Honduras has more than 3.1 million hectares of arable agricultural land with a high productive potential, and access to water and road infrastructure in the main agricultural development poles. The tropical climate, which allows for year-round agricultural production, ensures the cultivation of a variety of items including dairy products, fish and shrimp, a wide variety of fruits and vegetables, sugar, cocoa, coffee and bananas, among others. Agribusiness and its related sub-sectors represent 40% of the country's GDP.

Low land costs, competitive salaries, closeness to 300 million consumers in the United States and other markets, duty-free access to that market for 95% of fruits and fresh vegetables grown in Honduras and 100% of processed foods by means of the DR-CAFTA, availability of a young and dynamic labor force, as well as a legal framework that promotes and cares for foreign direct investment that includes a series of competitive incentives in the Central American region, make Honduras an ideal place for investment in the agribusiness sector.

The short trip to the United States' market, just two hours by plane to Miami, Houston and Atlanta, ensures that seafood and agricultural products arrive fresh, the same day they are exported. Products shipped by sea arrive within 48 hours since they're departure from Puerto Cortés, the largest and best equipped port in Central America.

POSITIONING of HONDURAN PRODUCTs IN NORTH AMERICAn AND EUROPEAN MARKETS

In recent decades, Honduras has been undergoing a process of reconversion and agricultural diversification that has led to a successful incursion into nontraditional products (with aquaculture activities of shrimp and tilapia farming standing out among others, making the country the second largest fresh tilapia exporter to the United States), as well as an incursion into a chain of horticultural products in both American and European markets. Currently, regarding the export of fruits and vegetables, Honduras ranks:

(a)           Leading bell pepper and cucumber exporter in Central America  to the North American markets (United States and Canada)

(b)          Leading processed Jalapeño supplier to the United States

(c)           Second eggplant exporter to the United States

(d)          Fourth fresh watermelon exporter to the United States

(e)          Leading sweet potato exporter to Canada and Europe

FOREIGN INVESTMENT IN HONDURAN AGRIBUSINESS

The country's agricultural tradition is evident with the presence of international companies that, for almost a century, have maintained operations in the country. In that sense, foreign investment has played a significant role in the development of agribusiness and is present, in a very important manner, in the production and marketing of pineapples and bananas, fruits and vegetables, aquaculture and processed food, among others.

There is no doubt that the know-how, technology, supply chains, support services, and property participation provided by foreign investors have been instrumental in the development of agribusiness activity in Honduras. These factors, combined with national capacities, will continue to promote agricultural production to meet domestic and international (export) demands. Currently, Honduras has the presence of prestigious international companies such as Dole, Cargill, Mount Dora Farms of the Seaboard Corporation, Wal-Mart, among others.

INVESTMENT OPPORTUNITIES

Honduras enjoys special preferential tariffs for the export of its products to major international markets, maintaining a proactive attitude in relation to integration mechanisms that allow potential investors to access new markets. Thus, Honduras promotes the development of agroexports utilizing its comparative advantages, from basic products (commodities), to competitive agricultural advantages based on high-value products, such as food differentiated by quality attributes, good agricultural and commercial practices, and environmental sustainability.

Under this context, the Honduran National Investment Promotion Program offers a modern legal framework, with clear rules applicable to both nationals and foreigners, based on Public-Private Partnerships that will allow for the realization of major agribusiness projects whose value amounts to approximately US$ 957,006,302.

The agribusiness project portfolio includes production, processing and/or commercialization of horticultural products and grains, as well as animal product projects aimed at the cultivation of tilapia and the production and/or processing of meat and milk products, and the production of concentrates, among others. In addition, the portfolio includes projects in irrigation infrastructure located in the main valleys of Honduras, and biofuel production from pinion crops and aquatic algae.

Due to the availability of undeveloped land and its availability of natural resources, the windows of opportunity offered by trade agreements to expand into major markets, and high agricultural yields, Honduras has great agribusiness investment opportunities.

