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Doing business in Honduras.

The U.S. Dept. of Commerce has produced a 125-page Country Commercial Guide which offers helpful information on doing business in or with Honduras. Excerpts follow. If you wish to read the complete report, Email me ( I'll Email it to you as a file attachment.

Market Overview

U.S. exporters enjoy an enviable position in the Honduran market, and will see this position improve after the implementation of the Central American Free Trade Agreement (CAFTA-DR). The US, joined by Honduras, El Salvador, Nicaragua, Costa Rica, Guatemala, and the Dominican Republic, signed the Central American Free Trade Agreement (CAFTA) in August 2004:

CAFTA-DR will lower tariffs on US goods destined for the Central American market. In the past decade, US exports have increased in dollar value and market share. Strong prospects for exports: franchising; food processing; auto parts & service equipment; safety & security equipment; computers & peripherals; computer services; textiles & equipment; telecommunications; electric power generation equipment;

The US supplies over half of Honduras' imports and buys 65% of its exports. US exports to Honduras were US$3.1 billion, up 8.9% from the previous year (2004). Honduras' tariffs on most goods from outside the Central American Common Market (CACM) are within the zero to 15% range. Once the CAFTA-DR goes into effect, about 80% of US goods will enter the region duty-free, with the remaining tariffs phased out over 10 years. Nearly all textile and apparel goods that meet the Agreement's rules of origin will be duty-free and quota-free immediately, promoting new opportunities for US fiber, yarn, fabric, and apparel manufacturing. Honduras is the third largest exporter of apparel and textile products to the US market behind Mexico and China, and the first among Central American and Caribbean countries;

US companies invested US$122.5 million in Honduras in 2004, which was 26% of all new foreign direct investment (FDI) here. The government is generally open to foreign investment, although some investors have experienced long waiting periods for environmental permits and concessions.

Market Challenges

Local, congressional, and presidential elections in Nov. 2005 were deemed fair and free by domestic and international observers, and the opposition Liberal party candidate Mel Zelaya won a close presidential race. The new government took office in 2006. Historically, Honduras has experienced reduced GDP growth in each post-election year.

Personal security is a major concern, with theft, pick pockets, and armed robberies occurring frequently in urban areas. Honduras has a very high incidence of murder and other violent crimes, although tourists and business people are not generally targets. The lack of judicial security, a deteriorating security environment, and endemic corruption pose real risks, making business disputes difficult to resolve.

Market Entry Strategy

The country can be thought of as divided into two regions: the North Coast, including San Pedro Sula, the country's commercial and industrial capital; and the Central region, where Tegucigalpa, the political capital and largest city, is located. A single distributor or representative can cover all of Honduras. Representatives and distributors tend to carry rather broad lines on a non-exclusive basis.

Foreigners exporting to Honduras are not required to sell through an agent or distributor, except when selling to the government. But appointing a local agent, representative, or legal advisor is strongly recommended to help with import procedures, sales promotion and after-sales service.

Exporters are required to register certain products before they can be sold here. Pharmaceuticals, food items and medicine-related products must be registered with the Ministry of Public Health. Agro-chemicals and animal feeds must be registered with the Ministry of Natural Resources.

Establishing an Office

The steps for launching a business in Honduras have been reduced from up to 6 months to an average of 42 days. An important requirement for operating a business here, in connection to any project that could generate potential harm to the environment, natural resources, or national cultural and historical sites, is an Environmental Impact Assessment, to be obtained through the Ministry of Natural Resources and the Environment (SERNA). Details:


About 60 foreign firms now operate here under franchising agreements. Most are US fast-food and casual restaurants, such as: T.G.I. Friday's, Applebee's, Tony Roma's, Ruby Tuesdays, Pizza Hut, McDonald's, Wendy's, Subway, Burger King, Church's Chicken, Sbarro, Cinnabon, Pretzels, Popeye's, Domino's Pizza, Quiznos, Dunkin Donuts/ Baskin-Robbins, Little Caesar's and Kentucky Fried Chicken (KFC);

Other foreign franchises are auto aftermarket services, clothing, movies & entertainment, cleaning & pest control, health & fitness, electronics, cosmetics & toiletries, business services, convenience stores, dry-cleaners, car rentals, mailing, and fast-printing. Several major hotel chains are building new facilities or acquiring existing properties, such as Holiday Inn, Real Inter-Continental, Clarion Hotels, Best Western, Microtel Inn and Marriott International. Honduras has no locally developed franchises.

Direct Marketing

Telecom and mail delivery infrastructures are not well developed. Obtaining reliable addresses is problematic, as the use of "reference" addresses (and not street names and numbers) is the common practice. Mail advertising of products and services is generally conducted through credit card companies, limiting the target market only to their respective credit card holders. Local company listings and mailing information can be obtained through local chambers of commerce and industry associations.

Growth in Cable TV and internet subscriber markets is creating increased opportunities for direct TV sales and e-mail-based promotional campaigns. Among the companies that utilize non-conventional distribution channels are TV Offer, Ofertel (direct response TV), Avon Oriflame and Rommanel (catalog and door-to-door sales).

