A/S REICH MEETS WITH HONDURAN PRESIDENT MADURO; DISCUSSION FOCUSES ON BORDER/TARIFF DISPUTE WITH NICARAGUA

C O N F I D E N T I A L SECTION 01 OF 04 TEGUCIGALPA 002534



SIPDIS



STATE FOR WHA, WHA/CEN, DRL, AND EB

STATE PASS AID FOR LAC

NSC FOR AMB MAISTO



E.O. 12958: DECL: 09/10/12

TAGS: PREL, PGOV, PBTS, ETRD, ECON, KJUS, HO, UNGA

SUBJECT: A/S REICH MEETS WITH HONDURAN PRESIDENT MADURO;

DISCUSSION FOCUSES ON BORDER/TARIFF DISPUTE WITH NICARAGUA



Ref: Tegucigalpa 2472



Classified by PolChief Francisco Palmieri, Reasons 1.5 (b)

and (d)



1. (C) Summary. WHA A/S Reich met August 28 in Tegucigalpa

with Honduran President Ricardo Maduro. The discussion was

positive and covered a wide range of issues, with the focus

being the ongoing dispute between Honduras and Nicaragua on

border issues and the Nicaraguan 35 percent tariff on

Honduran goods. Reich praised Maduro for not imposing a

retaliatory tariff and urged him to seek an amicable

solution to the dispute. Unfortunately, it appears that

there is no immediate solution in sight on the issue. Reich

and Maduro also discussed the issue of an ICC Article 98

Agreement (see reftel). End Summary.



2. (U) Participants in WHA A/S Reich meeting with Honduran

President Ricardo Maduro in Maduro's office in Tegucigalpa:



USG: A/S Reich, Ambassador, WHA/CEN Director Trivelli, DCM,

PolCouns, EconCouns, and PolOff (notetaker).



GOH: President Ricardo Maduro, Foreign Minister Guillermo

Perez-Cadalso Arias, Minister of the Presidency Luis

Cosenza, the President's Executive Assistant Xavier Arguello

and Cesar Batres, the President's Special Advisor on Land

Issues



Nicaragua and the Tariff

--------------



3. (C) Maduro welcomed A/S Reich to Honduras and opened the

meeting by asking Reich about his trip to Nicaragua August

26-27, noting that the GOH has many issues pending with the

GON. Reich told Maduro that he had met with prominent GON

officials while in Managua, including President Enrique

Bolanos. Reich said Bolanos was doing the best he could

with a difficult situation, including a struggling economy.

Reich noted that Bolanos was attacking corruption, just as

Maduro was doing in Honduras. Reich explained that the

question of stripping former President Arnoldo Aleman of his

congressional immunity was the major issue in Managua. He

added that he had also discussed obstacles to Central

American integration, including the 35 percent tariff

leveled in late 1999 against Honduran goods by Nicaragua.



4. (C) Maduro replied that it appeared reversing the tariff

had unfortunately become linked to the debate over stripping

Aleman's congressional immunity. Maduro then recalled that

Nicaragua's 35 percent tariff on Honduran goods was imposed

by the Nicaraguan Congress in reaction to Honduras ratifying

a Caribbean maritime boundary treaty with Colombia in 1999.

He explained that the Nicaraguans felt the treaty ignored

GON territorial claims. Maduro said he understood the GON

position that the GOH had to renounce its treaty with

Colombia. However, Maduro said now that the GON has filed a

case before the International Court of Justice on the

maritime boundary the GOH's position is that it will await

the court's ruling on its boundary claims before taking any

action on that treaty.



5. (C) Maduro outlined how Honduran FM Perez-Cadalso had

explored options to resolve the tariff issue with Nicaraguan

FM Norman Caldera. GOH/GON discussions had included the

possibility of joint maritime exploitation not just in

disputed areas, but in all areas. Maduro recognized that

Aleman had criticized Bolanos for seeking cooperation with

the GOH. However, Maduro charged that Caldera's recent

statements on oil exploration in the Caribbean were contrary

to statements made in private GOH/GON discussions and done

for political reasons. He explained that those comments had

provoked a strong negative reaction in the Honduran Congress

and private sector.



6. (C) Maduro also detailed efforts made by Cardinal

Rodriguez, the Archbishop of Tegucigalpa, to approach his

Nicaraguan counterpart Cardinal Obando y Bravo to discus the

possible elimination of the tariff but that Obando y Bravo

had declined to get involved. Subsequently FM Perez-

Cadalso, Nicaraguan MFA Sub-Secretary Salvatore (FM Caldera

did not attend),and Vatican officials discussed the issue

of possible Vatican mediation of the issue without success.



7. (C) Maduro said he understood that Bolanos had the

political will to eliminate the tariff but recognized the

problem Bolanos faced with Aleman. He offered that the GOH

was looking at different approaches to solve the tariff

problem, but warned that domestic political pressure on him

to take action was growing. He explained that some

political opponents were alleging he was not taking the

border issue seriously because he was not really Honduran.

(Note: Maduro was born in Panama and the issue of his

citizenship was a hot political issue during the 2001

presidential campaign. End Note.)



8. (C) Maduro said he was seeking to dampen political

rhetoric on the tariff issue and hoped to find a creative

solution. However, he flagged that even deputies of his own

party (the National Party) were calling for a retaliatory

tariff. Maduro underscored his strong personal belief that

a retaliatory tariff would be contrary to Central American

integration. Reich complimented Maduro and the GOH for not

responding with a retaliatory tariff against Nicaraguan

goods.