           
Honduras shares 12% of the world's biological wealth, as it possesses much of the mega-diversity in the Central American region, and has 6.6 million hectares of forests. Almost all of the Honduran territory (87%) is suitable for forestry and has access to abundant water resources. Located in the center of the Americas, Honduras has a privileged position, with excellent weather conditions, and close to North American and Caribbean markets, coupled with first class port infrastructure and 4 international airports. In this sector, what stands out is the fact that 36% of the country's are under the protected area regime, where it incorporates itself to productive and protective forest activities, a competitive workforce and more than 1,500 forestry professionals. The sector's legal regulation promotes and encourages foreign investment, making Honduras an ideal place to invest in high yield forestry businesses.    

COMMERCIALIZATION OF HONDURAN FORESTRY PRODUCTS

By 2010, forest area certified by the Forest Conservation Institute (ICF) amounts to 13,407.48 hectares for commercial purposes. The purpose of this ICF certification is to guarantee the use of crops from plantations for investors. The most significant species accounting for 95% of the total certificate are: Pine (Pinus oocarpa) with 904,533 (63.9% of the total), Mahogany (Swietenia macrophylla) with 186,509 plants (13.2%), African Mahogany (Khaya Senegalese) 126,477 plants (8.9%), Teak (Tectona grandis) with 65,992 plants (4.7%) and Cedro (Cedrela odorata) with 62,538 plants (4.4%). As to the potential for the generation of added value, records reveal that from the total lumber production, 60% goes to domestic consumption and 40% for the foreign market. Exports consist of furniture, furniture parts, baulks, boards, planks, sticks and others. In recent years, the major destination of Honduran exports is the Caribbean (Netherlands Antilles, Jamaica and Barbados), being the main products pine lumber, furniture and wooden stakes.

INVESTMENT OPPORTUNITIES

The National Investment Promotion Program offers a modern legal framework, with clear rules for investors, which under the Public-Private Partnership framework will facilitate the development of forestry sector projects amounting to approximately US$920,660,219, in activities related to management of protected areas, mahogany and other colored wood plantations, biomass generation, manufacture of prefabricated houses, among others.

BUSINESS OPPORTUNITIES IN COMMERCIAL FOREST PLANTATIONS

Opportunities include the forestation and reforestation of 35,000 hectares per year for the growth of native tree species such as Pine (Pinus oocarpa), Mahogany (Swietenia macrohylla), Cedro (Cedrela odorata), Blackwood (Dalbergia retusa, D. cubilquitsensis) and Reel (Samamea saman), among others. As well as other species adapted to high growth such as Teak (Tectona grandis), Neem (Azadirachta indica) and African Mahogany (Khaya senegalensis), to name a few.

OPPORTUNITIES IN THE NATURAL FORESTo:p>

51% of Honduran forest area is not under any special management category and can be incorporated into productive activities, as well as a significant area of ​​young dense pine forest and other forestry activities that can be used for processing particle boards, wood chips or biomass for energy cogeneration. As for the production of resins, the cultivation of sweet gum and pine is promoted. There is a national sweet gum market for natural medicines and an international resin market for essential oil.

OPPORTUNITIES IN THE FOREST INDUSTRY

The country promotes exploitation, sustainable use and management projects to develop the forestry industry, that aim to make better use of existing commercial forests (primary and secondary), especially in its efficient exploitation and maximum value added at a local level.

OPPORTUNITIES IN PROTECTED AREAS AND BIODIVERSITY

Protected areas are of vital importance for the development of the country as the topography and the variety of climates have contributed to the formation of more than 70 different ecosystems, finding dry forests, pine and oak forests, cloud forests, rainforests, mangroves, wetlands and coral reefs. These protected areas have natural resources suitable for various investments that provide sustainable development to areas that have significant flora and fauna natural resources, suitable for the development of recreation and ecotourism. Honduras is a country that offers opportunities for bio-prospecting, and a considerable supply of native and exotic species.

OPPORTUNITIES IN PRODUCTION OF REDUCTION OF CARBON EMISSION CERTIFICATES

It is estimated that Honduras could sell in the global market about 56 million tons of carbon, according to the national forestry mitigation potential survey. Between 13% and 42% one of Honduran territory is suitable to promote and develop forestry projects for carbon captures.

           
In the last twenty years, Honduras has undertaken significant efforts to modernize and open its economy. Investment in infrastructure has resulted in better roads, world class port facilities, 4 international airports, public and private works in major urban centers, which have led to transform Honduras, improving its territorial and population cohesion, giving it competitive advantages in the Mesoamerican region on the transport of people, merchandise, and goods and services, both nationally and regionally.

