Project Brief Investment Climate | World Bank Group 91180 Benefiting Honduran Farmers through Competition Reforms Project At A Glance Results and Impacts Country/Region Honduras/Latin American and the • Approximately 35,000 farmers in Caribbean Honduras have access to lower priced PRODUCT Private Participation in Infrastructure and agricultural inputs (up to 9 percent Social Sectors lower for certain products). THEME COMPETITION POLICY • More input products are now available Many developing economies still do not fully enjoy the benefits to help farmers. Three hundred of competitive markets. Distorted markets reduce investment products were registered in 2013 opportunities, increase business risks, raise the cost of essential compared to 68 in 2011, approximately business inputs needed to compete in domestic and international a 340 percent increase. markets, and lessen the benefits of private sector participation for • Firms are saving time and money economic development and poverty reduction. from a more streamlined process for registering products. In some cases, The World Bank Group’s Investment Climate Competition Policy registration time decreased from team, as part of its support to the Investment Climate Industry around 220 days (even 3 years in one team, helped the government of the Republic of Honduras create case) to less than 90 days. more competitive agricultural input markets for the benefit of farmers. The project leveled the playing field for agricultural inputs by implementing transparent and non-discriminatory rules for registering new pesticides and fertilizers. In Partnership with FIAS World Bank Group Context Authority identified several issues stifling competition in the market, resulting in higher entry costs, more business risk for Agribusiness is an important source of economic activity and firms, and higher prices and limited availability of agricultural employment in Honduras, contributing approximately 13 products for farmers. The main competition issue identified percent to GDP (40 percent if agroprocessing activities and was the advantageous treatment given to some suppliers for linked services are included), and representing more than their registration application. This discriminatory treatment two-thirds of all Honduran exports. delayed the commercialization of new products and created Agricultural productivity, profitability, and international unpredictability within the registration process. competitiveness depend in part on the availability of high quality agricultural inputs (such as pesticides and fertilizers) at a reasonable cost to farmers. Key agriculture inputs in Honduras are very costly when compared with neighboring countries. Variety and quality are limited. This has partly resulted from regulations that were implemented in a way that lacked transparency and predictability. Although intended to ensure the safe use of fertilizers and pesticides, the arbitrary implementation of the regulations allowed for advantageous treatment to some suppliers while limiting the competitiveness of small and new firms. In addition, cumbersome registration procedures for inputs were delaying The Bank Group supported the Honduran government’s the entry and commercialization of potentially safer products efforts to reform the market in a number of ways, which may contribute to higher productivity. including mapping the registration process and providing recommendations to reduce administrative discretion and increase transparency. Three process manuals were developed Our Role to assist staff with technical and legal evaluation procedures, The World Bank Group’s Investment Climate Competition helping reduce discretionary and arbitrary treatment of Policy team worked closely with the Honduran Secretary of firms. In addition, all relevant regulations were published for Agriculture and Livestock to introduce reforms that increase public use, and formal checklists of documents required for competition in the agricultural input market. An initial registration were disseminated to relevant stakeholders. market assessment conducted by the Honduran Competition Based on the recommendations provided by the Bank Group team, the government of Honduras: “The registration process for agricultural inputs • Optimized registration procedures for agricultural inputs. in Honduras has improved significantly in the • Enforced process manuals to ensure consistency and equal last two years. The process now is not only faster treatment across applications. but more predictable and better technically. This • Developed a web-based database of registered input improvement benefits all the agricultural chain in products (and their associated crops) by firm, with tracking Honduras, but particularly farmers who have now information on the product registration process. Public access to more and better pesticides and fertilizer access to the database will provide farmers information products.” on products available in the market and serve as a tool MR. JOSE JAAR for increasing transparency to limit the discretionary General Manager, Del Campo Soluciones Agrícolas, and Vice President, treatment of competitors. Croplife Honduras Photo Credit: Del Campo Contact Martha Martinez Licetti | Senior Economist | Investment Climate Email: mlicetti@worldbank.org | www.wbginvestmentclimate.org