LatinFinance - May/June 2016 - Honduras - HS4

Outlook

This is not an easy task. It is going to take
time, but the trend is positive," he says.
The government claims the homicide
rate has fallen to close to 50 murders per
100,000 inhabitants.
Luis Larach, president of the Honduran
Council of Private Companies (COHEP), an
umbrella organization of business groups,
says recent scandals that allegedly implicate the security forces in acts of violence,
including murder, and corruption, should
be seized as an opportunity to decisively
clean up these problems.
"Many people have a negative view
of the recent events, the allegations of
complicity of authorities in crime. If it is
true and if the process in place to investigate this leads to justice being served, it
is positive," says Larach. "We need to see
this as an opportunity, to show that we are
serious about dealing with corruption and
impunity, sending a clear sign that we are
changing."
Honduras is receiving support from the
Organization of American States (OAS) to
address corruption. The Mission to Support
the Fight Against Corruption and Impunity
in Honduras (MACCIH) began operating
in the country in April and will provide the
government with policy recommendations,
starting with a list of crimes related to cor-

ruption to be included in a reform of the
Criminal Code underway in the Congress.
Rivaling crime as a deterrent for potential investors is the energy supply sector,
which is expensive and inadequate. The
Hernández government has reformed the
National Electricity Company (ENEE), but
there is still a long way to go. Reliance on
imported fuel oil keeps electricity bills high
and losses in distribution are above 30%,
making the system highly inefficient.
"The problem is substantial. Between
2013 and 2014, ENEE losses were equal
to 3% of GDP, around $600 million a year.
The impact on the productive sector is
high. It hurts productivity, competitiveness
and the overall fiscal health of the country," says Alejandro Quijada, an economist
with the Inter-American Development
Bank (IDB) in Honduras.
The state has responded by promoting
renewable energy sources and Honduras
now has Central America's largest solar
and wind projects. It is also moving ahead
with its first geothermal project and has
a long list of planned hydroelectric plants
that could add at least 1,000 MW in new
generating capacity.
Honduras plans to promote electricity
projects through private-public partnerships. The first, awarded in late 2015, is
a $358 million
contract to reduce
Economic outlook
IMF GDP forecasts for Central American countries
distribution losses.
A consortium
7
formed by two
2016
2017
2018
Colombian com6
panies, Eléctricas
de Medellín and
5
Unión Eléctrica,
and Honduras'
4
Enterprise Consulting, won the
3
project. Its goal is
2
to reduce distribution losses from
1
32% to 17% and
the government
0
believes the longCosta Rica El Salvador Guatemala Honduras Nicaragua Panama
term impact will be
Source: Intertional Monetary Fund
a saving of more

than $1 billion.

Infrastructure to-do list
Resolving problems in the electricity sector
is part of a larger effort to overhaul the
country's infrastructure, with an emphasis
on transportation.
Quijada says that while Honduras needed substantial investment in transportation
infrastructure, the state had to prioritize
because resources were scarce and a new
fiscal responsibility law approved in March
by the legislature required justification for
large expenditures.
The IDB is helping financing transport
infrastructure, "but not just any roads,"
he says. "Projects need to be linked to
economic activities and improving regional
insertion. It is important for Honduras to
have great connectivity with the region,"
Quijada says.
The government is budgeting close to
$2 billion this year and next on projects,
including the new Pacific Corridor that will
improve the connection with El Salvador
and Nicaragua. The IDB is providing $154
million for the project.
Honduras is also getting some help from
South Korea to determine the feasibility
of a new deep-water port on the island of
Amapala, on the Pacific coast. Amapala
would complement the San Lorenzo port
that already exists on the Pacific side.
Honduras has three ports on its Atlantic
front. Among the projects underway is an
eight-lane highway connecting the Pacific
and Atlantic coasts, creating a "dry canal"
for the movement of goods.
In another of the public-private partnerships being promoted, the state's Commission to Promote Public-Private Alliances
(Coalianza) signed in the first quarter a
deal with EMCO, a joint venture led by
Germany's Munich airport, to build the
new $136-million Palmerola international
airport for Tegucigalpa. Construction of
a $200-million Civic Center in the capital
was awarded to Mexico's Constructora y
Edificadora GIA+A in partnership with a
Honduran firm.
To be effective, Honduras' 20/20 plan

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