For Honduras, infrastructure is synonymous with economic, social and human development, and, because, financial requirements exceed the availability of public resources, it has been necessary to prioritize programs and projects that have an impact on the reduction of poverty and achieving goals and objectives outlined in the 2010-2014 Plan, in accordance to the National Plan. Under this context, foreign direct investment in infrastructure takes on added significance, as it will help regain the growth path and focus efforts on building a more competitive and globally connected Honduras.

NATIONAL INVESTMENT PROMOTION PROGRAM

The National Investment Promotion Program offers a modern legal framework with clear rules applicable to both nationals and foreigners, based on Public-Private Partnerships to enable the development of major infrastructure projects in the following sub-sectors: road, airport, port, water and sanitation, and telecommunication infrastructure, at a cost of approximately US$8,768,326,594.

The proposed mechanism involves domestic private sector and foreign investment processes, maintenance and operation of large public works, through a procedure that will allow the private sector to finance economically profitable works, recovering their investment through the provision of a specific service and standard settings.

INFRASTRUCTURE INVESTMENT OPPORTUNITIES

PORT FACILITIES

Honduras is characterized as one of the Central America countries with the best natural features for the development of port facilities. Currently, the state-owned National Port Company (Empresa Nacional Portuaria, ENP), administers four ports: 3 on the Atlantic coast (Puerto Cortés, Puerto Castilla and Puerto de La Ceiba), and San Lorenzo on the Pacific.

According to the 2010-2011 Global Competitiveness Index, with regards to the Quality of Port Infrastructure, Honduras obtained a 32 of 139 ranking, which represents a distinct competitive advantage in the port field.

For the 2011-2013 period, the implementation of the Puerto Cortés Expansion and Modernization Program aims at improving the capacity and efficiency of port operations through a Public Private Partnership, seeking both a quantitative and qualitative jump in the port's capacity and regional outreach. The amount foreseen for the implementation of this program is US$317,236,000, and counts with the financial support from the Inter-American Development Bank (IDB) and the Central American Bank for Economic Integration (BCIE).

ROAD INFRASTRUCTURE

The demand for better physical road conditions in order to reduce transaction costs in the economy stems from the fact that about 23% of the country's road network is paved. Currently, the national road network consists of approximately 14,296 km, of which 3,280km belong to the primary road network (23%), 2,679km to secondary roads (19%), and the most part (8,336km) to the local road network. Of the total road network, 3,220km are paved (asphalt concrete, reinforced concrete and double treatment) and the rest (11,076km) unpaved.

For the 2011-2014period, the goal in terms of road infrastructure is the intervention of 640km of roads, and there are highway concession opportunities totaling US$1,435,093,855.

AIRPORTS

Honduras has four international commercial airports. The first one is located in the city of Tegucigalpa (Toncontín) and the others on the north coast: Ramón Villeda Morales Airport in the industrial capital of San Pedro Sula, Golosón in La Ceiba and Juan Manuel Gálvez in the Bay Islands, all of which since 2000 are under the concession of Interairports, which is responsible for infrastructure improvements, maintenance and operation of the airports.

The 2010-2014 Investment Plan for the airport subsector includes the construction of airfields for tourism under the Public-Private Partnership framework with a total investment of US$37,000,000.

WATER AND sanitation systems

The Water and Sanitation Subsector has an investment program whose projects are aimed at improving the quality of life of the population by increasing coverage, in accordance to the goals established in the National Plan emphasizing access to potable water, sewage disposal and wastewater treatment.

Investment opportunities in the Water and Sanitation Subsector, includes projects to be developed under the Public-Private Partnership framework, amounting to US$338,493,739.

TELECOMMUNICATIONS

As of December 2010, about 669,541 users in Honduras have access to fixed telephone lines, of which 67% are provided by the state-run HONDUTEL and 34% by private operators. 1 398,332 households have mobile cellular telephone service, offered mostly by private operators. For the 2006-2010 period, cell phone coverage showed steady growth, with a percentage change of 122.9%.

To comply with the transformation and modernization of the state-run HONDUTEL, the 2011-2014 period will have a portfolio of projects to be developed under the Public Private Partnership framework in the order of US$502,000,000.

