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December 20, 2019Amended

Law for the Strengthening of the Oil Palm Productive Sector

Congreso Nacional

  • Decree: 130-2019
  • Published: December 20, 2019
  • Issuing body: Congreso Nacional
  • Category: Commercial

Summary

AIThis summary was generated by AI and may contain errors. Always verify against the original law text below. Not legal advice. Learn how we use AI

This law creates a trust fund to provide loans to palm oil producers so they can buy fertilizers, equipment, and receive technical training. Producers repay loans through deductions from their production (up to 40%), and the State contributes 2 billion lempiras to guarantee these loans. It aims to prevent economic crisis and unemployment in this important sector for Honduras.

Considerations

Whereas it is the obligation of the State to ensure the sustainability of the national economy, being one of its fundamental objectives to take measures for the improvement of the economic and social situation that result in better opportunities for all and that foster the development of Honduras.

Whereas the cultivation of oil palm is the third most important item as a generator of foreign exchange for the country's economy, making a significant contribution within agricultural activity and contributing to social stability.

Whereas as a result of exogenous events, among others the fall in the international price of palm oil and the effect on low production caused by climate change, a negative impact is foreseen in the activities of cultivation and commercialization of oil palm, which will have repercussions in said sector and consequently in other sectors of the economy. This situation makes it necessary for the State to adopt measures that allow the mechanisms and resources necessary to maintain productive and financial capacity and therefore not generate a grave social crisis with serious consequences for the country, because if this situation worsens, approximately 18,670 producers will be affected, more than 18,000 families, extraction plants, refineries and exporters, as well as the indirect employment that this sector generates not only in the Atlantic coast of the country.

Whereas in addition to the above, the high cost of agricultural inputs and low production due to lack of adequate maintenance of productive units as a result of lack of financing due to the risk that the sector represents; as well as the imminent international requirements that demand products certified under climate-friendly production that is environmentally compatible, which is depriving the oil palm sector.

Whereas the actors in the oil palm sector present a series of problems, which has forced them to declare a national emergency, facing the possible crisis and lack of working capital to continue investing in their farms, which will result in unemployment, unrest, abandonment or loss of their farms due to actions for debt recovery that financial creditors will exercise.

Whereas the organized oil palm sector has demonstrated that it has the moral commitment to honor its obligations, requesting support in the sense that it allows them to alleviate their debts, have access to resources to maintain their farms and have alternatives that will allow them to add value to their products to obtain other sources of income, with which they can face their financial commitments and prepare to face the challenge of international requirements related to the cultivation and processing of the fruit.

Whereas in our country there already exist significant experiences with schemes to respond to financing payment commitments and programs for market organization and solidarity in the face of economic crisis.

Whereas the organized oil palm sector is willing to implement all actions and internal rules to improve all productive stages and commercialization of palm, in order to ensure compliance with any scheme agreed upon for the sector for the well-being of the oil palm sector and the families and employees who depend on it.

Whereas by means of Decree No. 205-2011, dated November 15, 2011, published in the Official Gazette "La Gaceta", on January 26, 2012, Edition No. 32,731, the Law of the System of Reciprocal Guarantee Funds for the Promotion of MSMEs, Social Housing and Technical-Professional Education was approved, whose purpose is to regulate the System of Reciprocal Guarantee Funds and its operations.

Whereas the Government does not have the budgetary capacity to meet all the requirements of the oil palm sector and the National Financial System demands solid guarantees for the granting of credits.

Whereas in accordance with Article 245 Attribution 31) of the Constitution of the Republic, it is the competence of the Executive Branch to exercise supervision and control of banking, insurance and financial institutions through the National Commission of Banks and Insurance (CNBS).

Whereas in accordance with Article 205 Attribution 1) of the Constitution of the Republic it is the power of the National Congress to: Create, decree, interpret, reform and repeal laws.

Amendments

Articles

Article 1.-

CREATION AND PURPOSE.- The Law for the Strengthening of the Palm Oil Sector is hereby created, as the necessary legal framework to promote the organization and technification of said sector, adequate management of its risks, access to credit and workability, through the adoption of best practices in productive, financial, environmental matters, legal certainty and market, aimed at its strengthening, inclusive growth and continuous improvement, for the benefit of all actors in the production chain, for the adoption and compliance with a State Policy in the Palm Sector and its corresponding Action Plan. CHAPTER II CONSTITUTION OF THE TRUST