Joint Ventures/Licensing

With few exceptions, there are no limits on the percentage of capital that can be owned by a foreigner. The greatest opportunities can be found in the industrial, mining, agricultural, tourism, power generation, forestry, construction, and service sectors.

The Foundation for Investment and Development of Exports (FIDE), a private institution, works with local businesses to strengthen their capacity to attract foreign joint venture partners, and locates facilities for investors. Details:

Majority Honduran ownership is required in certain types of industries. There are also limits on the amount of land a single corporation may own.

Selling to the Government

Foreign firms are required to act through a local agent. By law, local agency firms must be at least 51% Honduran-owned, unless the procurement is classified as a national emergency. (Once CAFTA enters into force, this provision will be eliminated.) Government has tried to improve transparency and fairness hiring the United Nations Development Program (UNDP) to manage procurement for an increasing number of ministries and state-owned entities. US companies have alleged bid requirements were written so narrowly that they favored a particular company from the outset and that UNDP management of invitation-only, limited-bid process was not transparent.

Distribution channels: New investments in the construction of large shopping malls and other mixed-use commercial centers in strategic urban areas, as well as big retail stores such as PriceSmart and HyperPaiz, are a good indicator of increased opportunities in the retail distribution sector.

Electronic Commerce

Internet connectivity is rapidly developing. Most government agencies use web-based infrastructure to facilitate information and electronic processing of documents, promote investment, and improve general services to the public.

An increasing number of private sector companies also use e-commerce. Several consumer trade sites and gateways market products and services via the internet, especially in grocery/foods, consumer household products, and tourism services. Among the most popular sites are:;;;;;;;;;;;;;;

Trade Promotion & Advertising

Most advertising is conducted through newspaper, TV, and radio. Billboards are also a strong medium, especially as vehicle traffic increases in the main urban areas. Several advertising agencies guide companies through the process of developing promotional activities.

Honduran Newspapers

Diario El Heraldo Diario La Tribuna. Spanish/Daily Spanish/Daily. Sub-Director: Maria Antonia Martinez Manager: Manuel Acosta Medina. P.O. Box 1938 P.O. Box 1501. Tegucigalpa, M.D.C., Honduras Comayaguela, M.D.C., Honduras. Tel: (504) 236-6000 Tel: (504) 233-1283. Fax: (504) 221-0778 Fax: (504) 234-2755. E-mail: E-mail: Http:// Http://

Semanario Tiempos del Mundo Honduras This Week. Spanish/Weekly English/Weekly. Director: William Cook Manager: Mario Gutierrez. No P.O. Box available P.O. Box 1323. San Pedro, de Ferreteria El Mar Tegucigalpa M.D.C. Honduras. 100 Sur, San Jose Costa Rica Tel: (504) 239-0285 Tel: (506) 280-2332 Fax: (504) 232-2300. Http:// E-mail: Http://

San Pedro Sula Based Newspapers

Diario La Prensa Diario El Tiempo. Spanish/Daily Spanish/Daily. Director: Nelson Fernandez Manager: Carlos Rosenthal. P.O. Box 143 P.O. Box 450. San Pedro Sula, Honduras San Pedro Sula, Honduras. Tel: (504) 553-3101 Tel: (504) 553-3388. Fax: (504) 553-4020 Fax: (504) 553-4590 E-mail: E-mail: E-mail: E-mail: Http:// Http://

Honduran Business Journals

Estrategia & Negocios. Spanish/Monthly. Silvia de Angulo, Manager. Barrio Rio de Piedras 7th Calle entre 19-20 Ave. S.O. Tegucigalpa, Honduras. Tel. (504) 553-5157. Fax. (504) 553-5157. E-mail:

Hablemos Claro Financiero. Regina Wong Ayl, Manager Ed. Torrelibertad Blv. Suyapa Col. Florencia Sur, Entre Ed. Leme y Escuela Antares. Tel. (504) 239-4350 / 239-3916 Fax. (504) 239-7008. E-mail:

Trade Promotion:

Most local trade exhibits are organized by the Foundation for Investment and Development of Exports (FIDE), as well as by the Chambers of Commerce of Cortes (CCIC) and the Chamber of Commerce of Tegucigalpa (CCIC).

Expocentro, in San Pedro Sula, the biggest local trade exhibit center, holds about 12 trade shows a year. Details: Expocentro. P.O. Box 14, San Pedro Sula, Cortes, Honduras Tel: (504) 566-0345 up to 48; Fax: (504) 566-0344. Lilia Urrutia de Hernandez, Mgr.


The government controls prices for coffee and medicines, and regulates prices of gasoline, diesel, and liquid propane gas. It also keeps an informal control over certain staple products, such as milk and sugar, by pressuring producers and retailers to keep prices as low as possible. The local sales tax is 12% for most goods. Products exempted from the tax include staple foods; purified water; fuels; medicines and pharmaceuticals; agrochemicals; educational materials; electrical power generation machinery & equipment; agricultural machinery & tools; handicrafts; trucks, tractors, cranes, computers, and maquiladora industry equipment.