Honduras is a country with excellent business projections. It has a modern legal framework, institutions that give due care and follow-up to foreign investment, and, above all, a welcoming climate for potential investors who bet on Honduras as an excellent destination to invest, build and grow.

           
Honduras has an installed generation capacity of 1610.3 MW and its renewable-thermal composition is 62/38%. The current electrical system is comprised of seven hydroelectric plants and three thermal power plants owned by the National Electric Company (Empresa Nacional de Energía Eléctrica, ENEE). For its part, the private sector has a total of 39 plants distributed as follows: fifteen (15) thermal generation plants, thirteen (13) small hydroelectric plants, ten (10) biomass-based plants and one (1) biodiesel plant, which contribute to the generation of renewable energy.

The projected demand for 2011-2015 is estimated to register an average growth of 5.2%. To meet future demand, the ENEE has an Expansion Plan (PEG) that incorporates various renewable projects. The Plan foresees the withdrawal of some thermal power plants and the construction of large renewable wind power, biomass and hydroelectric plants with a combined capacity of 358MW.

The development of the Expansion Plan will result in the modification of the energy matrix with an emphasis on the use of renewable energies, from 38.0% in 2008 to 48.6% in 2015.

RENEWABLE ENERGY GENERATION POTENTIAL

Currently, Honduras has implemented a diversification policy of its energy mix to reduce the volatility of energy prices, lower generation costs and improve energetic security in the country..

In that sense, there is an enormous natural resource potential in the country that can be developed at competitive prices with the participation of both domestic and foreign investment. The potential of renewable natural resources for power generation is estimated at:

(a)           Hydroelectric Power Potential: 5,000 MW (10.5% is currently being used)

(b)          Biomass Potential: ≥ 300 MW

(c)           Wind Energy Potential: ≥ 1.200 MW

(d)          Geothermal Potential: ≥ 112.3 MW

(e)          Solar Photovoltaic Potential: 5.2 KWh/m2 a day or 6 solar hours

GENERATION PROJECT INVESTMENT OPPORTUNITIES

The strong composition of current thermoelectric energy sources requires for the development, in the short term, of renewable resources, especially water resources, in order to modify the energy matrix and, at the same time, contribute more to the economic development country. This effort is projected in the country's Power Generation Expansion Plan, corresponding to the 2011-2016 period, representing a portfolio of hydroelectric power in the order of US$1,691,936.897. Likewise, private initiatives are generating energy by burning biomass (320 MW) in the order of US$640,000,000 and generation projects by means of energy crops (47MW) with an investment of US$99,104,374. The total investment in renewable energy products amounts to US$2,431, 041,271.

TRANSMISSION PROJECT INVESTMENT OPPORTUNITIES

The law reserves transmission activities to the State. Nonetheless, the ENEE is requiring, in the short term, transmission projects, substation construction and transmission lines throughout the country. These projects can be implemented under the Public Private Partnership (PPP) framework, and presents a project portfolio for construction and expansion of substations amounting to US$215,046,169.

DISTRIBUTION PROJECT INVESTMENT OPPORTUNITIES

The distribution activity is open to the private sector. The law provides that, in order to operate, the distribution companies will need to subscribe supply contracts with power generating companies for periods of no less than five years, and that distributors may have generation facilities, only when it is the sole way provide the service, or it is the cheapest way to do so at the discretion of the National Energy Commission. These distribution projects amount to US$83,597.

OPPORTUNITIES IN THE CENTRAL AMERICAN MARKET

The Central American Electrical Interconnection System (SIEPAC) presents a great opportunity for Honduras since it will expand the potential for regional energy trade and development of large regional generation projects. The project involves the implementation of a Regional Electric Transmission System that will strengthen the Central American power grid.

RENEWABLE ENERGY PROJECT INCENTIVES

To ensure the development of projects based on renewable resources, the procurement of electricity from renewable sources will have dispatch priority over other non-renewable sources. According to the legal framework, renewable plants will enjoy the following benefits:

(a)           Import duties and tax exemption, during the investigation and construction period;

(b)          Equipment, accessories and spare parts tax exemption, during the investigation and construction period;

(c)           Income tax, temporary solidarity contribution, net asset tax, and those related to income taxes, are exempted for a 10 year period from the beginning of commercial operations, for projects with installed capacity of up to 50MW;

(d)          Temporary import tax exemption.

