For a businessperson from a developed country, the prospect of opening a business in a developing country is often quite nerve-racking. They frequently face an impenetrable and incomprehensible bureaucracy, as well as corrupt officials who take advantage of their foreign status, and more importantly, their foreign currency. However, to shy away from the fruitful business prospects offered by an emerging market like Honduras would be a loss, not only to the business, but also to the country itself.

Over the past few years, the World Bank has helped countries to develop National Competitiveness Programs and currently ranks all countries of the world on their competitiveness. It publishes annual reports entitled Doing Business and outlines key statistics on its website doingbusiness.com (see side bar).

Honduras ranks 138 out of 175 countries for the ease with which a company can start a company. It also ranks last among its Central American neighbors (see side bar). Although this does not paint a rosy picture of the business climate in Honduras, it is an improvement from its 2005 ranking of 144. The enhancement in the country's standing stems from reforms undertaken by the Honduran government, in partnership with FIDE, a World Bank Funded NGO that is working to make Honduras more competitive.
Fernando Aguilera is the Technical Director of the Committee for the Simplification of Business Regulations (STCAE). He outlines the improvements that the government has made. "What we accomplished… was to reduce the Commerce Registry from 25 days in 2005 to 7 days in 2006. That's a 72% reduction and it was the largest reduction from any country in Central America."

It now takes 44 days to establish a business in Honduras, down from 62 days in 2005. "You can see that among these 44 days, almost 70% are for operation permits at the municipal office. So we have a project that started last year and this year will be implemented, that will reduce these 30 days to probably one day for at least 70% of businesses in Tegucigalpa and San Pedro Sula," said Aguilera.
Every business that is registered must undergo an inspection before it can begin operations. Aguilera would like to see this requirement done away with for all businesses except those where potential safety hazards could exist, such as factories using chemicals. "These types of businesses have to go through an inspection. But many of these businesses would only have to do a registration and will be visited later for post-inspection."

Other improvements can be made from using more efficient technologies. For example, they shortened the wait time at the Commerce Registry by installing computer systems and linking them onto a network. "Now we are financing the digitalization of the registry in San Pedro Sula," which he says is still operating on a system established in the 19th century. He also points out that some institutions have dramatically cut their processing times, but that this has not yet been reflected in the Doing Business report. In the case of the Honduran Institute for Social Security he notes, "[w]e have preliminary statistics that it is taking one day."

In Honduras, it used to be that foreigners wanting to start a business had to fill in additional paper work and needed a Honduran resident to act as their intermediary. "Not any more," said Aguilera. "Foreigners can register a company in Honduras, the only requirement is to have two people… They don't have to be residents, they can be foreigners, and they can register a company and follow the exact same procedures that a Honduran would."

While the country has made some significant gains, Aguilera notes that progress is not easy. In the case of obtaining an environmental permit for example, the wait time can be anywhere from 60 to 120 days, depending on the type of license required. "When we did an analysis last year of the 60 days, only five of those 60 days were spent doing a technical analysis." The rest of the time is taken up by antiquated legal procedures. "For example, last year it took 24 days for CERNA to say that, 'I received your request.'" After some investigation, Aguilera and his team realized that these procedures were no way required by law, they were simply bureaucratic traditions.        They then confronted the Director of CERN with this information, and he agreed to do away with some unnecessary procedures. "We have already measured some permits coming out in 20 days, against 60 days last year. But there's a lot of work to be done. This year we're working on the simplification of the process," said Aguilera.

Aguilera and his team at FIDE are optimistic about the direction in which Honduras is heading, and they hope to overcome El Salvador, which currently has the shortest wait time. "We expect next year when the Doing Business 2008 is published for 2007, that at least we will have reduced this to 20 days. So reducing it to 20 days will make us the best in Central America."