Honduras Still Supports Investment, But for How Long?

Alexander Sanné
Honduras This Week

Alexander Sanné/ Honduras This Week

According to FIDE, a non-profit organization that aims to promote and evolve the business climate in the country, Honduras is one of the major suppliers of apparel articles to the United States, ranked number one in Central America and the Caribbean and third overall globally. This is due in part to the current myriad of laws and legislation offering business protection and promotion and geographic advantages that the country is developing and propounding.

With regard to legislative restrictions, Honduras’ Investment Law reduces the scope of Government intervention in economic activity and treats all private enterprises, with domestic or foreign capital, equally within a transparent legal context. 100% foreign ownership is permitted. The Free Trade Zone and Export Processing Zone laws allows exporters to create zones that permit exemption from income and municipal tax as well as all customs charges on the import and export of capital for the operation.

Within these zones companies are also entitled to a 100% repatriation of capital and profits as well as reduced administrative costs. These tax exemptions do enact a cost with regard to a reduced capacity for Government revenue and thus expenditure, further highlighting the emphasis Honduras is putting on investment.

Honduras has also invested greatly in its infrastructure. Puerto Cortés has recently been certified in both the U.S. Government’s ‘Megaports Initiative’ and its ‘Container Security Initiative’ (CSI). The port is also the only deep-water port in Central America and ships can reach the U.S. in just 72 hours.

A huge investment is also being made in the Inter-Oceanic highway and the present construction of the Dry Canal, which aims to link Pacific ports with Caribbean ports throughout Central America. Some Hondurans have taken issue with the canal being built through El Salvador rather than totally within Honduras but many still hope it will accentuate market potential and allow greater mobility between the Atlantic and Pacific Oceans.

With the official exchange rate since 2005 stable at 18.89 Honduran Lempiras to the U.S. dollar, speculative intervention in the markets is reduced. ‘Hot money’ (money invested simply to accrue the highest short term profits) is also unlikely to be a problem in destabilizing the economy. This is due in part to the exchange rate and also the powerhouse economies of India and China whose rapid growth, inflation, interest rates and currency appreciation are attracting a lot of investors’ attention. Honduras may not have such a huge level of growth but represents a relatively stable environment for initiating new outlets.

Real gross domestic product grows steadily, with a 6% increase in 2006 and 5.1% in 2007, the slight decrease caused by a slowdown in the U.S. economy but offset by increased remittances.

However, questions are being raised as to whether the country should do without the potential benefits from the tax revenue currently being forgone to encourage investment. According to Armando Sarmiento, Executive Director of Income, between 2002 and 2007 Honduras has forgone around 40 Billion Lempiras in taxes from the fast food sector. He also stated that there will shortly be a revision of the time window for tax exemption and when companies should begin paying the ‘impuesto sobre la renta’ (IPR) a form of corporate revenue tax.

The Law of Tourism Incentive (LIT), which allows tax exemption for ten years after the creation of a firm or outlet, is also being reviewed.

It was criticized when introduced because it created imperfect competition between existing, mainly Honduran, firms that had to pay taxes compared to new investments that did not. Revistazo.com reports that the Government will now have to publish a list of companies that will begin paying their previously exonerated taxes in 2009, as well as a list of dates for when companies still within the ten-year window will have to begin paying taxes.

Although it could be argued that these changes are just measures to improve proper regulation of tax exemptions, the increased interest in such laws could result in future, more drastic changes.

The imminent presidential elections in 2009 could also result in a change in the economic landscape and thus these ‘bounties’ for investment should not be taken for granted.

Permanent Reservoir Plan Implemented in South Honduras

Álvaro Morales Molina
Honduras This Week

www.google.com

Drought problems that annually plague regions of south Honduras have prompted the Ministry of Agriculture to begin a reservoir construction project in several rural communities in the departments of Choluteca, Valle and southern Francisco Morazan. The large-scale initiative also includes the construction of irrigation systems, using a low-cost ‘drip method.’

The Ministry has constructed 32 reservoirs with the support of local agricultural producers who benefit from improved water distribution and availability and who have faced chronic drought conditions to the tune of only 750 millimeters of rain per year.

“It is almost a desert,” commented the Honduran Agriculture Minister, Héctor Hernandez. In central Honduras, average yearly rainfall is 1,200 millimeters, the northern coastal region receives 2,300 millimeters per year. Hernandez pointed out that because of the variations in these averages, different regions require different water needs analysis and solutions.

The Ministry’s goal for this year is 100 reservoirs in the region, coordinating with organized farm groups, each group comprised of 20 producers in their local municipality. These farmers have been designated because of their continual reports of crop losses of corn and beans. The project also includes the introduction of new varieties of existing crop and altogether new vegetables that can be successfully grown with irrigation.