A 15% sales tax is also assessed on new cars, alcohol, cigarettes and tobacco products. Exempt services include utilities (electrical power and potable water), educational services, professional fees (legal, accounting, engineering, etc.), clinical & medical services, land transportation services, banking, insurance & financial services. Tourism services are subject to a 4% tax; air transportation is subject to a 10% tax.

Due Diligence

Performing due diligence here can be time-consuming and difficult. There are few sources of independently verifiable information. There are no publicly listed Honduran companies and rarely do they publish information about their officers, sales or financial information. Most companies are sole proprietorships and partnerships, and business generally is conducted based upon personal reputation and contacts. Companies should request bank and trade references from potential agents and customers, and also consult with t heir own banks for information on Honduran banks. Another source is the International Company Profile (ICP), which can be ordered through any US office of the US & Foreign Commercial Service (US Export Assistance Centers).

Local Professional Services

Selecting a competent and reliable local attorney is an important first step. A list of attorneys that have experience assisting US firms is posted on the US Embassy's website at

Leading Sectors for Export & Investment

Telecom equipment & services. Market size: US$200 million (2006). The sector is evolving towards competitive markets led by the private sector. Entrance of new players through the "Telephony for All (TpT)" project, launched in 2003, generated profound changes in market structure, stimulating growth and modernization. The market opened to competition on Dec. 25, 2005, when Hondutel, lost its exclusivity for long distance services. Future passage of the new Telecom Framework Law, under legislative review, is expected to stimulate competition and investment, simplify licensing procedures, and strengthen the sector's regulatory entity (Conatel);

Access to telecom service remains well below the Latin American average. The number of fixed lines in service by year-end 2005 was 492,000 (6.85 lines per 100 inhabitants). Estimated telephony demand for 2006 is 752,605 lines.

Best Products/Services: Promising sub-sectors include wireless telephone systems and equipment; data transmission equipment; fiber-optic equipment, internet, VoIP, and broadband integrated solutions. Mobile telephony expansion and internet access have been the highest growth areas. Opportunities exist for value added and triple-play services, such as those including telephony, broadband internet access, and video. New hand-off mobile technologies (WiMax and protocol 802.16e) also look promising.

Opportunities: Central Americ and Mexico plan to develop a US$60 million fiber optic broadband telecom network project, the Mesoamerican Information Highway. To be completed by early 2008 and supported by the IADB and CABEI, it will utilize the region's existing electricity transmission infrastructure;

Increased liberalization is expected to stimulate the new telecom services. Further expansion is also anticipated, as the various new operators compete to service the current unsatisfied demand for fixed telephony. As Hondutel enters into the mobile telephony market as the third cellular operator here, through the recently awarded Band B concession, it will need to invest about US$125 million. Modernization investments are also foreseen in fiber optics; PCS; microwave network; fixed wireless band width access; and expansion of the telephone operating-center, submarine cable network, and trunking system.

Resources: National Telecommunications Commission Telecom Utility Company (Hondutel)

Security and Safety Equipment

Market Size: US$11 million, all imported (2006). Elevated crime rates have increased demand for safety and security equipment. The market will grow by an estimated 17% for the next three years, as security clients look to replace guards with technology. The US supplies 86% of imports, followed by Canada, Taiwan, France and Japan;

New private housing projects contemplate installation of home security systems. Demand for electronic alarm systems is also on the rise for commerce and banks. The Ministry of Security has been authorized to make direct purchases of modern technology for safety and security purposes.

Best Prospects: Electronic surveillance equipment, Biometric systems, Alarm systems (fire/burglar), TV closed circuits, Security Cameras, Electric residential fences, Armored Vehicles, Protective Clothing, X-ray Inspection Equipment, Safes and Strong Boxes, Sprinkler Systems, Smoke Detectors, Fire Extinguishers, Vehicle Alarm Systems, Airport and sea port safety & security equipment (including terminal X-ray equipment, closed circuit cameras, customs & baggage inspection equipment).

Opportunities: In compliance with the US Customs Service's Container Security Initiative, the National Port Authority has obtained maritime certification, encompassing the acquisition of technology to pre-screen cargo containers before they arrive at US ports. Equipment needed includes x-ray inspection equipment, security cameras and other electronic security devices. The four airports are also undergoing urgent improvements.

Resources: Honduras Trade Portal

Automotive Parts / Service Equipment

Market Size: US$125.6 million, all imported (2006). Growth of 10% is estimated over the next 3 years. An aging car population fuels demand for auto parts & accessories. About 70% of vehicles are at least 5 years old. The US is a major supplier, along with Japan, Taiwan, Korea, China, Brazil, Mexico, Germany and the UK.

Public service transport units are major end-users of auto parts and accessories. Most urban transport fleets use buses which are 80% obsolete. The replacement needs for urban buses alone is estimated at US$60 million.

More than 300 retailers buy directly from overseas or through local distributors. Japanese cars and light trucks dominate the market but parts are often purchased through the US. US-made pickups, SUVs, heavy trucks and buses have strong market shares. Recent tariff changes for autos include a reduction in tariffs, elimination of the disadvantage to US vehicles vs. Japanese models as Honduras rescinded the tariff based on engine size, and implementation of a ban on imports of used vehicles more than 7 years old.

