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

TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004
HONDURAS
3 months to a year, but with the assistance of the chamber’s help desk, the wait can be reduced to
7 days.
The Honduran Council of Private Enterprise, Consejo Hondureño de la Empresa Privada
(COHEP), is an essential organization for fostering business growth. COHEP makes proposals
for policy reform, specifically lobbying for reforms of the Property Law and the Law on
Administrative Simplification. COHEP has $200,000 available for SME financing. With these
funds, provided by the Government of Taiwan, the organization grants loans of up to $5,000 to
SMEs under flexible terms.
The National Association of Industry, Asociación Nacional de Industriales de Honduras
(ANDI), an organization of manufacturing companies, has played an important role in economic
and political changes, such as the transition from dictatorship to democracy. ANDI also has
extended its influence to promote growth of SMEs. For example, the organization promoted the
creation of the Fundación Covelo, a foundation for financing SMEs, which has accumulated
almost $25 million to assist small businesses. Fundación Covelo provides SMEs with credit lines
of up to $16,000.00 on favorable terms (monthly interest rates of 3 percent versus the 10-percent
daily rates that some microfinance institutions charge). The foundation seeks loan guarantees,
but guarantees are not required. Fundación Covelo is about to launch a bank specializing in
SMEs in which credits of more than $16,000 can be obtained. Currently, the foundation is raising
capital to set up the bank.
In Honduras, there are two stock markets: one in Tegucigalpa and one in San Pedro Sula. Neither
stock market has the capacity necessary to meet the demands of the private sector in Honduras.
The Tegucigalpa market is the larger of the two but is not automated and mostly trades
government bonds. Issuance of bonds is expensive and highly regulated. To date, there have not
been any equity-based issuances, although a bank recently announced intentions to make such an
issuance in the future. It was reported that there are only 144 stockholders in the Tegucigalpa
stock market, most of which are banks. In 1999 there was a major financial crisis after hurricane
Mitch caused extensive damage to Honduras. The hurricane caused bond holders to liquidate to
pay costs associated with the damage. This mass selling caused a liquidity crisis in banks, and
the government was forced to bail out many of these financial institutions, spending what
amounts to half of the country’s gross domestic product (GDP). A new Law on Stock Market
was passed as a result of the 1999 crisis, but the market remains in poor condition.
Officials interviewed for this assessment estimated that there are approximately 700 CPAs and
30,000 registered bookkeepers in Honduras. There is an association of CPAs, which certifies and
sets the standards for CPAs. This association is drafting a law on accounting and auditing that
will create a board to establish standards in those two areas. Currently, accountants nominally
follow Generally Accepted Accounting Principles (GAAP), but there is no uniformity in GAAP
application and use is not mandatory. The association of CPAs has issued resolutions urging
members to follow the international rules of accounting, International Accounting Standards
(IAS) and International Standards on Auditing (ISA), but these standards are rarely used.
The Comisión Nacional de Bancos y Seguros (CNBS) has supervisory authority over banks,
insurance companies, and the stock market. It requires banks, insurance companies, and stock
markets to submit audited financial statements. However, not just any accounting firm may audit
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