U.S. President Bill Clinton last week signed into law legislation passed by the U.S. Senate amplifying benefits of member countries of the Caribbean Basin Initiative. For Honduras, the best break came in the form of suspension of the 18 percent import tariff for clothing assembled in Honduras. Says, Jesus Canahuati, president of the Honduran Maquila Association, "This initiative will allow us to double our exports as well as create approximately 35,000 new jobs by the end of next year." -- La Prensa

According to Hernan Erazo, vice minister of Foreign Commerce, financial services will be the focus of the FTA agreement between Panama and other Central American countries. Erazo stated that at this time terms for negotiation agreements are being drawn up and that Panama's main concern is the financial market and not having to provide concessions to signatory countries.

Enrique Mejia Ucles, a negotiator in representation of the Honduran Council for Private Enterprise (COHEP), said "negotiations are well on their way and it is important to take into account Panama's concerns as it possesses a highly developed financial sector and a dollar economy." -- La Prensa

According to Central Bank statistics, banana exports are well on their way to recovering from the effects of Hurricane Mitch and the consequent fall in production during 1999. Figures show that while exports dropped in January and February of 1999 to a mere US$4.7 from US$31.8 for the same period in 1998, during the same period this year exports were US$12.6. -- El Tiempo

As a means of raising and stabilizing coffee prices on international markets, the Association of Coffee Producing Countries of which Honduras is a member agreed last week in London to adopt a coffee retention plan. The Association's Counsel approved a plan to retain 20 percent of each countries coffee exports, applied gradually according to the harvest seasons in each nation. It is hoped that this measure will stabilize coffee prices during harvest time. Brazil will be the first country to apply the measure since its harvest season begins in June. -- El Tiempo

The National Congress approved the transfer of Lps. 100 million to the Social Housing Fund (FOSOVI) for the housing program. The transfer complies with the original assignation to the program that was created by Congress. -- El Tiempo

According to Alma Rodas de Fiallos, president of the Mango Producers Association of Honduras, the association plans to expand their export market to include Chile and the United States. For the past 10 years, the only international market for Honduran mangos has been Europe.

According to Rodas, the association is negotiating the export of mangos to these country's beginning next year. She said that in the past their product did not meet U.S. sanitary requirements for imports, but that now producers have access to a hydrothermal treatment plant that will allow them to meet the required standards.

She said access to the U.S. market would lower transportation costs, since it is closer than Europe, thus providing producers a higher profit margin. She also said Chile is a good market because that country cannot produce the fruit due to seasonal temperatures, "our sector needs to take advantage of such factors."

After several months of negotiations and rumors of a possible stalemate, terms of the free trade agreement between the northern triangle (Honduras, Guatemala, El Salvador) and Mexico were finally agreed upon last week as scheduled.

The biggest opponent of the agreement was the textile industry, which had resisted a term that requires clothing manufacturers who wish to export their products to Mexico to use Mexican raw material or cloth. However, this item was finally settled and Jorge Interiano, manager of the Honduran Maquila Association, stated "the Honduran textile industry is capable of competing with Mexico even when we buy our raw materials from them."

However, Interiano said ideally Honduras should look toward producing its own cloth in the future.  El Tiempo

The Central Bank of Honduras last week issued nearly Lps. 6 million in 90 financial stabilizing bonds to former depositors of the bankrupt BANCORP bank. The one to 10 year bonds will earn 7 percent interest on lempira accounts and half that amount on dollar accounts.

Marco Tulio Lopez, manager of the Honduran Stock Exchange, expressed satisfaction with the transaction, stating, "We are pleased with these new financial instruments that allow us to provide investors stability as well as liquidity."  El Tiempo

According to Salvador Quiroz of the Department of Agriculture Policy, although Honduras began organic cultivation just three years ago, the private sector has responded in a positive manner to this possibility in the face of environmental degradation and an increasing global market for organic products.

Quiroz said Honduras has not obtained good results in agricultural production using chemical fertilizers and pesticides. "An acre of coffee using chemicals produces 10 quintals [1000 pounds], while the same area cultivated organically produces more and can be sold for a better price," he said.

Honduras currently produces pineapple, coffee, ginger, pepper and cacao organically. Higher profit margins from lower costs, since chemicals don't have to be bought, self-sustaining crops and environmental protection are the major incentives for advancing organic production.

At this moment, the Ministry of Agriculture and Cattle Ranching and the Ministry of Environment are supporting a project presented by an international consulting firm based in La Lima, International Services for Business Development, that promotes clean and certifiable agricultural production for Central America.  El Tiempo

The Inter-American Development Bank, together with special Japanese, Swedish and Norwegian Funds, have earmarked US$ 1.73 million to promote the sustainable social and economic development of the Maya region through a cultural tourism, ecological and adventure program.

Created in 1993, the Mundo Maya was designed to preserve the ecology and cultural history of the region. The financing includes the creation of a technical ministry that together with local communities and governments will identify sites that need to be developed.

The project encompasses the design of basic infrastructure projects and training programs to facilitate the efforts of local communities and investors in the implementation of initiatives that are economically and environmentally viable.

The purpose of the program is providing alternative sources of income to poor inhabitants of the Mundo Maya region, the main beneficiaries of the project, and to reduce the destruction of tropical rain forest in the zone.

