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

TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004HONDURAS♦♦♦The Honduran chambers of commerce have proposed a reduction in the number ofbureaucratic steps required to notarize powers of attorney granted from abroad, thusreducing the transaction costs borne by foreign investors. Steps have not been taken,however, to reduce or simplify these procedures.Most Honduran lawyers and judges are not well versed in international businesstransactions, leaving many foreign businesses unable to access sound local legalrepresentation and unsure of trial outcomes.A perception of corruption and over-politicization in various commercial law and traderelatedinstitutions affects foreigners’ interest in investing in Honduras.Thus, future reform efforts, in addition to considering the interests of SMEs, should make theconcerns of foreign investors a matter of continuous, cross-cutting concern.E. CENTRAL AMERICA′S PREPAREDNESSContinued progress in economic development and poverty reduction requires greater economicgrowth and productivity gains throughout Central America. Greater trade and investment providean opportunity for stronger economic growth, and the Central American Free Trade Agreementcan be a key part of this opportunity. Working together, the countries of the Central Americanmarket can achieve economies of scale. Central America’s prior efforts, through the CentralAmerican Common Market, provide a foundation on which CAFTA-related efforts can build.To fully benefit from freer trade under CAFTA, member countries must face institutional,regulatory, and operational changes covering a range of critical issues, such as macroeconomicconcerns, trade policy, education, health, environment, agriculture, trade facilitation, and thecommercial environment. Without a favorable business environment, domestic entrepreneurs andinterested foreign investors cannot seize new opportunities. Without a more efficient and securetrading system, these entrepreneurs and investors cannot efficiently and securely move theirgoods and services.As detailed in this report, Honduras needs to better prepare some of its sectors, such as businessand agriculture, for implementation of CAFTA. Examples include the following:♦♦Private sector representatives in Honduras claim that the government has not been activeenough in modernizing and reforming the practices that diminish the relativecompetitiveness of Honduras. Although there seems to be significant political will tochange, more urgency should be given to reform. More dynamic initiatives to decreasebureaucratic procedures and decentralize decision-making are required.Exporters could be better organized as a unified constituency. The export communityappears splintered and polarized into various organizations. The lack of a single,representative organization inhibits the presentation of an effective collective voice onpolicy and procedures affecting the export community, particularly because there is littlecommunication between the groups.II-6