Best Prospects: All types of engine spare parts; Electrical & brake system components; transmission & suspension parts; tires; wheels; bumpers; spoilers; tail lights; mobile electronics; alarms; sound systems; repair shop, paint, tools & equipment; emission control equipment; batteries; auto accessories;

Opportunities: All passenger motor vehicles must be fitted with an emissions control system or catalytic converter. This, coupled with the growing demand for effective emissions control devices, should generate demand for parts.

The US Commercial Service Office in Tegucigalpa annually recruits and leads a delegation of Honduran automotive aftermarket leaders to the AAIW (Sema/AAPEX) show in Las Vegas, Nevada, the most important retail and specialty automotive aftermarket trade event in the US. Details:

Resources: Honduran Association of Automotive Dealers and Distributors of Automotive Parts & Accessories


Overview: Honduras' population is estimated at 6.9 million (Dec. 2005). Tegucigalpa (the capital, at 1.2 million); San Pedro Sula (the main business center, at 850,000). Honduras has over 60 international franchises concentrated in these two main cities.

The market is expected to grow 10% yearly during the next 3 years. Great interest exists to open new franchises, as can be observed during the International Franchise Expo (IFE). Honduras participates annually, with a delegation of local businesspeople recruited by the Commercial Service through the International Buyer Program (IBP).

Best Prospects/Services: In addition to the food/beverage and casual dining sub-sector, demand for convenience, hotels/ motels & resorts, and entertainment services is growing rapidly. These include dry cleaning, pest control, day care learning centers, security, advertising, real estate, discount stores, convenience store/pharmacy, cosmetics and toiletries, casual clothing, and video rentals.

Opportunities: Strong efforts to promote Honduras as a tourism destination resulted in 78% increase in visitors for the period 2002-2005. Government is encouraging investments in large projects, such as the Tela Bay tourism complex, which will bring franchise concept opportunities in connection to the establishment of hotels, restaurants, and beach resorts. Urban modernization and a consumer-oriented society are attracting investments in large shopping malls and retail outlets.

Resources: International Franchise Expo

Textile Machinery, Equipment and fabrics

Overview: Total Market Size: US$30 million (2006). Honduras is the third largest exporter of apparel and textile products to the US market. With private construction of modern industrial parks, Honduras hosts some of the region's most successful textile manufacturers. Over 40% of the companies in export processing zones are of US origin. The Caribbean Basin Trade Partnership Act (CBTPA) has made the country more attractive to drawback factory investment, construction and expansion of industrial parks, and dyes to manufacture and process textile products. Average annual growth rate for the industry is 5-7% for the next three years.

Best Prospects/Services: Full Package Programs; Fabric producers starting from the Spinning process; Opening of woven textile companies; Accessories to be produced in order to supply the full package companies: trims, zippers, buttons, yarn, boxes, plastic bags, hangers, thread, etc.

Opportunities: Honduras owns the most important Port in the region, Puerto Cortes. It plans to be the textile hub of the region in the next 2 years. It is the No. 1 importer of Yarn in the region, importing more than 170 million kg. per year;

Resources: Honduran Manufacturers Association:

Food Processing and Packaging

Market Size: US$13.2 million (2006). The US continues to be the largest supplier of this equipment.

Best Products/Services: Industrial Machinery, equipment for food and beverage production; Can Sealing machines; Packaging & wrapping machinery; Machinery parts; Machinery for processing of fruits, nuts & vegetables; Machinery for the preparation of manufactured foods, drinks.

Opportunities: Exporters plans to increase production and improve quality, particularly non-traditional agricultural products such as melons, watermelons, mangoes, winter vegetables, fruits and flowers. Companies are strengthening the offer of processed products: tortillas; processed wheat, soy or oats; dehydrated fruits and vegetables; Individual Quick Frost fruit and vegetables; Milk cooling tanks.

Computers and Peripherals

Market Size: US$64.4 million (2006). Most imports are from the US, but many Asian countries have large distribution centers in Miami; trans-shipment data is not reflected in local import statistics. Increased IT modernization needs new products. E-Government initiatives, and increasing interest in Internet access have fueled demand. Small businesses, medium-sized enterprises, and households are emerging as important customers as a result of Internet popularity and expansion. Although still low compared to other Latin American countries, with a penetration of 0.32% per 100 inhabitants, average annual growth rate for internet coverage is 41.3%. Leading computer brands are Dell, Compaq, Hewlett-Packard, IBM. Honduras does not apply import duties to computer equipment and most software. Estimated average growth rate is 10-15% for 2006-2008. Honduras is the fourth largest market for computer equipment in the CAFTA region.

Best Products/Services: Computer systems, parts and peripheral equipment, including: storage devices and digitizers; Hard disks; Keyboard units; monitors; Server Systems; Modems; CD-Rom Drives; Single and Multifunction Printer Units; Memory modules and parts for printers; PCs; Software/Multimedia: Specialized software applications (accounting, financial); General Business Application solutions for Windows; Systems supporting software; Software development/programming tools; Software games.

Opportunities: A government priority for 2006-2010 is provision of computer equipment for the public educational network. Development of digital libraries and virtual laboratories are also important initiatives underway between the Honduras National University and private colleges. Under the Plan Puebla Panama initiative, Central American countries have agreed to develop a "Mesoamerican Information Society" and strengthen IT cooperation efforts to establish Internet "telecenters" throughout rural areas.

