Volume 6, Number 5, Page 2

Overview of New Honduran Legislation

By the Foundation for the Development of Exports of Honduras (FIDE)

New Mining Code: Effective at the beginning February 1999

After extended debate on the issue, the National Congress of Honduras approved the new Mining Code, which is designed to attract foreign investment and generate employment throughout the country. The law was passed on November 1998; its regulations took effect in February. Currently, Honduras holds 480 areas in which evidence of mineral deposits exists. For this reason, the new law was passed for the purpose of guaranteeing mining rights and eliminating certain criteria in the application of the law. The new Mining Code will replace that approved in 1968, which had been difficult to apply effectively due to its multiple and contradictory amendments. Accordingly, the new Code is streamlined and should be more easily put into practice with regards to taxation, while improving the market's attractiveness to foreign investment.

Law to Facilitate the Administration of National Reconstruction Efforts

The law constitutes one of the principal new laws that the Honduran Congress passed to be implemented should the Executive Branch declare a state of emergency in which temporary powers would be granted to the Presidency in order to expedite the reconstruction of Honduras and its internal reorganization. The Congress also established emergency regulations to permit the government to rapidly obtain new financial resources and mandates to temporarily rescind the tax obligations of affected populations. The objective is to give the Executive Branch the necessary flexibility to be able to manage any national crisis and begin reconstruction. Towards this end, the President will be enabled to create "Special Cabinets"

Law for the Financial Health of the Municipal Autonomous Bank (BANMA)

The Honduran Congress has passed new regulation with the primary purpose of contributing to the available assets of the BANMA. The new resolution will allow BANMA to provide support to all regions of Honduras order to facilitate the construction of the national infrastructure destroyed during Hurricane Mitch. In order to realize the fiscal reinforcement of BANMA, the new law will forgive BANMA's debt to various institutions of the public sector, including Social Security (IHSS).

Law for the Creation of the Secretary of Tourism

With Decree No. 6-98, el Congreso Nacional provided for the creation of the Secretary of Tourism. This office will have the objective of developing and creating incentives for increased tourism within Honduras, given that tourism is among the most important industries for the future economic development of the country. The new decree provides for the Secretary of Tourism to operate as an independent entity, separating it from the auspices of the Secretary of Industry, Commerce and Tourism. The new Secretariat will be entrusted with the coordination, execution and evaluation of policy related to tourism and it's development.

Law to Privatize the State-Owned Telecommunications Company HONDUTEL

In order to modernize and develop telecommunications services in Honduras, the Congress has passed a new decree to privatize HONDUTEL (Empresa Hondureña de Telecomunicaciones), the state-owned telecommunications company. HONDUTEL will be renamed COHDETEL (Compañia Hondureña de Telecomunicaciones), and will oversee the authorization of concessions, permits, license and registration in the telecommunications sector.

Additionally, COHDETEL will have under its jurisdiction all of HONDUTEL's assets and liabilities, whether tangible or intangible and including contracts, trademarks, rights and services. The Honduran Congress authorized the sale of 50 percent of the former HONDUTEL's assets to a strategically selected private investor (potentially a foreign telecommunications firm), while four percent will be sold to public institutions, employee's of HONDUTEL, professional organizations and individual investors. The rest of HONDUTEL's assets will be retained by COHDETEL.

The social benefit of the aforementioned privatization is that the entity purchasing 50 percent of HONDUTEL's assets will be required to expand rural telecommunications services. In the first stage, telecommunications services will be expanded to all communities with a population of 500 or more inhabitants. Additionally, of the funds received by the government for the privatization of HONDUTEL will be allocated in the following manner: 40 percent for education, 30 percent for health and medicine, ten percent for child welfare, 10 percent for the elderly and 10 percent to solidify the solvency of CONATEL.

Amendment to Article 107 of the Constitution

The Congress has approved an amendment to Article 107 of the Constitution which will permit foreign investors to expand their operations in Honduras to previously prohibited regions. The amendment is intended to attract increased foreign investment by opening Honduran beaches and maritime industries to the same. The law maintains provisions to protect Garífuna Indian communities.

For more information, go to the Foundation for the Development of Exports of Honduras website at http://www.hondurasinfo.hn/