Article 2.-

CONSTITUTION OF THE TRUST.- For the purposes of achieving the objective of this Law, the National Federation of Associations of Producers and Palm Oil Extraction Companies of Honduras (FENAPALMAH), Industrial Association of Palm Oil Producers of Honduras (AIPAH) and other oil extraction plants that wish to be part thereof are authorized, acting in their capacity as Settlors, to establish in the Honduras Bank for Production and Housing (BANHPROVI) a trust denominated: "TRUST FOR THE FINANCING AND STRENGTHENING OF THE PALM OIL SECTOR", with the purpose of fulfilling the objective and other obligations arising from this Law, as well as administering the resources obtained by the Trust by means of retention made and automatically transferred for the amortization of its loan or the return of said retention when there are no obligations; in any case, payment must be made to the corresponding producer for the production delivered, net of the repayment applicable to the obligations, within no more than twenty-four (24) hours or sooner, according to contractual conditions agreed between the producer and the extraction plants. For the financing and strengthening of the activities derived from this Law, the Trust shall be capitalized through a contribution called "Support Fund for Financing and Strengthening the Palm Oil Sector", which may be private and/or public funds and from the income generated, the beneficial producers of these credits shall honor their payments through mandatory retention until they settle their debt contracted by the producer. ARTICLE 3.- FINANCING FOR PRODUCERS.- The Trust is authorized to manage and/or contract with the National Financial System or international organizations, financing for the purchase of fertilizers, inputs, materials, machinery, technical assistance and training and/or productive equipment, through the bidding procedure, for the benefit of Palm Oil Producers and their value chain. The amount of financing is determined in accordance with the payment capacity of the producer and on the basis of the productivity of the registered plantations, taking as a basis the income of tons of fruit from the immediately preceding year. To be a beneficiary of the financing described in the previous paragraph, it is required to maintain the status of producer, have payment capacity and be an eligible subject for obtaining a reciprocal guarantee in accordance with the standards established in the Regulations of the Trust to be constituted; and must be registered or register as such in the records maintained for that purpose by the extraction plants and in the Information System implemented for such purposes by the Reciprocal Guarantee Company.

Article 4.-

CREDIT AMORTIZATION.- For the amortization of the credit referred to in the preceding Article, the extraction plants must retain from the producer a percentage of the production amount for each ton sold, which cannot exceed forty percent (40%) of the gross margin obtained as defined by the Trust Regulations. The foregoing without prejudice to additional retentions that may be applicable to the producer arising from other obligations with the extraction plants, within the framework of the lien right established by Law. The amount deducted by the company that purchases the fruit (Extraction Plant) must be transferred immediately to the Trust for the purposes established in this Law; maintaining said deduction in effect until the financing acquired under this Law is paid off.

Article 5.-

PATRIMONY.- The patrimony of the Trust is constituted by:

  • 1)

    The initial aliquot contribution made by the Settler or Settlers, whose value shall not exceed Ten Thousand Lempiras (L. 10,000.00);

  • 2)

    Contributions from the State of Honduras;

  • 3)

    Donations and national or international transfers;

  • 4)

    Financial income generated by the investment of available resources;

  • 5)

    Resources obtained through the contracting of loans from internal or external sources prior authorization of the Trust and Technical Committee; and,

  • 6)

    Others established in the trust contract.

Article 6.-

FUNCTIONS OF THE TRUSTEE.- The Trustee, in accordance with the trust contract, must perform the following functions:

  • 1)

    Receive, manage and maintain individual control of funds from the debt payments of producers;

  • 2)

    Execute proper diligence of the Credit to be granted, in accordance with applicable policies and standards;

  • 3)

    Carry out credit recovery management in accordance with the provisions of the contract and other applicable standards;

  • 4)

    Invest, with prior authorization of the Technical Committee of the Trust, the funds obtained through retention from producers, ensuring liquidity, profitability and security;

  • 5)

    Manage the financing amount received by producers, as well as make the corresponding retentions, payments and refunds, in accordance with what is established in this Decree and the respective Trust Regulations;

  • 6)

    Deliver monthly and annual reports on fund management; and,

  • 7)

    Other functions designated by the Technical Committee and established in the Trust Contract.

Article 7.-

TECHNICAL COMMITTEE.- The Technical Committee of the Trust is responsible for issuing guidelines for compliance with the purpose of this Law and the sound management of the Trust. The decisions of the Technical Committee must be made by consensus and said entity shall be composed as follows:

  • 1)

    Two (2) representatives of the Executive Branch appointed by presidential agreement;

  • 2)

    Two (2) representatives of the Industrial Association of Palm Oil Producers of Honduras (AIPAH);

  • 3)

    Two (2) representatives of the National Federation of Associations of Producers and Extraction Companies of Palm Oil of Honduras (FENAPALMA); and,

  • 4)

    Two (2) representatives of the oil extraction companies that are part of the Trust and that are not part of the Industrial Association of Palm Oil Producers of Honduras (AIPAH). The Trustee shall act as Secretary of the Technical Committee and has voice but no vote.

