Honduras: Investing

FDI in Figures

Foreign investments into the country have clearly slowed down in 2011, a trend which should continue in the coming years due to the crisis affecting the United States, one of the country's main investors.

The increase on corporate taxes, a decision made by the administration of President Lobo, as well as the increase of the minimum salary in 2012 might discourage foreign investment. In addition, the weakness of public institutions, the high level of corruption, the bureaucratic burdens and the insufficiently developed infrastructures are factors that limit the inflows of FDI. It is important also to note that criminality keeps increasing and it has placed Honduras in the category of one of the most violent countries in the world, outside from conflict areas. However, the country has certain assets to attract foreign investment, especially its International Free Trade Zones.

It is the manufacturing sector and especially the clothing industry which receives most of FDI. Besides the United States which represents about 70% of the total FDI, the main investing countries are El Salvador and South Korea.

Country Comparison For the Protection of Investors

	Honduras	Latin America & Caribbean	United States	Germany
Index of Transaction Transparency*	1.0	4.1	7.0	5.0
Index of Manager’s Responsibility**	5.0	5.3	9.0	5.0
Index of Shareholders’ Power***	4.0	6.0	9.0	5.0
Index of Investor Protection****	3.0	5.1	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	900	523	797
FDI Stock (million USD)	5,340.1	23,101.3	25,869.7
Performance Index*, Ranking on 141 Economies	46	53	-
Potential Index**, Ranking on 141 Economies	101	-	-
Number of Greenfield Investments***	10.0	7.0	-
FDI Inwards (in % of GFCF****)	19.7	5.4	-
FDI Stock (in % of GDP)	38.2	40.5	-

Source: UNCTAD - Last Available Data

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

Tax Rates

VAT: 12% on goods and services.
15% on alcoholic beverages and tobacco
Farm produce, basic food and pharmaceuticals are exempt.
Company Tax: 25% + a 5% temporary social contribution tax.
Withholding Taxes: Dividends: 0%, Interests: 5%, Royalties: 25%.
Bilateral Agreement: Honduras and Lebanon are not bound by a Double Taxation treaty.
Social Security Contributions Paid By Employers: 7%

Country Comparison For Corporate Taxation

	Honduras	Latin America & Caribbean	United States	Germany
Number of Payments of Taxes per Year	47.0	33.2	11.0	16.0
Time Taken For Administrative Formalities (Hours)	224.0	384.7	187.0	215.0
Total Share of Taxes (% of Profit)	48.3	48.0	46.8	48.2

Source: Doing Business - Last Available Data.

Investment Opportunities

Tenders, Projects and Public Procurement: Inter-American Development Bank, Tenders in South America
DgMarket, Tenders Worldwide
Setting Up a Company: Consult Doing Business Website, to know about procedures to start a Business in Honduras.
Useful Resources: Foundation for Investment and Development of Exports (FIDE)

Business Setup Procedures

Setting Up a Company	Honduras	Latin America & Caribbean
Procedures (number)	13.00	9.30
Time (days)	14.00	56.70

Source: Doing Business.

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