The clone equipment market assembled with Asian, US, European and Latin American parts is well established. Imported clone components include motherboards, keyboards, mouses and cases. Asian parts and components generally comprise 60% to 75% of the finished product. 25-40% of US parts are used for computer clone manufacturing: hard drives (Seagate) and microprocessors (Intel and AMD).


IT Governmental Committee

Government Procurement

Honduran Science and Technology Council

Electrical Power Systems and components

Market Size: US$190 million, all imported, including US$125 million from the US (2006). Energy demand is growing by 7.3% a year. The National Electrical Energy Co. (ENNE) forecasts needs of 856.5 MW generating capacity for the 2006-2008. Current installed capacity is 1,375.5 MW (474.9 hydro; 871.8 thermoelectric; 28.8 biomass). About 36% of fuel imports are used for thermoelectric generation. Expansion of renewable energy technologies is a priority. Electric power coverage is 62%; about 2.5 million citizens (mainly in rural areas) lack access to electricity. ENEE is expanding efforts to extend its grid to rural areas, and expand distribution in high growth areas.

Best Products/Services: Electrical Power Generators; Parts of panels, boards, consoles and transformers; Hydroelectric Turbines; Circuit Breakers; Switch Gear; Conducting Cable; Parts of Steam and other Turbines.

Opportunities: Most promising projects are in hydro, biomass, co-generation, wind, and geothermal sources. Renewable energy generation is expected to increase by 27% (about 350.4 MW of installed capacity). The potential for hydro generation is significant (around 3,200 MW). Financing support is led by the Central American Bank for Economic Integration (CABEI). Among the 2006 international public bidding projects CABEI will support are Patuca II and Patuca III (aka known as the "Piedras Amarillas" hydroelectric project). Cost: US$250 million. Rural electrification is another key component. Under ENEE's Strategic Plan for National Electrification, coverage is expected to increase from 62% to 75% by the year 2008.

Imports of electric power systems, equipment and materials for the region are being determined by the Central American Electric Interconnection System (SIEPAC). The US$320 million project has received approval (about US$240 million) from the Inter-American Development Bank (IADB). This is part of the Plan Puebla Panama (PPP), which requires construction of 230 kilovolt power lines and substations to create a 1,800 km new backbone extending from Panama to Guatemala (passing through the southern part of Honduras);

Another important initiative is the Mesoamerican Energy Integration Plan (PIEM), led by Mexico. Some proposals include construction of a refinery and a natural gas pipeline. Both IADB and CABEI are providing financing support.

Resources: Ministry of Natural Resources & the Environment

National Electric Co.

National Energy Commission

Plan Puebla Panama Initiative http://www.sre.gob.mex

Hotel and Restaurant Equipment

The hotel industry is rapidly expanding. Many new projects include bungalow-type resorts, apart-hotels, cabins, hostels and inns. Convention traffic is also increasing. The restaurant industry is growing at an even faster rate. First-class restaurants, fast-food chains and franchises are opening ice cream parlors, Internet cafes.

Best Products/Services: Hotel & Institutional Catering Equipment; Commercial Kitchen Equipment; Fast Food Equipment; Food Preparation Equipment; Restaurant Equipment; Vending Machines; Commercial Laundry Equipment; Resort Furnishing/Equipment; Refrigeration/ Freezing Equipment; Cooking appliances: ovens, ranges, broilers, grills, fryers, baking and pasta machines; Refrigeration compressors and air conditioning; Dishwashers and laundry machines; Catering equipment and vending machines; Kitchen sundries, glassware, china, tableware and flatware; Franchise opportunities for restaurants and hotels.

Opportunities: Many hotels and restaurants are US franchises; these seek high quality supplies and equipment.

The Tela Bay project covers 107 hectares of Caribbean coastline, including 3 kms of beach. It is owned by the Honduran Institute of Tourism. The project has a capacity of 1,013 hotel rooms, 454 condo/rentals, 124 residential units and 3,068 square meters of commercial space. Areas have also been set aside for recreational activities, administration and public services. Future plans call for a marina in the village of Miami, a golf course in Tela city, 8 kms from the project site.

Resources: Honduran Institute of Tourism

Agricultural Sectors

Coarse Grains: Market size: US$106 million. Local production US$77 million. Imports: US$39.9 million (2006). White corn, the grain produced on the largest scale, is utilized mainly for human consumption. Production does not satisfy demand. Lack of affordable credit, poor seed quality, several consecutive years of weather anomalies, have prevented Honduras from becoming self sufficient.

Best Products/Services: About 65% of yellow corn is imported. Imports of from the US are in demand to manufacture feed for the poultry, shrimp, livestock and swine industries. Opportunities: The poultry, livestock, aquaculture and swine sector will continue to grow. Honduras ranks 25th among country markets for US coarse grains imports.

Rice: Market Size, US$38.6 million. Local production, US$5.7 million. Imports from US, US$30.8 million (2005). Chronic production problems have not allowed domestic rice farmers to increase output and keep up with the demand.