Article 8.-

CREATION OF TECHNOLOGICAL PLATFORM.- Through a service center authorized by the Technical Committee, the Trustee must contract a Technological Assistance Platform that allows adequate management of processes and the creation of the database necessary for proper management of the credit portfolio, as well as follow-up and technical assistance for the beneficiary producers of the program. The foregoing without prejudice to the obligation that Confianza Sociedad Anónima (S.A.), Reciprocal Guarantee Society (SGR), has in accordance with its own Law, to establish an adequate Information System to manage its risks; in which case, it may agree with the Trustee collaboration agreements between parties that enable better use of resources and avoid duplication of costs.

Article 9.-

SPECIAL CONDITIONS OF THE SECTOR.- Technical assistance, financial inclusion and other benefits for the producer that derive from the application of this Law must be conditioned and/or create incentives for the adoption of sustainable environmental practices that promote the reduction of carbon footprint, quality certificate, sustainability certification, maintaining respect for protected areas and zero deforestation, in accordance with the approved management plan, the diversification and creation of added value in the transformation of products derived from Palm Oil, in order to promote the increase of income from new and improved products, which allow maintaining and expanding the national and international market. Disbursements for new financing must be conditioned to promote the sustainable management of plantations, in pursuit of climate certification, for the differentiation of national production as environmentally friendly plant material and not genetically modified. Likewise, producers commit to seeking business opportunities that derive from the palm oil fruit with the objective of diversifying their products and adding value to the palm oil sector industry making it competitive and sustainable despite external events that may affect it.

Article 10.-

ADMINISTRATIVE EXPENSES.- The administrative and operational expenses incurred by the Trust including technical, financial and legal studies, related to the design and implementation of the resulting Action Plan, aimed at the adoption of best practices in production and sustainable management in the Palm Oil Sector, must be covered with the Contributions of the State of Honduras identified and established in Article 14 of this Law. The expenses incurred by the Trust related to Financing Programs, including the technological platform associated with the management of said credits, must be covered with the income generated by the investments made by it, as well as with the resources received by said Trust in the form of closing expenses or other commissions charged through the financing party.

Article 11.-

NON-ATTACHABILITY.- The funds constituted in the Trust in favor of producers under this Law are not subject to attachment or any other involuntary payment mechanism promoted by a third party that contravenes the spirit of this Law.

Article 12.-

REGULATION OF THE TRUST.- The Technical Committee of the Trust must regulate matters pertaining to its administration, investment, control of funds subject to retention from the producer for payment of credit and other aspects related to its management, within a period not to exceed (30) calendar days counted from the effective date of this Law. ARTICLE 13.- COMPLEMENTARY LEGISLATION.- Matters not addressed in this Law shall be governed by the provisions of the Commercial Code, the Law of Financial System Institutions and where applicable by the Resolutions and Circulars issued by the National Commission of Banks and Insurance (CNBS), as well as other applicable laws. CHAPTER III SUPPORT FUND FOR FINANCING AND STRENGTHENING OF THE PALM OIL SECTOR AND GUARANTEE TRUST

Article 14.-

IDENTIFICATION OF STATE RESOURCES.- The Government of the Republic, through the corresponding agencies and service centers, must identify and allocate the necessary resources for the correct management and capitalization of the Support Fund for Financing and Strengthening the Palm Oil Sector and its respective Guarantee Trust, for the correct administration of credit risks granted to the Palm Oil Producer Sector and other Special Productive Sectors of massive job generation, for an amount of Two Billion Lempiras (L.2,000,000,000.00), which may be invested as capital of a Reciprocal Guarantee Fund and/or as a reserve deposit within intermediary banks, for the granting of revolving credits to special sectors that are co-participants in the financing risk, in more than ten percent (10%), through their production and commercialization chain. The Central Bank of Honduras (BCH) and the Honduras Bank for Production and Housing (BANHPROVI) are authorized, in their capacity as Settlor and Trustee respectively, that with the resources defined in Article 2 of the Law of Financial Support for the Productive Sectors of Honduras, contained in Decree No. 175-2008 dated December 18, 2008; reformed by Decree No. 67-2009 dated May 12, 2009; Decree No. 57-2013 dated April 16, 2013; Decree No. 95-2014 dated October 16, 2014; Decree No. 90-2016 dated October 19, 2016; and, Decree No. 145-2018 dated November 28, 2018, may make expenditures and investments that promote the management and capitalize the support fund for Financing and Strengthening the Palm Oil Sector, as well as its respective Trust constituted in this Law and/or the Reciprocal Guarantee Funds that provide guarantees for the palm sector and other priority sectors in job generation and foreign exchange for the country. The amount to guarantee of the credits granted to stimulate the cultivation, commercialization and export of strategic crops of special attention, must be determined by the Technical Committee of the Trust or the Reciprocal Guarantee Company (SGR), as appropriate, considering for this purpose aspects such as the size of the area to be cultivated, technical assistance required, financing needs for restructurings, refinancings and readjustments, complementary guarantees, etc; and without this type of products being subject to the limits established legally or by regulation for other types of crops or activities with lesser financing demand. CHAPTER IV FINAL PROVISIONS

