Legal market overview in Honduras

Before 2020, Honduras recorded some of the highest growth rates in Central America, with its GDP increasing by 2.7% in 2019. However, the double blow of the Covid-19 pandemic and two successive hurricanes, Eta and Iota, in November 2020, which caused severe flooding and forced thousands of people from their homes, has had a damaging impact. Honduras' GDP contracted by 9% in 2020, adding to the existing problems of poverty and inequality in the country.In addition, corruption scandals have continued to surround President Juan Orlando Hernández. In March 2021, Juan Antonio "Tony" Hernández, a former congressman and the president's brother, was sentenced to life imprisonment by a New York court for trafficking cocaine into the US. The president was also named as a co-conspirator by US prosecutors in the trial of former drug cartel leader Devis Leonel Rivera Maradiaga for drug smuggling. Honduras' next presidential elections are scheduled for 28 November 2021, creating further tension and uncertainty.While the government acted quickly to contain the pandemic and borrowed $2.5bn to aid with Covid recovery, the rollout of the vaccine has been slow; Honduras has had one of the lowest vaccination rates in the hemisphere.However, there have been some positive recent developments. GDP is expected to grow again in 2021 by 4.5% and US President Joe Biden has pledged $4bn to the Northern Triangle region of Central America (Honduras, Guatemala and El Salvador) to combat the root causes of mass migration, promising tougher enforcement against corruption and human trafficking. Still, it has yet to be seen whether the change in administration will signal a lasting change in US foreign policy in the region.This turmoil has understandably had an effect on the Honduran legal market. Election-year uncertainty, political scandals and the pandemic have combined to create a drop in foreign investment into the country, meaning firms have seen fewer large M&A and financial transactions. On the other hand, there has been a definite increase in restructuring work and advice to companies in sectors that have grown during the lockdown, including food and fintech. Firms have also continued to advise on the financing and construction of infrastructure and energy projects, which have been prioritised by the government due to their importance to the state.On the employment side, firms have advised on the suspension or termination of employment contracts for companies unable to operate during the pandemic, as well as on new remote and flexible working policies.Litigation work has also been reduced, as the courts were closed for a long stretch in 2020, meaning there is now a large backlog of cases. This has added to the increase in arbitration work - a steady trend in Central America - as clients have seized the opportunity to resolve disputes more quickly. The situation has been similar in the intellectual property sphere, as the Honduran Intellectual Property Office remained closed for several months and originally re-opened only for trade mark applications by email (as these still had to be filed physically, this led to twice the work for many firms).One area where litigation has increased is tax: the Honduran Revenue Administration (SAR) has been zealous in pursuing taxpayers over audits and tax adjustments. As a result, as well as defending clients in administrative and judicial processes, firms have seen an increase in work advising on tax compliance, assisting clients with navigating the complex Honduran tax system. They have also assisted clients with obtaining tax benefits available to certain companies under Honduran law, among them renewable energy, export manufacturing, free trade zones, tourism and international services companies (such as BPOs and call centres).The Honduran legal landscape saw a significant change in 2021 as domestic firm Bufete Melara & Asociados merged with QIL+4 Abogados, S.A. in Guatemala, Batalla Abogados in Costa Rica and Valdés Suárez & Velasco in El Salvador to form a new Central American firm, becoming Alta Melara & Asociados. The new firm joins a number of other regional outfits in Honduras, including Arias, Consortium Legal, Aguilar Castillo Love, BLP, García & Bodán, Central Law, Lexincorp and Latamlex / Matamoros Batson y Asociados.Other notable firms include ECIJA and Dentons Muñoz Zacapa, which launched offices in Honduras in 2018 and 2019, respectively, through mergers with local practices, and the Honduran office of leading Guatemalan firm Mayora & Mayora, S.C. In addition, the market includes established full-service local firms such as Bufete Gutiérrez Falla & Asociados, as well as several highly regarded IP boutiques. Most firms are based in the capital of Tegucigalpa, but many also have offices in the industrial hub of San Pedro Sula in the north of Honduras.