Chapter

HONDURAS

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: July 1, 1950.
Exchange Arrangement
CurrencyThe currency of Honduras is the Honduran lempira.
Exchange rate structureUnitary.
Classification
Crawling bandThe exchange rate for the lempira is determined in foreign exchange auctions. Banks and exchange houses are required to sell all their daily foreign exchange purchases to the Central Bank of Honduras (CBH). Buyers (banks, exchange houses, or private individuals) bid at a price that may not differ from the base price set by the authorities by more than 7% in either direction. The base exchange rate is adjusted every five auctions according to changes in the differential between domestic and international inflation and in the exchange rates of currencies of trading partners of Honduras with respect to the dollar. The amount of foreign exchange offered at each auction must be at least 60% of the CBH’s purchase of foreign exchange from its agents. The minimum amount of foreign exchange to be offered and the base price are announced before the auction. Individuals willing to purchase foreign exchange must make offers in lempiras for amounts ranging between $5,000 and $300,000. Foreign exchange agents may purchase for their own account to satisfy private demands lower than $5,000. The maximum amount of foreign exchange that may be purchased for this purpose is $30,000 for commercial banks and $10,000 for foreign exchange houses. Foreign exchange agents may charge up to 1.5% commission on sales to the public lower than $5,000 and up to 1.2% for larger sales. Auction rates may deviate from the base rate by ±7%. Auctions are held once each working day, and each bidder may make up to three offers in each auction.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payment arrangements
Regional arrangementsHonduras is a member of the CACM.
Trade transactions with the rest of Central America may be carried out in local currencies or in dollars.
Administration of controlThe CBH exercises control.
International security restrictionsNo.
Payment arrears
OfficialMost of these arrears were with the Paris Club creditors and were rescheduled through the Agreed Minutes signed on April 30, 1999.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedBanks are required to hold these deposits in (1) foreign currency notes in their vaults, (2) deposits in the CBH, (3) special accounts at correspondent banks abroad, (4) investments in high-liquidity foreign instruments, or (5) export or import financing instruments.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresImports of arms and similar items require a license issued by the Ministry of Security.
Import taxes and/or tariffsImport duties range up to 19%. Over 1,600 items from other Central American countries are exempt from import duties, except for a 0.5% import surcharge. The surcharge will be eliminated in 2000. There are duty-free and industrial-processing zones that benefit from tariff exemptions. The tariff for imports of certain consumer goods was reduced to 17% on December 31, 1999.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsYes.
Surrender requirementsAll export earnings, except those from trade with other Central American countries, must be surrendered to banks or exchange houses within a period of 20 to 85 days. Proceeds from coffee exports must be surrendered within 20 days. Exporters are allowed to retain up to 30% of their foreign exchange proceeds to finance their own imports, as well as to pay for their authorized external obligations. Commercial banks and exchange houses are required to sell all the purchased foreign exchange to the CBH.
Financing requirementsNo.
Documentation requirements
DomiciliationYes.
Preshipment inspectionYes.
Export licensesNo licenses are required, but exports must be registered for statistical purposes.
Export taxesBananas were subject to an export tax of $0.50 for a 40-pound box. On June 1, 1999, the export tax was decreased to $0.10, and is to be abolished by June 2000.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersThere are no controls on these payments, but all buyers of foreign exchange are required to fill out a form stating the purpose for which the funds will be used. There are no limits on the amount purchased.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsPurchases of capital shares in existing domestic firms are permitted, with the exception of defense-related industries, hazardous industries, and small-scale industry and commerce.
On collective investment securities
Purchase locally by nonresidentsThere are no controls on activities involving the receipt of foreign exchange and its transfer abroad for investment in mutual funds.
Sale or issue locally by nonresidentsForeign mutual funds and similar financial institutions must have permission to collect funds in Honduras for deposit or investment abroad.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsThe approval of congress is required for all public sector foreign borrowing. Private sector external debt contracts must be registered with the CBH for statistical purposes only.
Commercial credits
To residents from nonresidentsYes.
Financial credits
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilities
To residents from nonresidentsYes.
Controls on direct investment
Inward direct investmentInvestments are permitted in all sectors without control, with the exception of defense-related industries, hazardous industries, and small-scale industry and commerce. Investments in hazardous industries require prior approval. All foreign investments must be registered with the Secretary of Economy and Trade.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsThere are location and size limitations.
Controls on personal capital movementsNo.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadThe limit of indebtedness is three times their capital and reserves.
Maintenance of accounts abroadCommercial banks must deposit abroad 38% of foreign exchange deposits held by the private sector.
Lending to nonresidents (financial or commercial credits)CBH authorization is required.
Lending locally in foreign exchangeFinancial institutions may lend 50% of their foreign exchange deposits locally in foreign exchange.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsAll types of deposits are subject to a 12% requirement.
Liquid asset requirementsForeign exchange deposits are subject to a 38% requirement.
Credit controlsCredit with 40% of funds from foreign exchange deposits must be granted to export-related activities. The remaining 10% may be lent for any purpose.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsCurrently, banks, nonbank financial institutions, and savings and loan associations are subject to a nonremunerated reserve requirement of 12% on all deposits both in domestic and foreign currency. In addition, for deposits in domestic currency, financial institutions were required to hold obligatory deposits at the central bank at a market-based interest rate equivalent to 13% of deposits for banks, 3% for nonbank financial institutions, and 5% for savings and loans associations. For deposits in foreign currency, financial institutions are required to deposit 38% in foreign banks, and may lend 50% mainly to export activities. The central bank aims to harmonize all reserve requirements with levels prevailing in other Central American countries by 2000.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsThere is no securities law.
Changes During 1999
Arrangements for payments and receiptsApril 30. Most of the official payment arrears were rescheduled with Paris Club creditors.
Imports and import paymentsDecember 31. The tariff for imports of certain consumer goods was reduced to 17%.
Exports and export proceedsJune 1. The export tax on bananas was decreased to $0.10 for a 40-pound box.

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