The reservoir technology was introduced by the Program for Sustainable Agriculture in Central America (PASOLAC) and is specialized to be used in sloping terrain, like that in the south. It consists of a structure for water storage that is constructed half-buried in the ground. Each reservoir is designed so that water can be supplied through hoses to catch rainwater, rain runoff and through drainage ditches.

The anticipated end-result is that farmers will start to be able to rely on a steady supply of water for irrigation, which will begin a new era of sustained, consistent crop production and a better way of life for those who have been victims of the whims of Mother Nature for years.

Digicel Throws Its Hat into the Honduran Telecommunications Ring

Caroline Johansen
Honduras This Week

Mario Gutiérrez/Honduras This Week
Digicel Honduras President Miguel Garcia will head the third major cellphone carrier in Honduras.

Digicel, the fastest growing telecommunication operator in the Caribbean, sees huge potential in the Honduran market. In December 2007, Digicel's sister company Central America Holdings Limited, secured the license to operate a GSM mobile network in Honduras by paying an unheard price of $80 million, after a competitive bid. “We feel it is an opportunity in Honduras to bring in a low cost network, to provide more extensive coverage, and we think there is still a lot of growth potential in the region,” explains Miguel Garcia, the President of Digicel Honduras.

Garcia notes that setting up Digicel in Honduras has been a positive experience. “The central government has been helping us quite a bit through this process. We have had no major issues. The biggest problem has been to put up tenets around the country. The local municipalities sometimes take advantage of the situation and try to charge you more than they really should.”

Despite these problems, Garcia stresses that the Hondurans are easy to work with and that the process of setting up Digicel has been running smoothly. He feels confident the people of Honduras will provide Digicel with the expertise needed to penetrate the Honduran market, and as a result, he predicts a creation of 300 new jobs in Honduras directly and more than 2,000 indirectly. New employees will receive extensive training in order to suit the needs of the company.

Digicel’s founder, Dennis O’Brien, a telecommunications entrepreneur in Ireland, decided in 2001 to invest in Jamaica, ending the telecommunication monopoly which had existed there for decades. It proved to be a huge success for the company. They penetrated the Jamaican market by 90%, forcing prices down by 40% as well as increasing the level and improving the quality of service provided.

Digicel has continued to expand and is now operating within 23 other countries in the Caribbean and Central America. The strategy behind Digicel´s success is, according to Garcia, its ability to provide high quality coverage. “It is extremely frustrating when you need to get a hold of someone and the line is busy or the call keeps dropping,” he says. By improving the quality of the coverage, Digicel hopes to facilitate communication within Honduras. He also claims that in order to succeed as a telecommunication operator in the Caribbean and Central America, an accurate pricing strategy is vital. “We want everybody to be able to afford a cell phone. Therefore, it is important to offer people more value for their money.” He uses Haiti, the poorest country within the Americas, as an example of Digicel´s pricing strategy: Out of a total population of almost 9 million, more than 2 million are customers of Digicel.

Garcia admits that investing in developing countries involves higher risks than when investing in more developed countries. However, the advantages outweigh the disadvantages.

Garcia is convinced the region has a very high growth potential. In Honduras, only 55% of the market is currently penetrated. Because the region has seen a lack of competition for a long time, prices are too high and the level of service has remained, in many instances, unsatisfactory.

Many hope that Digicel´s entrance into the market will result in increased, improved and more affordable telecommunication within Honduras.

Honduran Youth Gunned Down by Police in Montreal, Canada

Emma Lovegrove
Honduras This Week

Graphic Design Santos Ortiz/ Honduras This Week

On Saturday August 9, Freddy Alberto Villanueva, an 18 year old Honduran, was mortally wounded by police bullets. Accounts of the event suggest that between four and ten gun shots were fired. Another 18 year old and 20 year old man were also wounded in the confrontation.

The incident has provoked outrage and riots in the Montreal neighborhood where the shooting occurred.

Tempers began to fester when the police approached Freddy Villanueva and his older brother, Danny, who were playing dice with friends in a Montreal Park. It is reported that they asked to speak with Danny Villanueva who refused to speak with them protesting that he hadn’t done anything wrong. According to witnesses Danny was then arrested.

The younger sibling allegedly approached the scene yelling insults at the police when one of the two police officers on the scene opened fire.

In the riots that ensued, provoked by what was felt to be an unnecessary use of police force, protestors set fire to garbage, tires and at least three vehicles in the streets of the neighborhood where the young men were shot. Shops were also looted, causing thousands of dollars of damage.

The initial police account, which has been disputed by eye-witnesses, suggests that the two police officers were surrounded by around twenty men who were hurling insults. Although the men were unarmed, the police officers felt threatened and opened fire. The two police officers were not hurt in the incident and Danny Villanueva was later released.