Best Prospects/Services: Local rice millers prefer to import paddy rice for price reasons and to keep their plants running. However, milled rice is also imported.

Opportunities: Import demand is expected to remain strong. Honduras is ranked 11th among the leading 35 country markets for US rice imports. Once CAFTA-DR goes into effect rice tariff will be eliminated in 18 years. Tariff cuts will be backloaded, with out-of-quota imports subject to a safeguard. There will be a base quota of 90,000 MT for rough rice, growing by 2% per year. A base quota of 8,500 MT will be for milled rice, growing by 5% per year.

Wheat: Market Size, US$30 million, all imported from the US (2005). Honduras's land and climate are unsuitable for commercial wheat farming.

Best Prospects/Services: Industry needs of wheat average per year 202,000 MT.

Opportunities: The US should remain Honduras' main source of wheat. Honduras ranks 33th among the leading 35 country markets for US wheat imports.

Soybean meal: Market size, US$31.3 million, all from the US (2005). Domestic production is negligible.

Best Prospects/Services: The growing poultry and shrimp sectors have triggered increasing demand for soybean meal.

Opportunities: Continued expansion in the feed industry, particularly for poultry production, should continue to fuel the demand for US soybean meal. US tariffs on Honduras imports are zero. Honduras ranks 12th among the leading 35 country markets for US soybean meal exports.

Red Meats: Local production US$4.6 million. Total imports: US$14 million. Imports from US are US$13.0 million (2005). Honduras was a beef exporter to the US, but due to a drop in prices production declined in 2002 and 2003.

Best Products/Services: CAFTA-DR will bring immediate tariff elimination on prime and choice pork and beef cuts. Current demand on beef cuts, prime pork, beef variety meats, liver, tongue, bellies, trimmings and pork foot.

Opportunities: From 1999 to 2003 total visitors grew by 107%; food and drink establishments increased by 86%; hotels increased by 52%. Hotels and fine restaurants need a consistent supply of quality meat products such as US beef and pork. There is competition from Canada and Nicaragua.

Processed Fruits and Vegetables: Market size: US$38 million. Imports: US$22 million. Imports from US: US$8.4 million (2006). Processed fruits and vegetables growth has increased every year. Canned goods with familiar US brands are well known.

Best Products/Services: Popular products that under CAFTA-DR will bring immediate tariff elimination are: canned sweet corn, tomato paste, canned pears, canned peaches and mixed canned fruit.

Opportunities: US franchises and restaurants import French fries from Canada. The U.S. could introduce its products after CAFTA-DR with immediate tariff elimination. The import duty will lower from 15% to 0%.

Investment Climate

The government is generally open to foreign investment. Restrictions and performance requirements are fairly limited. Foreign companies tend to encounter problems investing in infrastructure and a few visible large projects such as the airport, telecom, housing and energy sectors, as domestic companies seek ways to keep the competition out.

Relatively low labor costs, proximity to the US market, and Central America's best Caribbean port (Puerto Cortes) have made Honduras attractive to investors. The climate is hampered by high levels of crime, a weak judicial system, corruption, low educational levels among the population, a troubled financial sector, and limited infrastructure.

The Constitution requires that all foreign investment complement, but not substitute for, national investment. Companies that wish to take advantage of the Agrarian Reform Law, engage in commercial fishing, forestry, or local transportation activities, serve as representatives, agents, or distributors for foreign companies, or operate radio and television stations must be majority-owned by Hondurans.

The 1992 Investment Law does not limit foreign ownership of businesses, except for those specifically reserved for Honduran investors, i.e., small firms with capital less than 150,000 Lempiras (approx. US$8,000). At least 90% of the labor force must be Honduran, and at least 85% of the payroll must be paid to Hondurans.

Management of the 4 international airports was turned over to a consortium with majority US investment in Oct. 2000, the only major privatization effort in recent years. A dispute over financing soon developed, and the agreement was re-negotiated in 2003. There continues to be controversy over the terms, and US investors divested from in 2005.

Government opened the telecom market for joint ventures with Hondutel, the state-owned telephone monopoly, in Sept. 2003. Foreign and domestic carriers can register as sub-contractors for fixed telephony services. Full privatization took place on Dec. 25. The process through which foreign companies can obtain licenses to provide long distance and international dialing has not yet been established. All sub-operators must obtain approval from Congress. Cellular telephony services are open to full private ownership.

The National Electric Co. (ENEE) has turned over most of its thermal energy generation to the private sector but retains responsibility for electricity transmission and distribution, and almost all hydroelectric energy generation and distribution throughout. The GOH is working on a project to break up ENEE distribution and is working towards privatization, though there is no firm timeline set.

Dispute Settlement

The government has a poor record of handling investment disputes, due to the outdated commercial code and the weak judicial system. Most investment and property disputes are long lasting and arduous. US claimants frequently complain about the lack of transparency and the slow administration of justice in the courts. There are also complaints that the judicial system caters to favoritism, and bribes. While some US firms have resolved their cases through the courts, the majority have difficulty navigating the legal system. Many US citizens have also complained about the quality of legal representation they receive from Honduran attorneys.

