Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
Honduras is subject to all government procurement provisions contained under The Dominican Republic-Central America FTA. CAFTA-DR eliminated a local requirement that required foreign firms to act through a local agent partner company that was at least 51 percent Honduran-owned. CAFTA-DR requires fair and transparent procurement procedures, including advanced notice of purchases and timely and effective bid review procedures. Under CAFTA-DR, U.S. suppliers are permitted to bid on procurements covered by the agreement for most Honduran government entities, including most key ministries, on the same basis as Honduran suppliers. The anti-corruption provisions in the agreement require each government to ensure that bribery in matters affecting trade and investment, including government procurement, is treated as a criminal offense or is subject to comparable penalties, under local law.
At present, Honduras is not a signatory to the WTO Multilateral Agreement on Government Procurement (GPA).
Foreign companies may appoint a local representative, through a power of attorney, to help them navigate the government procurement. Bids are evaluated based on cost, delivery time, reputation of the firm, technical support, performance in previous contracts and specific aspects related to each bid.
Under the Government Contracting Law, all public works contracts over one million Lempiras/ $40,000 must be offered through public competitive bidding. Public works contracts between 500,000L and one million Lempiras/US$20,000 and US$40,000 can be offered through private bids. Contracts less than 500,000L/US$20,000 are exempt from the bidding process. Government purchases and project acquisitions are generally exempted from import duties.
Winning contracts with the Honduran government can be challenging, even for large companies. Some foreign firms have complained of mismanagement, bureaucratic delays, inadequate notification procedures, excessive direct contracting on the part of the government, and lack of transparency in the bidding process. However, efforts to strengthen the country’s procurement systems are underway. One way in which the Honduran government has tried to improve transparency and fairness in government procurement is by contracting with the United Nations Development Program (UNDP) to manage procurement for several specific projects and state-owned entities.
In 2015, Honduras also joined the Construction Sector Transparency Initiative (CoST), a global program supported by the World Bank that helps countries pursue infrastructure accountability. Honduras has achieved a project disclosure compliance rate of 85.3 percent regarding its public-private partnerships. In addition, the country is publicly sharing data on public infrastructure projects online.
In order to facilitate dissemination of public bidding opportunities, the Honduran government has an online contracting and procurement information system known as “Honducompras”, which is administered by the State Procurement Agency (ONCAE) under the Ministry of Transparency. As part of ONCAE’s State Contracting and Procurement Efficiency Program, Honduras implemented a national “Standard Bidding Document” in 2007 that is deemed acceptable to multilateral financing entities such as the Inter-American Development Bank (IADB) and the World Bank. It improved several aspects of the government procurement process. Local government tender announcements and other pre-qualified trade opportunities may also be accessed through the Trade Leads Program at the database of the U.S. Department of Commerce, as well as through the U.S. Department of State’s Business Information Database System (BIDS). The Commercial Service maintains Commercial Liaison Offices in each of the main Multilateral Development Banks, including the World Bank and the Inter-American Development Bank. These institutions lend billions of dollars in developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The Commercial Liaison Offices help American businesses learn how to get involved in bank-funded projects, and advocate on behalf of American bidders. Learn more by contacting the Advocacy Liaison for World Bank or the Advocacy Liaison Website for Inter-American Development Bank (IDB).
U.S. firms interested in government procurement opportunities should reach out to the Embassy’s Commercial and Economic sections prior to pursuing any procurement process with the Government of Honduras.
Many governments finance public works projects through borrowing from the Multilateral Development Banks. Please refer to the “Project Financing” Section in “Trade and Project Financing” for more information.
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.”
Financing of Projects
Long term financing for infrastructure, industrial initiatives, and other major projects is available from both U.S. and international entities. Multilateral organizations such as the Inter-American Development Bank and the World Bank are active players in development and project financing in Honduras, along with affiliated institutions such as the Inter-American Investment Corporation (IIC) and the International Finance Corporation (IFC), respectively. The Central American Bank of Economic Integration (CABEI) is also a leading source of multilateral financing.
The U.S. International Development Finance Corporation (DFC) is America’s development bank and is open in the Honduras market. DFC invests across sectors including energy, healthcare, critical infrastructure, and technology.
The Export-Import Bank (Ex-Im Bank), the official export credit agency of the United States, supports several trade transactions under a range of programs. It guarantees the repayment of loans, or makes loans to foreign purchasers of U.S. goods and services. Ex-Im Bank also provides credit insurance that protects U.S. exporters against the risks of non-payment by foreign buyers for political or commercial reasons. Ex-Im Bank does not compete with commercial lenders but assumes credit and country risks they cannot accept. Ex-Im Bank is not a development bank, and therefore looks for reasonable reassurance of repayment in all transactions.
Long-term financing is generally available only through special lines of credit that select commercial banks have with the Central American Bank for Economic Integration. The programs that are available concentrate on export projects, including export processing zones and industrial parks.
The U.S. Department of Agriculture (USDA) provides credit guarantees for a wide range of agricultural products exported from the United States, as well as export bonuses for selected products under the Export Enhancement Program and the Dairy Export Incentive Program. The USDA financing programs are aimed at encouraging U.S. agricultural exports.
The U.S. Small Business Administration (SBA) provides financial and business development assistance to encourage and help small business develop export markets. SBA offers both loans and loan guarantees.
The U.S. Trade Development Agency (TDA) provides grants for feasibility studies overseas on projects with high U.S. products and services export potential.
Multilateral Development Banks and Financing Government Sales
Price, payment terms, and financing can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB). A helpful guide for working with the MDBs is the Trade Finance Guide. The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at each of the five different Multilateral Development Banks (MDBs): the African Development Bank; the Asian Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the World Bank.
For the Central America region, learn more by contacting the Commercial Liaison Office to the Inter-American Development Bank and the Commercial Liaison Office to the World Bank.