Freddy Villanueva’s sister, Patricia, described Freddy as a “good boy” and a witness who chose to remain anonymous said that he “had nothing to do with street gangs or any other crime.” The Villanueva family came to Canada from Honduras in 1998.

The Sûreté du Québec, the provincial police force there, is conducting a criminal investigation into the actions of the Montreal police force. The government and police insisted on Tuesday that it will be “impartial and objective.” Although despite this, the Sûreté du Québec is only planning to release the conclusion of the public enquiry.

“Memories of My Melancholy Whores” by Gabriel Garcia Marquez (2005)

Todd Ellertson
Honduras This Week

www.google.com
Gabriel Garcia Marquez is a Nobel Prize winning author from Colombia.

(Editor’s note: This review first appeared in the Feb. 2, 2008 edition of HTW. It is being reprinted here.)

I have been on a little bit of a roll with Gabriel Garcia Marquez as of late, as those who have kept up with both my movie and book reviews might agree. In my defense, I only learned of his work and learned to appreciate his gifts to the world of literature recently, so, in my mind, I am making up for lost time! Nonetheless, I will make an effort in the near future to share my opinions on other worthy writers as well. For now, it’s another take on the Nobel Prize winning Colombian author.

“Memories,” Garcia Marquez’ first work of fiction for more than 10 years back in 2005, is actually a novella and therefore, due to its length and form, cannot compare to earlier masterpieces such as “One Hundred Years of Solitude” or “Love in the Time of Cholera.” In short, it’s a rather odd tale of old age, redemption and second chances, told by a unique character.

The story revolves around the unnamed, self-described ‘horse-faced’ narrator, a cable editor and columnist who, upon his 90th birthday, decides to hire a virgin whore, as a treat to himself and a nostalgic hope of a lusty roll in the hay. No stranger to sex-for-hire, he began keeping a list of his conquests in his much younger days and by the time he turned 50, he had amassed 514 names. The madame of the brothel, a deliciously created character, comes to his rescue, provides him with his wish and figures prominently during the course of the story.

(It turns out Garcia Marquez himself lived in a brothel and wrote about the experiences in a newspaper column. His memories obviouslysupplied the material for both this book as well as “Love in the Time of Cholera,” as one of the main characters in the latter offering spends a good part of his adolescence in a brothel.)

Most of “Memories” is the narrator’s account of his 90th year, with special attention paid to his repeat rendezvous with his 14 year-old ‘melancholy whore.’ The narrator, a cranky and often obsessive old man, is charming in that he seemingly doesn’t care what his audience thinks of him. “I’m ugly, shy and anachronistic,” he describes himself and proves to be reliable on that count throughout the course of his narration.

“Memories of My Melancholy Whores” might best be described as a perverse short story, but as Garcia Marquez tells it, it reads more like a simple, unlikely romance between an old man and an adolescent. In less skilled hands, the subject matter might have merely read as a sordid, bizarre tale. In this, Garcia Marquez tells a simple story that needn’t be examined too closely. The narrator admits that his foray into ‘puppy love’ during the autumn of his life is silly, and this reader found himself laughing delightedly at the often hilarous results.

Moving Honduras Forward – with Mentors

Todd Ellertson
Honduras This Week

We have received a few e-mails at HTW recently that sparked my interest. They are from Liz Riggs, an ex-pat here in Honduras championing, among other things, the idea of empowering Hondurans with knowledge and skills while easing visa/residency restrictions for those who desire to live, work, retire here or simply give back of their time and experience.

In a nutshell, the proposal works like this: Mentors from outside the country that have an interest in becoming a resident or simply want to mentor can come and train/mentor working Hondurans for two years. After two years, the mentor becomes a legal resident of the country. Currently, there are mentors ‘doing their thing’ here. A program like this would allow even more.

Liz and many other collaborators are on to something here. Their particular vision is for mentors to work with Hondurans who are not in school, but in the workplace and could benefit from further training in how to evolve their business, whether that means improved English-speaking skills (or any other foreign language for that matter), advanced computer skills, bookkeeping skills, math skills…the list of possibilities is actually endless.

Sounds like a reasonable, worthy endeavor, right? The biggest obstacles standing in the way of a program like this are current Honduran immigration visa/residency requirements. The amount of red tape, attorney fees, waiting and uncertainty are what keep this brilliant idea from becoming a reality. The irony here is that the Honduran government readily acknowledges their desire to further educate their working adults in order to better compete in the expanding global marketplace.

Further details of the plan call for a mentor with a two or four year college degree, who is willing to come here for two years and provide face-to-face training. Mentors with technical and people skills (retail, customer service, travel and tourism, hospitality, etc.) would also be considered and welcomed.

The plan also incorporates an element of quality improvement that requires ongoing assessment and stringent follow-up to ensure those being mentored have benefited from their training. Initially, the plan would last ten years.
At that point, it would be analyzed and evaluated for its effectiveness and either scrapped, revamped or continue.

