How proper ZEDE implementation can address the current economic and social issues facing Honduras DECEMBER

14, 2013 10 POINT BULLET SUMMARY PREPARED FOR COALIANZA AND THE NEW PRESIDENT ELECT
Barbara A. Cole Robert C. Haywood Community Matters, Inc. Located in Historic Downtown Littleton 5601 South Nevada Street Littleton, CO 8013 USA

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Importance of Moving Quickly on ZEDE Program - What has been learned

1) A dynamic start in Juan Orlandos first 100 days: Preliminary work indicates that in the first 100 days, this administration can launch a ZEDE program with real investors submitting a Notification of Intent to form a ZEDE. With true focus and commitment, by 7 May 2014 a ZEDE application could be approved, or near approval. This would create a strong, positive shift in attitude toward a can do administration. Economic modeling to shows benefits and sustainability of the program, and that it can move forward quickly to achieve measurable results. 2) Initial ZEDES can be locally backed and can build on Honduras successes: The resources exist within Honduras for the initial ZEDEs to be started by respected Honduran Businessmen, yet still be attractive for foreign investment. This avoids some of the political outfall of selling the country to foreigners. It builds on a generation of experience Hondurans have in attracting foreign investment in the Maquila and Tourism Industry. It ensures that the backers are committed to Honduras for the long term. 3) ZEDEs are the program to implement the National Plan: The ZEDE program is an effective and integrated approach to meeting the goals of the National Plan. CMI knows of no other development tool that focuses on so many parts of the National Plan. 4) ZEDEs are financial feasible and sustainable: The economic analysis conducted by CMI puts the Maquila and Tourism industries as top priorities with initial ground work already accomplished and an implementable course of action outlined. Actions to implement must begin now. The Tourism Financial model should be completed before January 24, 2013. Notification of the Intention to Form (NIFZ) a ZEDE should also occur during this time period. 5) Window of opportunity for maquila industry growth: Countries that are competitive with Honduras in the Maquila are going to need to reform and eliminate their export incentives programs before December 31, 2015. The following Developing Countries, Antigua and Barbuda, Barbados, Belize, Colombia, Costa Rica, Dominica, Dominican Republic, El Salvador, Fiji, Grenada, Guatemala, Jamaica, Jordan, will be required to phase out their export by December 2015, as they will no longer be covered by an exemption created in 2001 in Doha. This exemption was not extended at Bali. Unlike these competitors Honduras, is still considered a least developed country by the WTO, and does not need the exemption to offer export subsidies. Honduras will have a trade advantage for at least five years, and more likely a decade. This creates an opportunity for Honduras to become relatively more attractive as an investment site. Coupled with changes in Asia making transportation and labor more expensive there, Honduras has the potential to double Maquila employment over the next four years. This would also create an additional 260,000 jobs outside the Maquila industry, for a total of nearly 400,000 new jobs. 6) Honduras can improve the quality of its labor regulations at no cost: Inflexible labor regimes encourage the production of low value commodity products, low wages, slow hiring, excessive overtime demands, and inequality. These are serious problems that hold back Honduran development. Honduras current labor laws are detrimental to workers, employers and the nation. The ZEDE provides an opportunity to create a better work environment for employees that is

cheaper and more productive for employers and more beneficial for workers. This can also serve to improve the quality of items produced, and lead to rising wages based on productivity gains. 7) Honduras needs new cities: In 25 years the population of Honduras will be nearly 13,000,000 people; at least a 4,000,000 increase, much of it predicted in urban areas. Tegucigalpa cannot absorb another 2 million people without destroying its environment and history. Living costs would become prohibitively expensive, and the country would not meet its goal of decentralization, a fundamental principle of the National Plan and new government. The country needs to create new urban centers to absorb this predicted urban population growth. To accommodate this growth takes 25 years, so Honduras must begin now to create these centers, as this level of growth cannot occur in a few years. New cities need shopkeepers, local entrepreneurs, chefs, and builders, not just workers for foreign factories. They produce jobs for Hondurans by Hondurans. 8) ZEDEs improve the opportunities of a growing Honduran workforce: 30% of Honduras citizens have sought opportunity for meaningful employment by migrating out of the country. Many have had to use coyotes and other human traffickers at great cost and risk. ZEDEs permit migration to a more productive environment by boarding a local bus. It is clearly more humane to bring a productive environment to Honduras than to require Hondurans to seek a productive environment and jobs away from their family and homeland. Moving to or being employed within a ZEDE is, at all levels, a voluntary act. 9) Honduras lacks investment opportunities, not investment capital: Contrary to popular belief, underdevelopment is a result of the lack of dynamic opportunity, not a lack of capital. By enabling capital to invest in a predictable, productive, and profitable location, Honduras will find there is more than enough capital, both domestically and internationally, to support its highest ambitions. The stability clause, and its implementation, is critical to creating the predictable environment attractive for investment. Vast amounts of capital are seeking opportunities. With predictable, productive opportunities, Honduras does not need donor funds to get capital. Without such opportunities, donor funds will never be enough to start development. 10) Business case must be made: As stated by Guillermo Bueso Anduray, CEO, Banco Atlntida S.A. I appreciate your [CMIs] perception of the capacity our country may have as compared to others, especially regarding the sophistication of our business and political structures. The ZEDEs initiative will require further consideration in order to come about a solid business case departing from the fundamentals of our economy, and to that exercise, I look forward.1 The CMI report provides business feasibility case and shows how this will assist the Country to perform better on a number of key global indicators. Clarity and understanding of the ZEDEs benefits, and how they can function in concrete terms, will bring in national and foreign investors.2 CMI believes the submitted report provides the requested clarity. The next steps are clearly articulated, and should be begun immediately.

1 2

E-mail from Guillermo Bueso Anduray, CEO, Banco Atlntida S.A., to Robert Haywood, CMI, November 11, 2013 http://www.proceso.hn/2013/07/19/Nacionales/Presentan.proyecto.de/72058.html