Gulf Of Fonseca

--------------



9. (C) Maduro also discussed the Gulf of Fonseca border

dispute with El Salvador and Nicaragua, saying that the 1992

ICJ ruling had clearly given Honduras an exit point from the

Gulf in the Pacific Ocean. Maduro opined that a trilateral

economic agreement to develop the gulf would be the best

solution. However, he noted that the Inter-American

Development Bank did not want to get involved in the issue

due to a lack of interest from the GON and GOES. He noted

that the 10-year anniversary of the ICJ ruling on the

Honduran/Salvadoran border would occur September 11. Maduro

said he wanted to lower border tensions and emphasize

positive economic issues between the countries.



10. (C) A/S Reich responded that the USG would be happy to

help if it could to reduce tensions in Central America. He

noted that no one wanted to return to the tensions of the

1980s. Reich emphasized that President Bush was very

interested in Central America. Reich added that Honduras

needed to catch up economically with El Salvador and Costa

Rica, but acknowledged that would not be easy and that

expectations needed to be realistic.



Regional Disarmament?

--------------



11. (C) Maduro said that he had discussed with El Salvadoran

President Francisco Flores the idea of regional disarmament.

Maduro said that if disarmament occurred it could lead to

savings that could be used for social investment. A/S Reich

said that the USG was concerned about the number of arms in

Central America, and cited the recent case of 3,000 rifles

that went from Nicaragua to Colombia via Panama. Reich also

noted that in Nicaragua there was a plethora of AK-47 rifles

but a shortage of pistols for police. He stressed that all

of the arms left over from the 1970s and 80s in the region

concerned the U.S. Maduro noted that Honduras had fewer

weapons and a smaller military than its neighbors do and was

concerned by its neighbors' military spending. Maduro said

that the GOH could not invest in military hardware because

it needed the money for police, teachers, and other

important productive domestic investments. He asked for

U.S. support on the disarmament issue, saying American

leadership would be helpful. A/S Reich offered U.S. and

pledged to look into ways to assist this effort.



Trade is Key

--------------



12. (C) Maduro emphasized his vision that Central American

integration and free trade within the region were key to

making progress against poverty in the region. He noted he

has now met with Bolanos and Flores together at least 4

times since taking office in January. He shared that he

would soon meet again privately with Bolanos, and separately

with Flores, to encourage more concrete efforts toward

regional integration.



13. (C) Maduro stressed the importance of a Central American

free trade agreement with the U.S. Maduro said the GOH was

happy about the U.S. Congress voting to grant the President

Trade Promotion Authority. Maduro pointed out that

increased trade was key to reducing illegal immigration to

the U.S., but underscored that Honduran remittances from the

U.S. were a critical element to maintaining a stable

economic situation in Honduras. Maduro said he hoped the

proposed Central America Free Trade Agreement would boost

foreign investment in the region. A/S Reich said such

investment usually followed a trade agreement, especially if

progress was made against corruption and in favor of

judicial security.



Land Disputes and the Administration of Justice

-------------- --

14. (C) Maduro introduced Cesar Batres, his Legal Advisor,

who explained (as expected) that the GOH had decided to seek

to resolve land disputes involving the GOH by submitting

them to arbitration (similar to the process used in Costa

Rica for expropriation cases). The proposal required a

change in legislation. Batres provided the draft law

prepared by the Supreme Court to Ambassador. A/S Reich and

Ambassador thanked Maduro for this initiative.



15. (C) Reich noted that the administration of justice (AOJ)

was key for investment. Why would a business invest if the

law and protection for investments were not clear when they

could invest in another location where investments were

protected, asked Reich. Maduro agreed that AOJ was critical

for investment.



Limited Progress on Economic and Security Problems

-------------- --------------



16. (C) On agricultural issues, Maduro suggested the need

for a coordinated international response to the free-fall in

coffee prices. Reich noted the importance of coffee in

Central America and the challenge producers in Central

America and the Andean Region faced from Vietnamese coffee.

Maduro said that even though oversupply had led to falling

producer prices, it had not affected consumer prices, which

if anything were rising.



17. (C) Maduro commented that the tourism and textile

sectors were improved. He said his administration was

trying to foster home ownership, infrastructure development,

and micro and small businesses. Maduro explained that

though the International Monetary Fund (IMF) was

disappointed in the GOH's wage settlement with teachers, he

hoped they would be successful in negotiating a new three-

year IMF program, when the IMF team arrived in October. He

indicated that tax receipts had risen since July, due to use

of enforcement measures in the new tax law that included

temporarily closing businesses that did not pay taxes.



18. (C) Maduro noted he had boosted police patrols with the

military to crack down on crime and claimed that both

homicides and crime in general had dropped since his

inauguration.



GOH Appreciates Visit

--------------



19. (C) Reich thanked Maduro for the GOH's support on issues

of concern to the USG at the UN. Maduro thanked Reich for

his visit and noted that U.S. support is key and very much

appreciated. Maduro praised retiring Ambassador as a friend

of Honduras and of Maduro.



Candid Discussion Reveals No Quick End to Tariff Issue

-------------- --------------



20. (C) Comment. Reich and Maduro had a friendly and open

discussion, dominated by discussion of the tariff and border

dispute with Nicaragua. In the lengthy talk it was clear

that there was no immediate solution at hand on the tariff

issue. Maduro is likely to face growing political pressure

to retaliate against the Nicaraguan tariff unless there are

signs of progress in resolving the issue. Reich's visit was

an important statement that the USG recognizes Maduro's

leadership in avoiding such retaliation, and that its

resolution is key to Central American free trade and

integration. End Comment.



PIERCE