Honduras: Investing
According to the UNCTAD's World Investment Report 2022, FDI inflows to Honduras increased from USD 419 million in 2020 to USD 700 million in 2021. Honduras' FDI stock also increased, reaching USD 17.5 billion in 2021. Main investing countries include the U.S., Canada, and Mexico followed by other Caribbean and Latin American countries (El Economista). The most attracting sectors for investment also include production of harnesses, garments, and textile products, bank services, transport, storage and telecommunications, among other services (El Economista).
Investments in Honduras face various challenges, including violence, insecurity, weak public institutions, high levels of corruption, heavy bureaucracy and underdeveloped infrastructure. However, the country has certain assets that attract foreign investors, including a decent level of productivity, decentralisation, the privatisation of many sectors, and the establishment of International Free Trade Zones. Government policies have been friendly towards foreign private investment, which is generally accorded the same rights as domestic investment. The government has bet on a young, and bilingual population, along with tourism, agriculture, and textiles to bolster its FDI. Crime reduction's strategies have also been implemented. In recent years, Honduras made starting a business less expensive by reducing the notary fees for the preparation of the articles of incorporation. The government has also made significant improvements in streamlining procedures and eliminating a series of administrative obstacles involved in the process of establishing a company through the adoption of new legislation, such as the Law of the Bay Islands Free Zone and the Law for the Promotion and Protection of Investments, both of which have highly favourable incentive packages. In early 2022, the Honduran special economic zone of Próspera adopted cryptocurrencies as legal tender which can be used as a form of payment for individuals and businesses, in an endeavour to boost economic activity and attract foreign investment through crypto. Among the major investments made in the country in recent years is the construction of the Patuca III hydropower dam by Chinese company Sinohydro, which was delivered in 2021 after an investment of US$349 million by the Chinese giant.
| Honduras | Latin America & Caribbean | United States | Germany | |
|---|---|---|---|---|
| Index of Transaction Transparency* | 3.0 | 4.1 | 7.0 | 5.0 |
| Index of Manager’s Responsibility** | 8.0 | 5.2 | 9.0 | 5.0 |
| Index of Shareholders’ Power*** | 6.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
| Foreign Direct Investment | 2020 | 2021 | 2022 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 419 | 739 | 823 |
| FDI Stock (million USD) | 16,898.0 | 17,636.7 | 18,459.2 |
| Number of Greenfield Investments* | 8.0 | 3.0 | 4.0 |
| Value of Greenfield Investments (million USD) | 403 | 63 | 191 |
Source: UNCTAD - Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
| Income tax | Progressive rate up to 25% |
| From HNL 0 to 172,117.89 | 0% (including NHL 40.000 for non-documented medical expenses) |
| From HNL 172,117.89 to 262,449.27 | 15% |
| From HNL 262,449.27 to 610,347.16 | 20% |
| Above HNL 610,347.16 | 25% |
| Individuals with gross income above HNL 1 billon | 1% on gross income, if it is greater than the tax payable as per the standard progressive rates |
| Honduras | Latin America & Caribbean | United States | Germany | |
|---|---|---|---|---|
| Number of Payments of Taxes per Year | 59.0 | 28.2 | 10.6 | 9.0 |
| Time Taken For Administrative Formalities (Hours) | 203.0 | 327.5 | 175.0 | 218.0 |
| Total Share of Taxes (% of Profit) | 39.1 | 46.8 | 36.6 | 48.8 |
Source: Doing Business - Latest available data.
| Setting Up a Company | Honduras | Latin America & Caribbean |
|---|---|---|
| Procedures (number) | 11.00 | 8.00 |
| Time (days) | 42.00 | 25.22 |
Source: Doing Business.
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Latest Update: November 2023
