pedro Sula International Airport 2 Tegucigalpa International Airport XV-2
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