On the legal end of the plan, the Honduran government would, after a successful two-year training/mentoring period, grant residency to mentors. Specifically, those over 55 would receive residency after two years, those under 55 would receive residency after five years. Mentors would be allowed to bypass expensive attorney fees and bureaucracy, and not have to deal with continually renewing (and paying for) the 90-day tourist visa mechanism currently in place.

Think of the possibilities: Honduras could literally put out a worldwide call to anyone who wants to give back, wants a change of scenery or wants to just do something different. Such a program would send a message to other countries that Honduras is serious about giving their people tangible opportunities for improvement. That kind of reputation is attractive on so many levels: to skilled people who have a desire to share their talents, to working people who want to know more and for an economy that needs to embrace its strengths and bravely march into the 21st century global economy.

So, what’s standing in the way? Theoretically not much, except for someone in the right place within the Honduran government to take a little time to consider what a program like this might mean to the country; someone who could take this cause on, with forward-thinking and a long-term vision of investing in the invaluable commodity of its human infrastructure.

Commission of Support Arrives in Honduras

Andres Avila,
Sub Director Bridge of Peace, Inc.
Special to Honduras This Week

Human development advocates recently made their way to Honduras, where they were welcomed with open arms. Bridge of Peace, Inc., a U.S. charitable organization, has a presence in the San Marcos de Colon and Guajiquiro regions of the country.

Coordinators from that organization met up with members of the Program of Cooperative and Strategic Attendance, a division of the Red Cross of the Greater Miami Keys area, along with other support programs to further develop education, health and natural disaster preparedness in Honduras.

Bridge of Peace Executive Director Vivian Forest arrived here on August 11 and will be in the country until the 31st, meeting with, among others, Albert Portugez, Cooperative and Strategic Attendance Founder and Director. His group focuses on humanitarian work in Central and South America and the Caribbean and has had significant impact on the people in these regions. Forest will be joined by her cohort Lillian Sardines, Board of Directors Treasurer for Bridge of Peace, Inc. on August 27.

Kurt Marshall, President of American Eagle, a world-renowned titan of industry directly involved in assisting disaster victims in Florida and throughout the U.S. and in Africa will also arrive August 27, contributing his expertise to the cause. A meeting is planned between these leaders and the Honduran First Lady, Xiomara de Zelaya to discuss her well-known humanitarian work and how they can all work together in the future.

Planning international and local aid events is also on the meeting agenda.
Members of the commission have just concluded meetings with Honduran Minister of Women, Selma Estrada and Commissioner of the Strategic Poverty Reduction Alliance Fernando Garcia, the Minister of the Honduran Council of Science and Technology (COHCIT), Mayra Mejía and the Director of Fundaniquem, Tita Matamoros. The coordinators of the meetings want to acknowledge the General Consul of the Republic of Honduras in Miami, Fernando Agurcia, for his valuable coordination to make this visit possible and successful.

Honduras not worst case scenario

Pavel Pardo scored twice and Mexico used their best offensive tactics to beat Honduras Wednesday night as the semifinal round of World Cup qualifying began in the North and Central American and Caribbean region qualifying.

At the first half, DeLeon for Honduras made a beautiful shot and beat goalkeeper Oswaldo Sanchez and put Honduras at the top of the scoreboard.

Although Mexico came out strong on the second half, it took them 30 minutes to score 2 goals in two minutes putting Honduras dreams over for the night. Even though Honduras lost, this was not their worst case scenario since Canada and Jamaica tied and both teams are in Honduras group.

Honduras next game is this coming September 6th in which they are playing on their second road game against Canada in Montreal. Honduras must call a new defender since Maynor Figueroa will miss next match because of a red card. The possible substitute could be Samuel Caballero who plays in Chinas soccer league or any other Honduran in the local league.

On the other match, Mexico is visiting Jamaica in which the best result for Honduras would be another tie. Honduras is reciving Jamaica 4 days later at home to open their first home game in San Pedro Sula this coming September 10th.

Suazo to Portugal

Inter want-away forward Suazo has told the Italian press that he does not wants to leave the club and join any other. Suazo has not yet talk to the press about his future where he might end up. Although news from Portugal have said that Inter is talking to Benfica club of Portugal to pass Suazo for the next two-three seasons.

Inter has no problem passing Suazo to Benfica since this is an international club, since they don’t want to negotiate with any local club in Italy. Although, not only Benfica wants Suazo but other clubs have manifest their interest for this great forward like Manchester City and Rome but to a lower price than want Inter wants

Benfica is the club that more possibilities have for the Honduran striker since the club has as General Sports Manager an ex-teammate of Suazo, Mr. Rui Costa who knows all the good conditions of Suazo and the president of the Italian club.