Govt. Signs Away Hondutel Monopoly

- Monday, July 9, 2001

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Honduras' state-owned telco Hondutel now stands to lose its exclusivity in the provision of basic telephony more than three years ahead of schedule because of a treaty with the US, a government source confirmed for BNamericas.com.

The "Reciprocal Investment Protection Treaty" gives US investors the right to invest in all sectors, including those that are currently state monopolies. In Honduras' case that would include Hondutel, electricity distributor ENEE and the national social security system.

A similar treaty with Mexico and one currently being drafted with Chile exclude state monopolies. The US treaty was signed in 1995, ratified by the Honduran Congress last year, and is scheduled to take effect on Wednesday July 11.

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It can only be challenged through an arbitrational hearing in the US, and the source said, "Nobody is going to do that," adding that it is not clear if the failure to exclude monopolies was a blunder or a political decision.

Some US telcos have already approached the Honduran embassy in the US to clarify whether the loophole is viable. New entrants would still have to bid for licenses to provide local, mobile, and long distance services, he said.

"Some members of Congress are now relieved that the last Hondutel privatization attempt failed because (otherwise) they would now be facing a huge international lawsuit," the source concluded.

Had the auction in October 2000 been successful the winner would have discovered in late November that the company's monopoly was no longer secure until 2005.

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