The Mundo Maya is comprised of approximately 500,000 square kilometers spread over Belize, El Salvador, Guatemala, Honduras and the Mexican states of Campeche, Chiapas, Quintana Roo, Tabasco and Yucatan, where the ancient Mayan Civilization once flourished. The region boasts excellent beaches on both the Atlantic and Pacific Oceans; one of the longest coral reefs in the world; tropical, cloud and rain forests; lakes; rivers; and more than 50 volcanoes. However, it is a well-known fact that the whole area is endangered due to the reigning poverty of local inhabitants.  El Tiempo

Central American countries were able to reduce the average inflation rate of the region from 6.9 percent in 1998 to 6.4 percent in 1999. Inflation in 1999 was 10.1 percent in Costa Rica, -1.0 percent in El Salvador, 4.9 percent in Guatemala, 10.9 percent in Honduras and 7.2 percent in Nicaragua.

The improvement in Honduras can be attributed to a more cautious monetary policy that counteracted the increase in the fiscal deficit.  El Tiempo

Due to the fact that government representatives now have less than 40 percent of the vote within the Honduran Coffee Institute (IHCAFE), the government has decided to turn control of the institution over to coffee producers. Coffee growers currently hold seven of the 11 positions in the institution.

The Association of Coffee Producing Countries (APPC) will meet in London next week to seek mechanisms to control fluctuating coffee prices. Brazil, Colombia and Central American countries will participate in the meeting to discuss a possible "coffee retention" scheme that would establish annual export quotas distributed equally in accordance with each countries production. By limiting the amount of coffee released on international markets during certain seasons, the countries hope to prevent coffee prices from plummeting at harvest time. -- El Heraldo

Due to the opposition of the Honduran business sector, a free trade agreement may not be signed with Mexico by the middle of the year as planned. Local businessmen claim that the agreement, as it stands, is unequal due to the fact that Mexico is not conceding preferential treatment to participating Central American countries (Honduras, El Salvador and Guatemala).

According to National Association of Industrialists (ANDI) consultant Adolfo Facusse, the private sector has not had enough time to go over details of the negotiations as they were provided information concerning the agreement only a few days ago. He went on to say that if a large part of the private sector (cement and bottled beverages companies, financial institutions and the textile industry) has asked to be excluded from the agreement, it is because conditions are not favorable for Honduras.

Facusse stated that although Mexico is not imposing import/export tariffs, it is proposing other types of restrictions that would seriously affect Honduran businesses. One of these is limiting the amount of beef imports to 2,500 tons, an amount considered ridiculously small by national producers.

Another example is the textile industry. If the agreement were to be signed as is, only Mexico would be able to sell its products in the region since one of the requirements they suggest is that each country produce its own polyester (Honduras imports polyester). According to Facusse, when this factor was discussed, Mexico proposed a quota that is minimal in comparison with Honduras' textile productive capacity.

At the same time, the President of the Honduran Council of Private Enterprise (COHEP), Juliette Handal, stated that it will be necessary to thoroughly revise the agreement in order to achieve the consensus of all involved sectors before Congress can approve it. -- El Heraldo

Hoping to reactivate the integration process, Guatemala, El Salvador and Nicaragua on Tuesday signed a tripartite agreement, the El Salvador, Guatemala, Nicaragua Tri-national Declaration: Integration for the 21st Century.

Among other things, the declaration includes unifying import duties between El Salvador and Guatemala and reactivating maritime transportation between Nicaragua and El Salvador in the Gulf of Fonseca. While Costa Rica, Honduras and Panama are being encouraged to form part of this union, Honduran President Flores stated that before his nation can participate, the dispute between Honduras and Nicaragua must be settled. -- El Heraldo

Next week, the U.S. Congress is expected to give final approval to a project extending new trade privileges toward Central American, Caribbean and African countries. The measure will include duty free imports into the United States of finished products fabricated with U.S. cloth, which is subject to a limit on the amount imported. Currently, the limit is 1.5 percent of all U.S. imports, but this might be raised to 3.5 percent over the next eight years.

According to Gonzalo Carias, President of the National Insurance and Banking Commission, lower interest rates on loans is due to the banking system's increased liquidity or cash flows that have reached a record Lps. 1,600 million this year.

Carias stated that "the private banking system's increased cash flow is due to many factors, among these the rise of exports as well as high volume of cash remittances received in Honduras last year."

He also stated that it might be possible to slice in half last year's 32 percent interest rate and that some banks are already offering loans at 22 percent. -- El Heraldo

Businessman Rigoberto Stephan in representation of the Honduran private sector has requested the intervention of the World Trade Organization in settling the problem of the 35 percent import duty that Nicaragua has imposed on Honduran products.

Stephan stated that the WTO and other Central American countries need to contribute toward resolving the problem that in the long run will affect the economy of the entire region and that although Nicaragua only exports to Honduras US$7 million a year, the figure from Honduras to Nicaragua averages US$50 million and that the import duty is severely affecting the profit margin of exporters.

He also said that imposing an economic blockade on Nicaragua is not the solution, although he urges the government to take other steps in accordance with integration agreements. -- El Heraldo

According to a report published by the World Trade Organization, 1999 was the worst year of the decade for Latin America in terms of economic growth. The report states that production in at least eight countries was less than in 1998, with imports decreasing as much as 2 percent.

According to the report, the type of exports is one of the main reasons many countries do not prosper. WTO cited Mexico as exemplary, with 85 percent of that country's exports being manufactured goods. In contrast, only 40 percent of the exports of the other countries in the region are manufactured.

It also stated that countries producing manufactured goods are more economically stable than countries that export raw materials. -- El Heraldo

As part of the reforms to the Deposit Insurance Law, legislators are proposing a mechanism by which the government will insure saving accounts up to US$7,000. The measure will guarantee the return of this amount to the depositor, in national or foreign currency, as a means of providing stability to the financial sector. Institutions to be included in the law are banks, savings and loans companies, financial institutions as well as foreign banking subsidiaries. -- El Heraldo