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

TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004
HONDURAS
country report states, “Since the mid-1990s, three governments have pledged to accelerate the
privatization program, with the partial privatization of the state-owned telecoms company, the
Empresa Hondureña de Telecomunicaciones (Hondutel), a priority, but the sale has repeatedly
stalled. The part-privatization of the generation and billing arms of the state-owned electricity
company, the Empresa Nacional de Energía (ENEE), went ahead in 2000. Some successful
privatizations have occurred in the transport sector, with concessions awarded to manage four
international airports and some roads.” 162 The “partial privatization” within the energy sector has
been minimal. Only 20 percent of power generation, for example, is privately owned.
There has been progress in improving competitiveness especially since the beginning of 2004. In
2000 the World Bank and the International Monetary Fund (IMF) confirmed that Honduras had
qualified for debt relief under the heavily indebted poor countries (HIPC) initiative, contingent
on its adherence to an economic adjustment program. In February 2004 the Government of
Honduras agreed with the IMF on the specifics of the economic adjustment program and is now
working to meet the poverty reduction and growth facility goals to reach the completion point for
HIPC. The economic adjustment program includes the introduction of a great number of reforms
that will increase the competitiveness of the economy. Specifically, regarding a competition law,
World Bank conditions for disbursement of funds require adoption of a competition law. 163
External pressure is merely one driver of the process of adopting a competition law. Internal
pressure has increased enormously since the widely-publicized events in the cement industry. In
brief, in 2003 a Japanese cement company, Taiheyo Cement, entered the Honduran market and
started a price war, resulting in average prices’ falling from La 80 to La 44 per bag by early
2004. The price war continued until the two dominant cement companies—one operating in the
north and one in the south—were able to push the Japanese company out of the market using
pricing strategies.. As soon as the Japanese company was forced out of the market, prices began
to rise, exceeding pre-2003 levels. The public was outraged at what they considered illegal
activities on the part of the cement companies. The government eventually imposed price
controls on cement in the summer of 2004. Proponents of a competition law have used the
cement example to highlight the need for a law.
Allegations of anticompetitive conduct have also surfaced in the dairy sector and in the sugar and
flour industries. For example, in the dairy sector, a dominant dairy producer created a plant to
produce powdered milk. Shortly thereafter, a new tax was imposed on imported powdered milk,
making the locally produced powdered milk cheaper than the imported product. In the sugar
industry allegations have been made that an association of sugar mills conspires to fix prices for
the sale of sugar across regions.
Certain members of government, private legal practitioners, and members of FIDE have a solid
understanding of competition law policy. FIDE and the executive branch of government appear
to be the strongest local drivers of reform.
162 Economic Intelligence Unit (2004), Country Profile for Honduras at 21.
163 In 1993, through the Protocol of Guatemala to the General Treaty on Central American Economic Integration,
Honduras and its neighbors committed themselves to adopting a competition law. As noted above, efforts to
date have been unsuccessful.
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