Political Violence

Honduras has not experienced major problems with political violence. Sporadic demonstrations are usually peaceful. Most major demonstrations occur in downtown Tegucigalpa. However, levels of crime and violence are high. In a 2002 World Bank survey of both Honduran and foreign firms operating here, one in three reported having suffered a criminal attack in the previous year. These led to a loss of 0.9% of annual sales, and expenses devoted to security measures (hiring security guards, installing alarms, etc.) represented another 3.6% of annual sales. Total losses (4.5% of sales) were second in the region only to Guatemala.


In a 2002 World Bank survey of both Honduran and foreign firms operating here, corruption was identified as the single largest constraint to economic growth. In its 2004 perception survey of business persons, Transparency International named Honduras as one of the five most corrupt countries in the Western Hemisphere. Corruption appears to be most pervasive in government procurement, government permits, and in the buying and selling of real estate (land titling). The government is seeking to reform the judicial system, though serious problems remain.


Honduras has plentiful available labor for industries with a demand for relatively low skilled workers. There is a limited supply of skilled workers in all technological fields, as well as in medical and high technology industries.

Labor laws are generally good. The maquila sector has made great strides in eliminating the worst forms of labor violations. Union officials remain critical of what they perceive as inadequate enforcement by the Ministry of Labor (MOL) of workers' rights, particularly the right to form a union and bargain collectively, and the reinstatement of workers unjustly fired for union organizing activities. Through cooperation within the bipartite and tripartite commissions (unions, MOL, private sector) and other venues, MOL inspectors' access to maquila plants to enforce the labor code has improved, and MOL has continued to work to increase its effectiveness in enforcing worker rights and child labor laws.

Foreign-Trade Zones/Free Ports

The Temporary Import Law (RIT) allows exporters to introduce raw materials, parts and capital equipment (except vehicles) exempt from surcharges and customs duties if the input is to be incorporated into a product for export (up to 5% can be sold locally). Export processing zones can be established anywhere, and companies operating in export processing zones are exempt from paying import duties and other charges on goods and capital equipment. The production and sale of goods within export zones are exempt from state and municipal income taxes for the first 10 years of operation. Companies operating in an export zone are permitted unrestricted repatriation of profits and capital and have access to onsite customs facilities. However, companies are required to purchase the Lempiras needed for their local operations from Honduran commercial banks or from foreign exchange trading houses registered with the Central Bank.

Foreign Direct Investment Statistics (FDI)

FDI has registered sustained growth since 2002, reflecting increased governmental efforts for attracting investors' confidence. FDI flows in 2004 totaled US$324.6 million (up 31.3% from 2003), an historical high, according to the Central Bank. (The US continues to be a dominant source with 60.1% of all FDI in 2003). Other countries with high levels of investment include: U.K. (telecommunications); Canada (mining); Mexico (ICT, telecom, consumer trade); Central America (mainly Panama & El Salvador, in the financial services sector and development of commercial projects); Switzerland (food, beverage, construction industry); and Germany (agro-industry).

FDI by country of origin in 2004 (in millions of US$) was: US, 68.6; Canada, 40.8; Mexico, 35.9; El Salvador, 17.7; Guatemala, 9.0; Nicaragua, 5.7; Costa Rica, 6.6; Panama, 21.7; Bahamas, 4.8; Spain, 0.1; England, 61.0; Holland, 3.6; Germany, 14.4; Switzerland, 23.7; Italy, 6.0; France, 0.0; Japan, 0.1; Others, 4.9; Total, 324.6. Source: Central Bank of Honduras.

FDI by Economic Activity (in millions of US$ and percentages for 2004): Agriculture; Fishing, 11.1, 3.4%; Mining, 40.9, 12.6%; Manufacturing, 106.7, 32.9%; Electricity, gas, water, 7.2, 2.2%; Construction, 0.8, 0.2%; Consumer Trade, Hotels/Restaurants, 23.3, 7.2%; Transportation, Storage, Communications, 81.1, 25.0%; Financial, Insurance, Services, 53.4, 16.5%. Total, 324.6. 100.0%. Source: Central Bank of Honduras.

FDI Maquiladora Industry by Sector, 2004 (in millions of US$ and percentages): Textile Industry, 57.5, 41.0; Electric components and car parts, 28.7, 20.5; Tobacco, 22.4, 16.0; Service to corporations, 20.7, 14.7; Agriculture, hunting and fishing, 7.7, 5.5; Cardboard Products, 3.8, 2.7; Watch assembly & electronic products, 2.2, 1.6; Furniture production & wood products, 0.5, 0.3; Chemical products, 0.0, 0.0; Trade, -3.3, -2.3. Total: US$140 million, 100%. Source: quarterly surveys applied to industrial park companies.

Selected Foreign Investments

A list of dozens of foreign firms and franchises operating here, with a description of the type of investment and country of origin is available in the complete version of this report, which you can request by Emailing

US Banks and Local Correspondent Banks

A list of these banks, with addresses and contact information can be obtained in the complete report, which you can request via Email:

Country Trade Associations /Chambers of Commerce

This is a partial list. The complete list is available in the full report, available from

Honduran American Chamber of Commerce (AMCHAM).

