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

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004HONDURAS3 months to a year, but with the assistance of the chamber’s help desk, the wait can be reduced to7 days.The Honduran Council of Private Enterprise, Consejo Hondureño de la Empresa Privada(COHEP), is an essential organization for fostering business growth. COHEP makes proposalsfor policy reform, specifically lobbying for reforms of the Property <strong>Law</strong> <strong>and</strong> the <strong>Law</strong> onAdministrative Simplification. COHEP has $200,000 available for SME financing. With thesefunds, provided by the Government of Taiwan, the organization grants loans of up to $5,000 toSMEs under flexible terms.The National Association of Industry, Asociación Nacional de Industriales de <strong>Honduras</strong>(ANDI), an organization of manufacturing companies, has played an important role in economic<strong>and</strong> political changes, such as the transition from dictatorship to democracy. ANDI also hasextended its influence to promote growth of SMEs. For example, the organization promoted thecreation of the Fundación Covelo, a foundation for financing SMEs, which has accumulatedalmost $25 million to assist small businesses. Fundación Covelo provides SMEs with credit linesof up to $16,000.00 on favorable terms (monthly interest rates of 3 percent versus the 10-percentdaily 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 inSMEs in which credits of more than $16,000 can be obtained. Currently, the foundation is raisingcapital to set up the bank.In <strong>Honduras</strong>, there are two stock markets: one in Tegucigalpa <strong>and</strong> one in San Pedro Sula. Neitherstock market has the capacity necessary to meet the dem<strong>and</strong>s of the private sector in <strong>Honduras</strong>.The Tegucigalpa market is the larger of the two but is not automated <strong>and</strong> mostly tradesgovernment bonds. Issuance of bonds is expensive <strong>and</strong> highly regulated. To date, there have notbeen any equity-based issuances, although a bank recently announced intentions to make such anissuance in the future. It was reported that there are only 144 stockholders in the Tegucigalpastock market, most of which are banks. In 1999 there was a major financial crisis after hurricaneMitch caused extensive damage to <strong>Honduras</strong>. The hurricane caused bond holders to liquidate topay costs associated with the damage. This mass selling caused a liquidity crisis in banks, <strong>and</strong>the government was forced to bail out many of these financial institutions, spending whatamounts to half of the country’s gross domestic product (GDP). A new <strong>Law</strong> on Stock Marketwas 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 <strong>and</strong>30,000 registered bookkeepers in <strong>Honduras</strong>. There is an association of CPAs, which certifies <strong>and</strong>sets the st<strong>and</strong>ards for CPAs. This association is drafting a law on accounting <strong>and</strong> auditing thatwill create a board to establish st<strong>and</strong>ards in those two areas. Currently, accountants nominallyfollow Generally Accepted Accounting Principles (GAAP), but there is no uniformity in GAAPapplication <strong>and</strong> use is not m<strong>and</strong>atory. The association of CPAs has issued resolutions urgingmembers to follow the international rules of accounting, International Accounting St<strong>and</strong>ards(IAS) <strong>and</strong> International St<strong>and</strong>ards on Auditing (ISA), but these st<strong>and</strong>ards are rarely used.The Comisión Nacional de Bancos y Seguros (CNBS) has supervisory authority over banks,insurance companies, <strong>and</strong> the stock market. It requires banks, insurance companies, <strong>and</strong> stockmarkets to submit audited financial statements. However, not just any accounting firm may auditIII-7

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