Renewable energy plants will receive from the ENEE a 10 year contract and a rate 10% higher than the marginal short-term cost. For plants of up to 50 MW, the 10% incentive rate is extended for 15 years.

           
Honduras has significant competitive advantages for the strengthening of the Textile and Transformation Industry, which opens broad possibilities for its continued development, and a new momentum to position Honduras in the Global Service Industry, known as Business Process Outsourcing (BPO). Honduras's strategic location in the Americas, as well as its proximity to North America, has allowed it to use its rapid response capability as a decisive advantage in "time to market". An on-site U.S. Customs and qualified under the Container Security Initiative, a short 30 minutes trip from the industrial and technological parks at the north of the country, and a 48 to 72 hours trip to U.S. ports, make Puerto Cortés the most efficient port in Central America,. The 4 international airports and the presence of renowned international airlines allow for a short trip, of just 2 hours, to markets in the United States. The Textile and Transformation Industry in Honduras has been steadily pushing forward garment industries, yarn production, the manufacturing of electronic equipment, automotive parts (harness), and furniture manufacturing from wood and related products, as well as related services.

HONDURAN TEXTILE INVESTMENTS

The international recognition of Honduran textiles is evidenced by the presence of prestigious international companies such as Fruit of the Loom, Gildan, Hanes, among others, that maintain successful operations in the country, and local investors who not only operate manufacturing companies, but also provide physical facilities and high-tech and high-quality services, operating under free zone and industrial processing zone regimes with regional competitive incentives, such as the ones listed below:

Investment Incentives in Honduras

Incentives	Free Zones	Industrial Processing Zones
Import Taxes	100% Exonerated	100% Exonerated
Export Taxes	100% Exonerated	100% Exonerated
Fiscal and Municipal Taxes	100% Exonerated	100% Exonerated
Income Taxes	100% Exonerated	100% Exonerated
Repatriation of Capital	No Restriction	No Restriction
Exchange Market	Free	Free

HONDURAN PRODUCT POSITIONING IN INTERNATIONAL MARKETS

In the last decade, Honduras has taken significant positions in the textile processing and transformation market, presenting in agglomeration terms, a "cluster" of firms unique in Central America:

(a)           Honduras is the fourth largest supplier to the world market.

(b)          Honduras is the largest exporter of socks to the U.S. market.

(c)           Honduras ranks first worldwide as U.S. yarn importer.

(d)          Honduras ranks first as a supplier to the American market.

(e)          Honduras ranks first as a supplier to the DR-CAFTA market.

 

The strengths and reputation acquired by the Textile and Transformation Industry allow Honduras to continue to record growth levels and lead the industry, competing with Central America, Dominican Republic, Haiti, Mexico and Asian countries.

BUSINESS SERVICE OPPORTUNITIES

Honduras currently reunites all the factors to become, in the short term, a "hot spot", to supply a wide range of services by means of high quality BPOs.

Industry promoters in Honduras offer higher level real estate facilities, and have ample capacity to offer services with the highest quality standards, in order to efficiently manage a business: maximizing resources, reducing costs, increasing profits and having more contact with customers; which, together with low operating costs and availability of bilingual human resources (graduates of bilingual schools or colleges), representing attractive opportunities to promote Global Business Services.

The current legislation in Honduras that has been refined and modernized, combined with a system of competitive investment incentives, make possible the development of the National Investment Program in the Textile, Transformation and Business Service Sector, with a project portfolio of US$10,750,000.

           
Honduras has been blessed by an extraordinary natural and cultural heritage: we have the Bay Islands-surrounded by the second-largest coral reef in the world and one of the five top scuba destinations in the world; Copán, declared a World Heritage Site by the Unesco and considered the Athens of the Mayan civilization; more than 600km of Caribbean beaches with an undeniable beauty; exuberant nature highlighted at the Rio Plátano Biosphere, also declared a World Heritage Site; and a large number of protected areas, colonial cities, and living cultures. In short, Honduras has huge tourism potential to be discovered and offers great opportunities for domestic and foreign investment.