Article 15.-

SUPPORT FOR PRODUCTIVE DIVERSIFICATION OF THE SECTOR.- The centralized and decentralized institutions of the Government of the Republic are ordered to provide all necessary technical support to reconvert the palm oil sector as a strategic supplier in the generation and sale of Biofuels, Biogas and other new renewable energy schemes, as an alternative to improve income and diversify risks of the sector, with high environmental and social standards, through the generation of massive employment and democratic and inclusive distribution of the new added value generated. A period of forty-five (45) days is established for the Honduran State, through the Secretariat of State in the Office of the Presidency to present a proposal for Law or reforms that may be necessary for the correct application of this Article.

Article 16.-

LEGAL CERTAINTY.- The Trust must contemplate policies and standards in the execution of its resources aimed at ensuring that the Palm Sector in General ensures the lawful origin of the production, intermediation, commercialization and subsequent sale of the fruit. Furthermore, in those cases where invasions occur in industrial operations and/or farms of palm oil producers and because it is an item of national interest, the National Police are ordered, within no more than twenty-four (24) hours after being notified of the invasion of operations and/or palm oil farms; to proceed with its eviction and place the producer in possession of said industrial operation and/or palm oil farm. All this by virtue of the fact that the invasion of property is a crime of permanent flagrancy as long as the invasion has not ceased.

Article 17.-

PRIORITY TO NATIONAL DEMAND.- Within the framework of corporate social responsibility, palm oil extraction companies must guarantee the supply for national consumption of coconut meal from national producers.

Article 18.-

SPECIAL LEGISLATIVE REFORMS.- To reform Article 34 of the LAW OF THE SYSTEM OF RECIPROCAL GUARANTEE FUNDS FOR THE PROMOTION OF MSMES, SOCIAL HOUSING AND TECHNICAL-PROFESSIONAL EDUCATION, contained in Decree No. 205-2011 dated November 15, 2011 and published in the Official Journal "La Gaceta" on January 26, 2012, Edition No. 32,731, which, from now on, shall be read as follows:

Article 34

RESOURCES. The equity resources of the different Reciprocal Guarantee Funds are comprised of:

  • 1)

    ...;

  • 2)

    ...;

  • 3)

    ...;

  • 4)

    FUND FOR STRATEGIC PRODUCTIVE SECTORS. Constituted by the transfer made by the Honduran Bank for Production and Housing (BANHPROVI) to the capital of the fund, according to authorization established in Article 13, second paragraph of this Law, as well as by other resources that are deemed applicable. The value of the transfer must be greater than Three Hundred Million Lempiras (L300,000,000.00) deferred in three (3) proportional payments according to the fund's resource needs, increasing the aforementioned value with other resources that the Government of the Republic designates. This may be used to support refinancing operations and credit restructuring, as well as for new credits to producers of coffee, palm, banana and other priority sectors of the country, through financial intermediaries and other authorized intermediaries that provide financing to producers. Confianza Sociedad Anónima (S.A.), Reciprocal Guarantee Company (SGR) must establish the Information System necessary to promote proper risk management and the promotion of smart contracts, georeference systems and databases. All of the foregoing aimed at improving transparency in the different stages of the process, generating added value to the participants of the supply chain, improving their financial inclusion, providing them with certified technical assistance, including biological and environmental aspects that allow for georeference and traceability of crops. All of the foregoing to promote conservation, improvement and opening of markets, through the adoption of the best national and international practices for certification based on national and international standards..." The Managing Company is authorized to internally transfer resources among the different Guarantee Funds, with prior authorization from the respective Technical Committee. The Reciprocal Guarantee Funds, including their surpluses...

Article 19.-

SPECIAL FISCAL CONDITIONS.- The trust referred to in this Law is nonprofit and for the purposes of achieving its objectives must be exempt from all kinds of taxes, fees and contributions.

Article 20.-

This Decree shall enter into force as of the day of its publication in the Official Journal "La Gaceta". Given in the city of Tegucigalpa, municipality of the Central District, in the Session Hall of the National Congress, on the Fourth day of the month of December of two thousand nineteen. ANTONIO CÉSAR RIVERA CALLEJAS PRESIDENT JOSÉ TOMÁS ZAMBRANO MOLINA SECRETARY SALVADOR VALERIANO PINEDA SECRETARY To the Executive Power Therefore: Let it be executed. Tegucigalpa, M.D.C., December 20, 2019. JUAN ORLANDO HERNÁNDEZ ALVARADO PRESIDENT OF THE REPUBLIC THE SECRETARY OF STATE IN THE OFFICE OF THE PRESIDENCY EBAL JAIR DIAZ LUPIAN

Notes

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