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

TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004HONDURASI. EXECUTIVE SUMMARYHonduras faces both challenges and opportunities. There is, at this time in Honduras, a particularurgency in pursuing the current economic reforms: assuming the agreement is ratifiedimplementation of the Central American Free Trade Agreement (CAFTA) is imminent, a seriesof high-profile initiatives pertaining to property rights are being implemented, and new demandson institutions that have been ineffective or corrupt are challenging the country to take evengreater strides toward meaningful change. The near future will show whether Honduras is to bepushed forward by the energy, commitment, and forward-thinking acts of many of its officials orwhether self-interested groups will obstruct these critical reforms and dominate the economiclandscape for the remainder of this decade.At the request of the United States Agency for International Development (USAID), Booz AllenHamilton conducted an assessment in September 2004 to analyze strengths, weaknesses, andopportunities for change in two critical areas in Honduras: commercial legal and institutionalreform (CLIR) and trade facilitation. The Assessment was conducted by a team of legal and tradereform specialists as one part of a five-country Central American regional assessment. A reportprepared for the region presents the team’s findings and recommendations directly pertaining toHonduras. This report addresses common issues in trade facilitation and CLIR, along withregional approaches to reform and development in these areas.First, the report identifies certain overriding themes in Honduras’s Commercial Law andInstitutional Reform (CLIR) and trade environment that should be incorporated into reformprograms on a cross-cutting basis. These issues include (a) the significance of the enactment in2004 of the Ley de Propiedad (LdP) and other real property reforms, and the long-termimportance of monitoring and supporting their implementation; (b) a lack of public confidence inthe judiciary; (c) difficulties in establishment and growth faced by small and medium-sizedenterprises (SME), due particularly to the lack of access to capital; (d) a series of constraintsagainst foreign direct investment; and (e) difficulties Honduras may face in preparing forimplementation of the CAFTA.Second, the report examines 13 CLIR and trade-related areas designated for assessment byUSAID—namely, company law, contracts, real property, collateral law, commercial disputeresolution, bankruptcy, competition policy, international trade, flow of goods and services, flowof people, flow of money, financial crimes, and supporting infrastructure. Each topic is analyzedfrom a four-part perspective: framework laws, implementing institutions, supporting institutions,and social dynamics. The four-part analysis not only allows a multidimensional understanding ofspecific CLIR and trade-related challenges but also creates the basis for certain general themes toemerge.A. THE TRADE AND COMMERCIAL LAW ACTIVITY ASSESSMENT PROCESSThe assessment process was carried out through much of 2004 in each of the CAFTA countriesby a team of expatriate specialists. In order to gain the highest quality information possible, theCLIR portion of the Trade and Commercial Law Assessment (TCLA) also employed teams oflocal experts in each country, which included lawyers, judges, government officials and businessleaders, to assist in the collection of data. The process began in March with a methodologyI-1