Roberto Alvarez, Pres. Lic. Patricia Lopez, Exec. Dir. P.O. Box # 1838. Tegucigalpa M.D.C. Tel: (504) 235-9959, 231-1379, 232-6035. Fax: (504) 232-2031. E-mail:

Foundation for Investment and Development of Exports (FIDE). Lic. Vilma Sierra Exec. Pres. Antonio Young, VP. P.O. Box # 2029. Tegucigalpa M.D.C. Tel: (504) 235-3471, 235-3472. Fax: (504) 235-7484. E-mail: Http://

Federation of Agricultural Producers and Exporters (FPX).

Medardo Galindo, Gen. Mgr., P.O. Box # 236. San Pedro Sula, Cortes. Tel: (504) 566-0139, 566-3794, 566-2368, Fax: (504) 566-3852. E-mail:

Honduran Council for Private Enterprise (COHEP). Ing. Mario Cnahuati, Pres. Benjamin Bogran, Exec. Dir. P.O. Box 3240. Tegucigalpa M.D.C. Tel: (504) 235-3336. Fax: (504) 235-3345/44. E-mail:

National Honduran Assn of Exporters (ANEXHON). Lic. Roberto Panayotti, Pres. Local de la C.C.I.C. San Pedro Sula, Cortes. Tel: (504) 553-3626. Fax: (504) 553-3777. Construction Industry Association (CHICO)

International Chamber of Commerce (INTERCHAM). Hector Diaz, Pres. Ave Circunvalacion, 17 Ave., 9-10 Calle, S.O. Edificio CCIC. P.O. Box # 4548. San Pedro Sula, Cortes Tel: (504) 557-4994. Fax: (504) 557-4994. E-mail:

National Industry Association (ANDI). Ing. Adolfo Facusse, Pres. Guermo Matamoros, Exec. Dir. Tel: (504) 232-2221, 239-1239. Fax: (504) 221-5199. P.O. Box # 3447. Tegucigalpa M.D.C. E-mail:

Honduran Apparel Manufacturers Assoc. Jesus Canahuati, Pres. Henry Fransen, Exec. Dir. P.O. Box # 2658. San Pedro Sula, Cortes. Tel: (504) 556-5526. Fax: (504) 556-5525. E-mail:;

Honduran Assn of Banking Institutions (AHIBA). Roque Rivera, Pres. P.O. Box #1344. Tegucigalpa, M.D.C. Tel: (504) 235-6770. Fax: (504) 239-0191. E-mail:

Honduran Mining Assn (ANAMINH). Miriam Bueso, Pres.

Edif. Plaza Millennium 2ndo Nivel Cubi B Guel 3, Comaguela, Honduras. Tel: (504) 225-3733. Fax: (504) 225-3733. Email:

Honduran Chamber of Tourism (CAMTURH). Raul Welches, Pres. Lourds Benedett, Dir. Col Los Girasoles, Hotel Escuela Madrid 4to Piso. P.O. Box # 5804. Tegucigalpa, M.D.C. Tel: (504) 236-8836. Fax: (504) 236-9702. E-mail:

Country Market Research Firms

KMPG Peat, Marwick y Asociados. Armando Barnica, Gen Mgr. P.O. Box # 3398. Tegucigalpa M.D.C. Tel: (504) 232-5907; Fax: (504) 232-5925. E-mail:

Morales Group. Roberto Morales. Exec. P.O. Box 2232 San Pedro Sula, Cortes, Honduras. Tel: (504) 553-1176; Fax: (504) 557-6722; 553-3723.

Mercaplan. Jorge Martin Frech, Gen. Mgr. Col. Moderna 20 y 21 Ave Blvd Los Proceres. San Pedro Sula, Cortes. Tel: (504) 550-1992, 550-1092 Fax: (504) 550-1996. http:// E-mail:

C.I.D. Consultoria Interdisciplinaria en Desarrollo, S.A. (Gallup de Centroamerica). Xiomara Munoz Deras, Gen. Mgr., P.O. Box # 3390. Tegucigalpa M.D.C. Tel: (504) 232-0637, 239-0993; Fax: (504) 239-0899. E-mail:

Martinez Calvo. Ricardo Martinez, Gen. Mgr. Hotel Clarion, Edificio Corporativo. Tegucigalpa M.D.C. Tel: (504) 232-3951, Fax: (504) 232-5005. E-mail:

U.S. Embassy Economic Personnel Washington--Based U.S. Government, Country Contacts U.S. Department of State

Request complete report with these details from

Other U.S.-Based Offices

Embassy of Honduras. Amb. Norman Garcia. 3007 Tilden Street, NW. Washington, DC 20008. Tel: (202) 966-7702. Fax: (202) 966-9751. Email:

Honduras Institute of Tourism. 299 Alhambra Circle Suite 226. Coral Gables, FL 33134. P.O. Box 140458. Coral Gables, FL 33114-0458. Toll Free:1-800-410-9608. Tel (305) 461-0600. Fax (305) 461-0602. Email:

Trade Events

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Title Annotation:HONDURAS; Country Commercial Guide
Publication:Caribbean Update
Article Type:Excerpt
Date:Mar 1, 2007
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