Editor’s notes

Honduras has continued its steady economic recovery following the back-to-back blows of the Covid-19 pandemic and the two successive hurricanes which struck in 2020. According to figures from the World Bank, GDP is predicted to grow by 3.4% in 2024 – a slight slowdown due to the subdued economic performance of the US, the main destination for Honduras’ exports of agricultural products and textiles, and the main source of its high levels of remittances.

The most significant factor affecting the country’s legal market has been the sweeping reforms proposed by President Xiomara Castro’s left-wing administration as part of a plan to increase the role of the state in the economy. Its strategic location and rich natural resources have long made Honduras a popular destination for foreign investment, but a proposed law (which is currently being debated by the National Assembly) to replace the existing tax incentives for new investment has left many investors in wait-and-see mode, leading to a reduction in M&A activity.

The picture is similar in the banking sphere, as the government’s tight controls over foreign currency exchange have meant a shortage of US dollars, and in the energy sector, concerns that a new law introduced in May 2022 could allow for the expropriation of energy investments has also left investors wary.

However, firms have not been short of work, as the rapid pace of the reforms and uncertainty over how they will be implemented has led to an increased demand for advice, especially in the labour and tax fields. Many US companies with nearshoring operations in Honduras (particularly in the BPO sector) have been affected by the repeal of the law permitting hourly employment, so firms have been busy advising employers on the transition of part-time workers to new employment structures.

In the tax space, the government’s plans to replace the tax incentives offered to various investors (including in the tourism and export manufacturing sectors) have kept firms occupied with advising on obtaining the benefits that are still available.

The main trend in the dispute resolution sphere has been cases relating to Honduras’ autonomous economic zones, or ZEDEs. While the law on the establishment of these zones was repealed in April 2022, the constitutional framework remains in place, allowing them to remain in operation, but in a tenuous situation. So far, nine investment arbitrations have been filed against the state of Honduras by the owners of ZEDEs (including a claim for nearly $11bn – equivalent to two-thirds of Honduras’ annual budget – brought by US investors in December 2022). As a result, Honduras has declared its intention to withdraw from the ICSID Convention, effective as of August 2024 – although proceedings can continue to be brought against it.

Meanwhile, the legal landscape in Honduras continues to be dominated by regional firms Aguilar Castillo Love, Arias and Consortium Legal, which benefit from their connections to the larger markets of Guatemala and Costa Rica. Other notable Central American firms include BLP, Alta Melara & Asociados, García & Bodán, Lexincorp, CENTRAL LAW, Mayora & Mayora, S.C. and Latamlex / Matamoros Batson y Asociados, as well as IP-focused Eproint. Global outfits Dentons and ECIJA have also established a foothold in the country through mergers with local firms.

In addition, Honduras recently saw the launch of IO·Epik, one of the first alternative legal services providers in Latin America, which offers assistance to corporate clients across Central America on a flexible basis – although how much this will disrupt this traditional market remains to be seen.

On the domestic front, full-service players Gufa Law and López Rodezno & Asociados are the most prominent, but the market is also home to a number of specialist boutiques, including litigation-focused Galeano & Garcia, dedicated IP practices Bufete Casco, Bufete Durón, Bufete Mejía & Asociados and Casco & Casco, and Ulloa & Asociados, which specialises in labour law.

Most firms offer services from offices in Tegucigalpa and the industrial capital of San Pedro Sula, where much of the Honduran maquila industry is located, and in September 2023, Mayora & Mayora, S.C. also launched an office in Roatán, the largest of Honduras’ Islas de la Bahía and a key location for clients in the tourism and real estate sectors.