The United States is Honduras’ most important economic partner. While the Honduran government places a priority on improving the investment climate as a means of attracting investment and promoting economic growth, meaningful reform has been slow. As of April 2019, the Honduran Congress is debating plans to merge the three institutions charged with attracting increased foreign direct investment: the National Investment Committee, ProHonduras, and President Hernandez’s signature Honduras 20/20, an ambitious initiative to create 600,000 new jobs by 2020. Economic reforms and continued commitment to fiscal stability in Honduras have led to a stabilized macroeconomic environment and positive outlooks and debt upgrades from major international ratings agencies. Some foreign companies with investments in Honduras, however, continue to face challenges. Inconsistent and expensive energy, corruption, weak institutions, high levels of crime, low education levels, and poor infrastructure hamper Honduras’ investment climate. While the political climate has stabilized since the weeks of protests that followed the November 2017 presidential election, continued low-level protests and uncertainty also pose a challenge to the investment climate.
The Honduran government implemented several measures to improve investment and trade facilitation. In November 2016, the Government of Honduras launched the Presidential Commission for Integral Reform of the Customs System to simplify import/export procedures and improve relevant efficiency aspects of Honduran customs services. In July 2016, Honduras formally ratified the WTO Trade Facilitation Agreement, which contains provisions for expediting the movement, release, and clearance of goods, and sets out measures for effective cooperation for customs compliance and trade facilitation issues. In June 2017, Honduras and Guatemala initiated a Customs Union to foster and increase efficient cross-border trade. El Salvador subsequently approved joining the Customs Union in July 2018. In July 2017, the Government of Honduras shifted management of product registration from the Ministry of Health to a new, more efficient Sanitary Regulatory Agency, leading to a decrease in the backlog of 13,000 sanitary registrations. Finally, in February 2019, the Government of Honduras established the National Trade Committee, chaired by the Minister of Economic Development.
Many of the approximately 200 U.S. companies that operate in Honduras take advantage of protections available in the Central American and Dominican Republic Free Trade Agreement (CAFTA-DR). Honduras’ participation in CAFTA-DR has enhanced U.S. export opportunities and diversified the composition of bilateral trade. Substantial intra-industry trade now occurs in textiles and electrical machinery, alongside continued trade in traditional Honduran exports such as coffee and bananas. In addition to liberalizing trade in goods and services, CAFTA-DR includes important disciplines relating to investment, customs administration and trade facilitation, technical barriers to trade, government procurement, telecommunications, electronic commerce, intellectual property rights, transparency, and labor and environmental protection.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||132 of 175||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||121 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||105 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$1.4 Billion||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$2,250||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
Following anticorruption protests in 2015, President Hernandez signed an agreement with the Organization of American States to form the Mission Against Corruption and Impunity in Honduras (MACCIH). MACCIH has four principle objectives:
- Prevent and combat corruption and impunity
- Criminal justice system reform
- Political and electoral reform
- Public security
Since its inception in April 2016, MACCIH has worked with the Public Ministry to achieve success on several significant cases, including against current and former public officials. MACCIH advanced justice reform by lobbying the Honduran Congress to pass a Law on Financing, Transparency, and Oversight of Political Parties in Honduras. They also presented draft legislation for a Law of Effective Collaboration (similar to plea-bargaining) to the Honduran authorities. MACCIH worked with the Public Ministry to create a special anti-corruption unit (UFECIC) to pursue large-scale corruption cases. MACCIH established a Civil Society Observatory to monitor the criminal justice system in the country and work with civil society to implement a cohesive strategy to address systemic corruption. MACCIH faces the end of its mandate in January 2020 without agreement for an extension between the OAS and the Honduran government.
U.S. businesses and citizens report corruption in the public sector and the judiciary is a significant constraint to investment in Honduras. Historically, corruption has been pervasive in government procurement, issuance of government permits, customs, real estate transactions (particularly land title transfers), performance requirements, and the regulatory system. Since 2012, the Honduran government signed agreements with Transparency International, the Construction Sector Transparency Initiative, and the Extractive Industry Transparency Initiative. Honduras is also receiving support from the Millennium Challenge Corporation in the development of an e-procurement platform and public procurement auditing.
Honduras’s Rankings on Key Corruption Indicators
|TI Corruption Index||2018||29.0/100, 132 of 180|
|World Bank Doing Business||May 2018||121/190|
|MCC Government Effectiveness||FY 2018||-0.30 (13 percent)|
|MCC Rule of Law||FY 2018||-0.73 (10 percent)|
|MCC Control of Corruption||FY 2018||-0.16 (37 percent)|
The United States Foreign Corrupt Practices Act (FCPA) deems it unlawful for a U.S. person, and certain foreign issuers of securities to make corrupt payments to foreign public officials for the purpose of obtaining or retaining business for directing business to any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more information, see the FCPA Lay-Person’s Guide: http://www.justice.gov/criminal/fraud/ .
Honduras is a member of the UN Anticorruption Convention, which entered into force on December 14, 2005. The UN Convention is the first global comprehensive international anticorruption agreement and requires countries to establish criminal penalties for a wide range of acts of corruption. The UN Convention covers a broad range of issues from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The UN Convention contains transnational business bribery provisions that are functionally similar to those in the Organization for Economic Cooperation and Development Anti-Bribery Convention.
Honduras is a member of the Inter-American Convention against Corruption (OAS Convention), which entered into force in March 1997. The OAS Convention establishes a set of preventive measures against corruption; provides for the criminalization of certain acts of corruption, including transnational bribery and illicit enrichment; and contains a series of provisions to strengthen the cooperation between its states parties in areas such as mutual legal assistance and technical cooperation.
Resources to Report Corruption
Companies that face corruption-related challenges in Honduras may contact the following organizations to request assistance.
Coordinator for External Cooperation
The Public Ministry is the Honduran government agency responsible for criminal prosecutions, including corruption cases.
Association for a More Just Society (ASJ)
Yahayra Yohana Velasquez Duce
Director of Transparency
Residencial El Trapiche, 2da etapa Bloque B, Casa #25
ASJ is a nongovernmental Honduran organization that works to reduce corruption and increase transparency. It is an affiliate of Transparency International.
National Anti-Corruption Council (CNA)
Executive Board Assistant
Colonia San Carlos, calle Republica de Mexico
CAN is a Honduran civil society organization comprised of Honduran business groups, labor groups, religious organizations, and human rights groups.
U.S. Embassy Tegucigalpa, Honduras
Attention: Economic Section
Avenida La Paz
Tegucigalpa M.D.C., Honduras
Telephone Numbers: (504) 2236-9320, 2238-5114
Fax Number: (504) 2236-9037
Companies can also report corruption through the Department of Commerce Trade Compliance Center Report a Trade Barrier website: http://tcc.export.gov/Report_a_Barrier/index.asp .
10. Political and Security Environment
Despite recent progress on improving security in Honduras, crime and violence rates remain high and add cost and constraint to investments. While the political climate has stabilized since the weeks of protests that followed the November 2017 presidential election, continued low-level protests and uncertainty pose a challenge to ongoing stability.
U.S. citizens should be aware that large public gatherings might become unruly or violent quickly. For more information, consult the Department of State’s latest travel warning: https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/honduras-travel-advisory.html.