 TOURISM BY THE NUMBERS

During the 2000-2008 period, tourist arrivals showed an average annual growth of 8.4%. In 2009, tourist arrivals were affected by the global economic crisis, uncertainty due to the H1N1 virus and the country's political developments during the second half of the year, resulting in a decrease of 3% in tourist arrivals. Nonetheless, this figure shows an increase of 85% over the total number of tourists received in 2000, demonstrating that the sector has seen steady growth. According to the World Tourism Organization's (UNWTO) projections, starting 2011, the tourism sector in Central America will resume its recovery. For Honduras, the growth projections for 2010-2014 show an average growth in tourist arrivals between 3% and 4%. Similarly, it is anticipated that the arrival of cruise ships maintain an average annual growth of 3%..

COMPETITIVE ADVANTAGES

Among its competitive advantages, Honduras enjoys a perfect location, just 2 hours from main markets, its tropical climate is ideal during most of the year. In addition to 4 international airports distributed in different regions of the country, it maintains good road infrastructure, and known for its port facilities located on the Atlantic coast (Honduran Caribbean) and on the Pacific (Gulf of Fonseca); and two cruise ship piers located in the islands of Roatán (Bay Islands), operated by Royal Caribbean Cruise Line and Carnival Cruise Line. Prestigious international hotel chains (Marriott, Hilton, Intercontinental, Crowne Plaza, Holiday Inn and Clarion), are part of the 949 accommodation establishments in Honduras with approximately 20,000 rooms and 33,000 beds. Close to 8,000 tourist services, including restaurants, local and international car rental companies and tour operators, internationally certified dive centers, and a modern fleet of long distance domestic transport interconnect major tourist destinations in the country and the region, among others, all operate under international standards. Labor in Honduras is young and talented, with competitive salaries. Finally, Honduras is the country with the most tourist attraction diversity in Central America and is the only country in the region with resources and infrastructure oriented at its Caribbean coast. 

INVESTMENT OPPORTUNITIES

From the 2006-2021 National Sustainable Tourism Strategy, the 2010-2014 Plan prioritizes actions aimed at the effective promotion of our products in international markets, the consolidation of the main tourist destinations by means of infrastructure projects and tourism facilities, development of new attractive products with high added value in areas with tourism potential, and the design of new and diversified tourist business alternatives consistent with the trends and demands of a highly competitive global market, among others. In that sense, the strategic direction orientation is aimed at making the Caribbean coast the main tourism driving force in Honduras through the development of Integrally Planned Centers (CIP) with the necessary infrastructure and supply of housing along the Honduran Caribbean. These CIP will serve as "hubs" to other destinations in the country. This would attract traditional "sun and sand" tourism and offer as complementary activities those special interest attractions that do not have the critical mass necessary for their development, such as nature/adventure tourism. This strategy will protect those consolidated primary products whose characteristics are subject to limits of acceptable change and carrying capacity, such as archaeology in Copán, cruises and diving in the Bay Islands, destinations that are in growth stage and according to special interest markets. Finally, the Plan intends to develop at least one municipality in each of the regions with tourism potential, aiming at turning these development poles to investment magnets and tourism triggers at the regional level. The tourism sector 2010-2014 Investment Plan totals US$553,551,420 and contains projects to be executed under Public-Private Partnership framework and private projects that seek joint venture opportunities.

TOURISM PROJECT INVENTIVES

Incentives for tourism projects are the following:

(a)           Fifteen (15) years of non extendable income tax exemption, after the start of operations. This incentive will be awarded only to new projects, understood to be tourism establishments that begin operations for the first time and do not involve expansion, remodeling, change in ownership, change of name, company name or corporate name or any other similar situation.

(b)          One time tax and import fee exemption on goods and new equipment for construction and start-up projects, until they finish equipping.

(c)           Tax and import fee exemption on printed materials for the promotion and publicity of the project or the touristic destination, for a non extendable period of 15 years.

(d)          Exemption from payment of taxes and other charges for the replacement of deteriorated property and equipment, for a period of ten (10) years, upon verification.

(e)          As indicated above, 15 year exemptions apply only for projects starting operations for the first time, and do not involve expansion, remodeling, change in ownership, name, or other similar situations). Other incentives may also apply in the case of an expansion project, renovation or replacement ranked by the Ministry of Tourism.

(f)            The granting of these incentives is subject to, among other requirements, the environmental license granted by the Ministry of Natural Resources and Environment..