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

TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004HONDURAScan be taken to re-establish public confidence. Necessary reforms include prosecutingcorruption and reconsidering the issue of separation of powers, in particular the methodof appointing judges; educating attorneys, law students, and the business community incommercial law topics and the benefits of alternative dispute resolution (ADR); updatingthe Commercial Code, including incorporation of oral proceedings; and reviewing thenotary practice to ensure that the licensing of notaries is impartial and ethical.♦♦♦♦Bankruptcy. Although Honduras has a well-drafted, detailed insolvency law, which waspromulgated as part of its Commercial Code in 1950, the country has virtually nobankruptcy practice. Typically, businesses in Honduras carry out de facto insolvencyproceedings by simply shutting their doors and ceasing to exist. One of the major reasonsfor this lack of a formal bankruptcy practice is that insolvency proceedings fall toHonduras’s all-purpose trial courts, which may not have the capability to handle complexbankruptcy cases. These courts have no experience with insolvency proceedings. Withrespect to banks, the failure of certain institutions in recent years has resulted in morecareful scrutiny and control by the Commission for Banking and Insurance. Banks do notnow fall under insolvency laws.Competition Law and Policy. Recognizing the benefits of a competition law and policy,the Government of Honduras has engaged in significant efforts to adopt a competitionlaw. Substantial initial efforts began in 2001, with renewed interest and activity in 2003.The well-publicized anticompetitive practices in the cement sector in 2004, combinedwith pressures created by the preparations for CAFTA and related internal and externalconcern about the lack of a competition law, have all driven forward the process ofadopting a competition law. In September 2004 a draft competition law was “officiated,”i.e., submitted to the Economics Committee of the Legislative Assembly, where itremained as of December 2004.International Trade. Many steps remain before Honduras will have a complete legal andadministrative structure for its international trade. To date, Honduras’s foreign tradeconcerns have focused on promoting and facilitating export operations to the relativeexclusion of import controls other than simple tariffs. Honduras has enjoyed GeneralizedSystem of Preferences (GSP) privileges in industrialized markets for which it did nothave to reciprocate by opening its borders. At these conditions change, necessaryimprovements will include (a) encouraging the growth of cooperation between the privateand public sectors; (b) encouraging and supporting increased efficiency and transparencyin Customs administration and operations; (c) addressing the lack of a national legalframework for international trade, perhaps first through internal administration anddevelopment of procedures for applying countervailing duties; and (d) engaging infurther regionalization of Honduras’s international trade practices and structures.Flow of Goods and Services. Notwithstanding certain recent improvements, trade-relatedinstitutions in Honduras still encumber traders with unnecessary transaction costs throughdelays and administrative burdens. By eliminating unwarranted and onerous constraintsembodied in laws, regulations, and procedures, Honduras can capture greater savings andefficiencies. In fact, improving the trade facilitation environment could reduce trade costsby as much as 15 percent of the value of traded goods. Even in Honduras’s relativelyI-7