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

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS I. EXECUTIVE SUMMARY Honduras faces both challenges and opportunities. There is, at this time in Honduras, a particular urgency in pursuing the current economic reforms: assuming the agreement is ratified implementation of the Central American Free Trade Agreement (CAFTA) is imminent, a series of high-profile initiatives pertaining to property rights are being implemented, and new demands on institutions that have been ineffective or corrupt are challenging the country to take even greater strides toward meaningful change. The near future will show whether Honduras is to be pushed forward by the energy, commitment, and forward-thinking acts of many of its officials or whether self-interested groups will obstruct these critical reforms and dominate the economic landscape for the remainder of this decade. At the request of the United States Agency for International Development (USAID), Booz Allen Hamilton conducted an assessment in September 2004 to analyze strengths, weaknesses, and opportunities for change in two critical areas in Honduras: commercial legal and institutional reform (CLIR) and trade facilitation. The Assessment was conducted by a team of legal and trade reform specialists as one part of a five-country Central American regional assessment. A report prepared for the region presents the team’s findings and recommendations directly pertaining to Honduras. This report addresses common issues in trade facilitation and CLIR, along with regional approaches to reform and development in these areas. First, the report identifies certain overriding themes in Honduras’s Commercial Law and Institutional Reform (CLIR) and trade environment that should be incorporated into reform programs on a cross-cutting basis. These issues include (a) the significance of the enactment in 2004 of the Ley de Propiedad (LdP) and other real property reforms, and the long-term importance of monitoring and supporting their implementation; (b) a lack of public confidence in the judiciary; (c) difficulties in establishment and growth faced by small and medium-sized enterprises (SME), due particularly to the lack of access to capital; (d) a series of constraints against foreign direct investment; and (e) difficulties Honduras may face in preparing for implementation of the CAFTA. Second, the report examines 13 CLIR and trade-related areas designated for assessment by USAID—namely, company law, contracts, real property, collateral law, commercial dispute resolution, bankruptcy, competition policy, international trade, flow of goods and services, flow of people, flow of money, financial crimes, and supporting infrastructure. Each topic is analyzed from a four-part perspective: framework laws, implementing institutions, supporting institutions, and social dynamics. The four-part analysis not only allows a multidimensional understanding of specific CLIR and trade-related challenges but also creates the basis for certain general themes to emerge. A. THE TRADE AND COMMERCIAL LAW ACTIVITY ASSESSMENT PROCESS The assessment process was carried out through much of 2004 in each of the CAFTA countries by a team of expatriate specialists. In order to gain the highest quality information possible, the CLIR portion of the Trade and Commercial Law Assessment (TCLA) also employed teams of local experts in each country, which included lawyers, judges, government officials and business leaders, to assist in the collection of data. The process began in March with a methodology I-1
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS seminar where local experts from the region were introduced to the CLIR methodology. Following this process, the local experts performed the base assessment for the CLIR portion of the analysis. With the completion of the base assessment, the expatriate team used this information as well as their own research to discern particular areas of focus prior to arrival in each country. The expatriate team members and their areas of specialization are presented in the following table: NAME ORGANIZATION SUBJECT AREA FOCUS* Aimee Carter, Team Leader Booz Allen, International Development Specialist CLIR Andrew Mayock, Co-team Booz Allen, Legal Reform Specialist Flows of People and Money, Leader, TradeStream TradeStream James Newton, Assessment Booz Allen, Legal Reform Specialist Commercial Dispute Resolution Coordinator (CDR), Financial Crimes, other CLIR areas John Corley Booz Allen Hamilton, Engineer Infrastructure John Baker Louisiana State University, Commercial CDR, Financial Crimes, Law Specialist Competition JoAnne Cornelison Independent Customs Consultant Flows of Goods and Services Maria Coppola Federal Trade Commission, Legal Reform Specialist Competition Dale Furnish, National Law Center for Interamerican International Trade, Bankruptcy, Boris Kozolchyk, Maria Alejandra Rodriguez, Mariana Silveira Free Trade, Legal Reform Specialists Collateral Omar Garcia BG Consulting, Legal Reform Specialist Property, Contracts, Company Law Irina Swift Independent Customs Consultant Flow of Goods and Services * Given the extended nature of the assessment process, team members served as back-ups for each other as not all experts were able to participate in each country. During September 2004, while the assessment team was being conducted in-country, they interviewed numerous government officials, nongovernmental organizations, multilateral and bilateral donor agencies, judges, lawyers, notaries, investors, associations and chambers of numerous industries, trade and customs experts, and other domestic and international businesspeople to assess the trade and commercial legal environment of the each country. 1. Background of the Diagnostic Methodology Used The Trade and Commercial Law Assessments are the latest in a series of assessments applying USAID’s CLIR methodology, as refined by Booz Allen Hamilton, to gauge the status of CLIR in developing and transitioning countries. Additionally, Booz Allen Hamilton designed a proprietary metric tool, TradeStream to assess the trade facilitation capabilities of a country. While the CLIR and TradeStream diagnostics are two separate, stand-alone tools, they have both been applied in the TCLA assessments to generate a comprehensive snapshot of the overall situation and context for domestic and international business. Both the CLIR and TradeStream methodologies have been subjected to field testing and peer review on a regular basis. Moreover, they have been adapted to the exigencies and realities of the I-2
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