After Congress approved the last set of attached laws last week, Honduras is set to enter the US - Central American Free Trade Agreement (CAFTA) on April 1st. And according to FIDE, a non-profit organization assisting foreign companies wanting to invest in Honduras, CAFTA is already starting to attract investors. Recently, FIDE were contacted by a Brazilian textile company, the world's largest, wanting to enter the American market via Honduras.
"Our region is of interest to investors because of our proximity to the United States," agreed Vilma Sierra, executive director of FIDE. "But also because of the investments Honduras is making in infrastructure, for example the improvements of the port in Puerto Cortes.
FIDE assists potential investors with a wide range of services. They carry out market surveys, put foreign companies in contact with local suppliers and potential partners, set up meetings with government authorities, bank representatives and legal consultants, provide information on transportation, wage rates and productions costs and help with immigration procedures. If necessary, they even find schooling for the children of investors. All free of charge since the services are financed by the industrial parks in the country.
FIDE has been promoting investment in Honduras since 1984 but starting this year they will be more proactive. "We won't be sitting around waiting for investors to contact us anymore but go look for them ourselves," said Sierra. "The global competition for attracting investors has increased enormously, especially since the Chinese entered the market, and we have to be more aggressive in order to attract investment." Currently, FIDE is focusing on a handful of sectors where Honduras has been proven to have a competitive advantage, for example; textile and automotive parts industries.
But to offer a competitive business climate, Honduras needs to get rid of several administrative bottlenecks holding back its development and discouraging investors. Therefore, FIDE is also working to simplify the procedures that companies have to go through when setting up their business. "Last year, we focused on seven critical administrative procedures. In the department of Francisco Morazan we managed to reduce the time it takes to register property from 31 days to only five," said Sierra. "The paperwork at the Tegucigalpa Patent Office now takes two days instead of one month. And most importantly, registering your employees in the Social Security Office takes three days instead of nine months and I hope we can lower it even further," she continued.
Speeding up the process in the different authorities is often a question of attending to details, such as updating technical equipment or streamlining the procedure.
"In the Social Security we simply eliminated a very old procedure that everyone thought was required by law but which turned out to be completely unnecessary. They were asking for documents from several government agencies that really were of no use and only collected dust in a storage room."
Five years ago it took on average 120 days to go through all the procedures necessary to open a business. Now the number is down to 62 days and Sierra is hopeful for the future.
"By 2007 it should be only 15," she said.
One of the businesses that have used the services of FIDE is Manufacturas de Automatización Avanzada from Mexico. They came to La Lima and Honduras one and a half year ago, following their biggest customer Lear Cooperation.
General Manager Jose Luis Orosco is a member of The United States-Mexico Foundation for Science, a bi-national NGO promoting scientific and technological collaboration. In 2004, they carried out a study on the development hubs of Latin America and according to Orosco, Honduras was one of the countries that stood out. He cites three main appeals. First, government stimulation, specifically the tax exemption of the industrial parks. Second, a strategic geographic location in the centre of Central America and with the port in Puerto Cortes. Third, he mentions a relatively well educated population. "Honduras has very good engineers compared to the rest of Latin America," said Orosco.
Orosco contacted FIDE who invited them to a tour of industrial parks and provided information on legal framework, social security, and all the steps needed to register the company. In one and a half month, the paperwork was done and the company could start its operations. The only problem was getting the residence permit which took a year and a half. That doesn't influence Orosco's opinion though. "Honduras is certainly becoming very attractive for investors." - reprinted courtesy of Honduras This Week, copywrite 2006.
