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Honduras to improve its transport and freight logistics system with IDB support

Loan of US$111.65 million will allow for modernization of regulatory framework and trade facilitation systems

Honduras will upgrade its transport system and freight logistics services thanks to a US$111.65 loan from the Inter-American Development Bank (IDB). These funds -- mostly of a concessional nature -- will allow the government to enhance freight logistical services by strengthening the regulatory framework, formalizing the sector through the National Logistics Council and simplifying and modernizing technological processes and systems in the area of trade facilitation.

“The development and performance of the transport and freight logistics sector is crucial for Honduras' competitiveness due to their interaction with agriculture and manufacturing," said Manuel Rodríguez Porcel, head of the IDB project team. “In particular, it is vital for the maquila industries based in San Pedro Sula, which account for 31 percent of the aggregate value of the manufacturing industry and 5.2 percent of the country's gross domestic product," he added.

This program is the second in a series of three transactions that are technically linked to each other but financed independently by the IDB under the Policy Reform Support Loan modality.

In the first of them, which was approved in October 2018, reform priorities for the sector were set, in line with guidelines established by the goverment's National Freight Logistics Plan. 

This second loan, which amounts to a quick response so that  the country can access the funds as soon as possible and which was enlarged from an initial amount of US$25 million because of the COVID-19 pandemic, aims to develop the legal framework to support those reforms. This includes a freight logistics bill aimed at updating the regulatory framework taking into account energy efficiency considerations, and adoption of regulations needed to update laws in areas of freight security.

At the same time, processes for integrated planning and improved transport, freight logistics and trade facilitation have been strengthened. This includes among other measures the drafting of a national plan to modernize the transport and freight logistics fleet; instituting a national transport school and private ones as well, all of them including a training program specifically for women; and finally, an updating of the technological and digital tools for consolidating information in tax administration, so as to monitor and manage it through a business intelligence tool.

This project is also designed to reduce wait times and costs in customs procedures through logistical and technological improvements. By way of example, while exporting a container in Panama costs US$670, from Puerto Castilla in Honduras it shoots up to US$2,300, of which overland transport accounts for around half.

The US$111.65 million loan is composed of a concessional tranche of US$72.57 million with a reimbursement period of 40 years, a 40-year grace period and annual interest rate of 0.25 percent; and a 20-year tranche of $39.08 million, with a 5.5-year grace period and a variable interest rate pegged to the Libor. The finance secretariat in Honduras will execute the loan.

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The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.

 

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