By Melanie Wetzel

A sociedad is a commercial entity made up of two or more individuals who combine capital and labor in order to share the possible gains or losses in a commercial venture. Similar to corporations in the United States, the sociedad is seen as an individual with rights and obligations separate from the rights and obligations of the partners or shareholders.

There are six types of sociedades established in the Commercial Code (1950), but only two are commonly used today: the sociedad de responsabilidad limitada and the sociedad anonima. Both of these entities limit the civil responsibility of the partners or stockholders to the amount of their investment.

The sociedad de responsabilidad limitada (S. de R. L.) can be made up of two to 25 partners. They are generally smaller than a sociedad anonima, and the partners in a S. de R.L. are more closely linked together. This is due to the fact that each partner's share in the S. de R. L. cannot be sold or transferred without the consent of the other partners, and a registry of partners is kept by the administration.

The sociedad anonima (S.A.) is generally a larger corporation, and has a higher minimum capital. Investors are referred to as stockholders, and the stock in the corporation can be freely transferred without the intervention of the administration or the other stockholders. In some cases, the title certificates of the corporation can be made out to the bearer, therefore creating the "anonymity" for which it is named.

Individuals cannot incorporate in Honduras. They can establish themselves as a comerciante individual, but this entity does not provide the separation of personal and company property, rights and obligations. At this time, there must be at least two investors in a sociedad in order to benefit from the protection of one's personal property from the obligations of a commercial venture. In most developed countries, including the United States, individuals can incorporate. This is becoming an international standard, and as commercial law continues to become globalized, Honduras will probably one day institute a single person corporation.

Honduras This Week is now listed in the new Encyclopedia Britannica online as a "noteworthy" resource for Honduras. The world famous encyclopedia stated that HTW is an "Independent weekly newspaper reporting current news about Honduras and Central America in English."

By MELANIE WETZEL

Many people who are new to the Honduran Law system are confused to learn that there are several types of lawyers. Abogado, licenciado, and notario are all terms that describe different legal professionals. Deciding what kind of lawyer you need is simple, and it is based on the type of legal service you need.

A person who has graduated from a Honduran law school is a licenciado. This is a general term meaning university graduate. A lawyer is licenciado en ciencias juridicas y sociales, or licenciado en derecho, for short. Once a licenciado en derecho is affiliated with the Colegio de Abogados (Bar Association), they can handle most legal matters, although they require the supervision of an abogado for certain formalities.

After practicing for three years, a licenciado can take a test before the Supreme Court to become an abogado. On passing the test, the new abogado may now handle all court proceedings and other legal matters without supervision.

To become a notario, the abogado must fulfill certain requirements that seek to prove his or her honorability and honesty. These include witnesses who testify before the Supreme Court. A notario is a minister of public faith, similar to a notary in the U.S. system. They can attest to the authenticity of signatures, they can create public documents, and in some cases they can take sworn statements for court proceedings.

To choose a legal professional, one must consider the type of service needed. If a public document is needed, one should seek the services of a notario. Some examples of contracts that must be celebrated before a notario are civil marriages, wills, constitution of a corporation or sociedad and any transfer of real estate titles.

For general legal matters and for litigation, a licenciado or abogado is sufficient. It can be assumed that an abogado will have more experience than a licenciado, but licenciados all have abogados with whom they consult.

Honduras This Week is now listed in the new Encyclopedia Britannica online as a "noteworthy" resource for Honduras. The world famous encyclopedia stated that HTW is an "Independent weekly newspaper reporting current news about Honduras and Central America in English."

By WENDY GRIFFIN

When President Rafael Callejas came to power in January 1990, he acknowledged that he had "inherited" three serious problems - a high fiscal deficit, accumulated inflation of more 70 percent over the last decade, and high foreign debt. In order to improve the situation, the Callejas administration, which included current presidential candidate Ricardo Maduro as President of the Central Bank, accepted the structural adjustment package or "paquetazo" required by the World Bank and the International Monetary Fund as a condition for receiving more loans.

If we look at the pre-structural adjustment prices of 1988 and current prices, after 10 years we can see that the prices have increased much more than the 70 percent over this period. Beef prices have increased 1000 percent and yuca is up over 3,000 percent.

However, salaries have not kept pace. On the North Coast, day laborers made Lps. 10 a day in 1989 and now they make Lps. 40 a day. In the interior, workers were making Lps. 6  8 a day and now they make between Lps. 25 and Lps. 40/day. (Sometimes agricultural land owners refuse to pay the government mandated minimum wage.) Salaries of professionals have kept pace worse than the salaries of lower paid workers. For example, salaries of high school teachers and university professor have about doubled in 10 years, while prices like gasoline have increased 16 times.

"This policy has resulted in a general impoverishing of the standard of living," says Alcides Hernandez, coordinator of the Central American Graduate Program in Economic and Development Planning (POSCAE) at the National University (UNAH).

Inflation was lower before the structural adjustment program. During the administrations of Roberto Suazo Cordova and Jose Azcona Hoyo, the annual inflation rate was between 2.9 percent and 11.4 percent. After the structural adjustment program, annual inflation rates were usually over 20 percent and in the second year of the Callejas administration it reached 36.4 percent. What is driving the inflation?

In his book "Del reformismo al ajuste estructural," Hernandez points out that for the World Bank and the International Money Fund, inflation always has one cause. "Too much money, chasing too few goods." To control imports and inflation, they want to tighten the amount of money.

However, this description of the cause of inflation seems absurd to Hernandez in Honduras, where obtaining change for a Lps. 100 bill (now about $8) can put a whole village in crisis. In 1988, it was still necessary to bring lots of coins from the capital, because there were physically not enough coins to give change for buying the newspaper (Lps 0.50) or a Coca-Cola. Honduran villages are not famous for having "too much money," yet mangos, bananas, and yuca have all gone throw the roof compared to previous prices.

His alternative theory is that devaluation of the lempira is causing the inflation. In El Salvador, when the colon was devalued 33 percent, the inflation rose to 32 percent. In small countries like Honduras and El Salvador, where there is a high percentage of imported essential goods, devaluing the currency causes prices to consumers to climb, thus causing inflation.

One of the items that most fuels this inflation is oil. Honduras does not produce oil, and so imports 100 percent of its kerosene, bunker oil, diesel, propane gas and gasoline. As gasoline prices have increased 16 times, everything that has to be transported such as food goes up in price as gasoline goes up. Rises in the cost of bunker oil raises cement prices and construction prices go up. The lowest price house for Hurricane Mitch victims will cost Lps. 20,000, to replace houses that cost Lps. 1,700 to build 10 years ago.

The electric bills are forcing many prices up. As electric bills climb for hotels, the cost of hotel rooms goes up. It used to cost Lps. 30 for a medium hotel room on the North Coast. Now it is Lps. 130 and the owner is still not earning what he earned before, in terms of buying power. Internal Honduran tourism is way down, both because of higher prices and less discretionary income. "The situation of people who produce for the domestic market has deteriorated due to decreased buying power," notes Hernandez.

Almost everything has an imported component. Oranges are grown here. But any fertilizer, pesticide, plastic bag, paper carton etc. that the producer buys for the oranges are imported. The gasoline to move them, the trucks they are hauled in, the spare parts for these are all imported. The price has to go up, especially since the workers and drivers now demand higher salaries. If there is a loan for pay for these, loan interest rates have also gone up as a result of neo-liberal policies.

Another reason the prices go up is that domestic consumers have to compete with export consumers for the same goods. In order to get any fish, Trujillo restaurant owners have to pay the price of the fish packing plant that exports frozen fish. So prices have gone up from about Lps. 1.60/lb to Lps. 16 a pound. To get beef, the local consumers have to pay what U.S. meat company buyers pay, so beef has disappeared from the diet of the poor and has become rarer among the middle class.

The government dropped chicken from its calculations of the "canasta basica" (basic basket), which is what a family of four needs to buy food for three meals in one day, figuring that the poor can no longer afford chicken. People are buying chicken feet and chicken giblets (menudos), because they cannot afford the actual chicken. Recent studies have shown that moderate-severe nutrition has worsened in Honduras over the last 10 years.

POSCAE students analyzed the relationship between inflation and other economic factors. Prices increased as devaluation increased. As devaluation increased, there is also an increase in the amount people charge as their return on equity. If the Cresida company used to make 30 centavos on each bar of laundry soap, they now need to make more profit per bar, about Lps. 3, to be able to get the same return per bar in 1988 lempiras. These two factors - devaluation and need to increase return on equity to account for inflation -- were the two driving forces they saw behind inflation.

The middle class is not being able to get the same return from their work. Therefore, they are trying to increase their return elsewhere, most notably in rents. In 1988, you could rent a 3-bedroom house in a moderate-income residential neighborhood (colonia) like the San Angel for Lps. 300/month. In a nice colonia, like Las Colonias, a 3-bedroom house was Lps. 600/month. In 1999, you can rent a room in a mediocre neighborhood for Lps. 1,000-Lps. 1,500/month and actual houses start at $300 in medium-income neighborhoods. "There is a general trend toward dollarization, which has an inflationary tendency in times of devaluation," says Hernandez.

The neo-liberal policies have failed to reduce inflation, but rather actually increased it. In Hernandez's analysis of the results of the macroeconomic policy, published in the journal of POSCAE, the country also still has a high foreign debt and a high deficit. According to Virgil Gonzalez, a Peruvian economist, devaluating the currency in a country that has an inelastic demand for dollars does not reduce imports. The demand is "inelastic" (does not change much) because most imports are necessary items, such as machines for factories, cars, buses, gasoline, etc. Thus the cost of the imports goes up, but the commercial deficit does not improve.

The World Bank is supposed to be working to improve the standard of living of Hondurans, yet with 10 years of following their policies, the standard of living has fallen for almost everyone except those with direct access to dollars. Access to foreign exchange is limited through the technique of government auctions, which accounts for over 60 percent of the foreign exchange. Only the largest companies can participate, again hurting the small companies and producers for the local market, and worsening the gap between the upper class and the small business owners.

"The measures required by the World Bank do not give the desired results, showing an incoherency in their theories as applied to the practice in a small economy like ours," concludes Hernandez.