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2002-10-28 16:40:00
Embassy Tegucigalpa
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E.O. 12958: N/A

REF: a) Tegucigalpa 01756 b) Tegucigalpa 02833

1. (SBU) Summary. Clear property ownership is important to
improving the well-being of the Honduran urban and rural
poor, as well as to the resolution of outstanding Amcit
investment disputes. Although the GOH has not formed a
small Commission to address the outstanding Amcit disputes
as Embassy had encouraged (see ref a), Honduran officials
instead plan two complementary efforts: legislation to
create a National Property Institute (INAP) and a
legislative change that would allow arbitration of selected
land expropriation claims. These actions are welcome and
indicative of a thoughtful approach by the Maduro government
but are not expected to result in significant progress on
Amcit land cases in the near term. Embassy has supported
GOH efforts to address the complicated land tenure issue
with a variety of USAID and Public Affairs projects and
through extensive discussions with Embassy contacts. End


A System for Arbitration


2. (SBU) The Supreme Court will soon recommend to the
National Congress an amendment to Honduran law to allow
arbitration of pending land cases. This draft bill, which
was provided to former Ambassador Almaguer and WHA A/S Reich
during his recent visit to Honduras, deals explicitly with
cases involving action or inaction by the Honduran
government at the national or local level (expropriation
claims). The claimant's case must currently be in process
under administrative or judicial procedures. If the case
has already exhausted all legal avenues (final Supreme Court
decision made) the claimant cannot apply for arbitration.
Note: This prevents use of the arbitration mechanism by a
claimant in one of the Embassy's oldest land cases, Alfred
McDaniels, who lost his appeal to the Honduran Supreme Court
for compensation for his investment in a banana farm that
was taken over by squatters. Mr. McDaniels requested USG
espousal for his case in 2000. End note.

3. (SBU) Under the proposed legislation, a case would be
eligible for arbitration if:

a) The legal proceedings have taken more than half the
allowed time and the case has not yet been resolved;
b) The delay in the proceedings is not caused by a lack of
action on the part of the individuals, their
representatives, or attorneys;
c) The deadline to file the petition in the case's
respective court level or procedure has not passed;
d) The private party requests arbitration within six months
of the effective date of this law; and
e) The Attorney General determines that arbitration is
consistent with this law.

4. (SBU) Once the Attorney General's office concurs with
arbitration in a particular case, the parties would sign an
arbitration agreement. The signed agreement would be
submitted to the judge or other authority working on the
dispute, requesting that the legal case be suspended. The
case would then go to arbitration.


A Land Institute is Proposed


5. (SBU) A small group of lawyers working for the Minister
of the Presidency is preparing a proposal for the National
Congress to create a unified property registry called the
National Property Institute (INAP). The INAP would be
responsible for the development, execution and
administration of a national policy on real estate, liquid
assets, business property and intellectual property. This
institute would be composed of a board of directors, an
executive directorate, the National Center for Registry and
Surveys, the National Center for Property Policy and
Regulations, an Inspector General, a Complaint Resolution
Commission and the Director Generals.

6. (SBU) The Board of Directors would be made up of the
President of Honduras and various Ministers such as the
Minister of Industry and Trade, Minister of Justice,
President of the umbrella association for the private sector
group (COHEP) and others. It does not include a member
representing the National Agrarian Institute (INA), the
Honduran agency that implements the Agrarian Reform Law.
INA will continue to be responsible for titling national
lands fit for farming and distributing land to peasant
groups; however, INA would have to get their titles through
the proposed National Property Institute.

7. (SBU) Within the INAP, the National Center for Registries
and Surveys would be responsible for unifying and regulating
the efficient functioning of registries and surveys for all
of Honduras. The National Center for Property Policy and
Regulations would serve as a body for proposals and dialogue
dealing with property issues such as the security and
transparency of registered transactions, dispute settlement,
and public outreach, among others.

8. (SBU) Whereas the arbitration proposal is designed to
facilitate resolution of old squatter and expropriation
cases involving the State, the land institute is designed to
avoid the current proliferation of private land title
disputes in the future. In the proposal, land registration
would be the exclusive jurisdiction of the INAP. Any
negative responses to land inscriptions would be sent before
the Dispute Resolution Commission. All resolutions issued
by the Dispute Resolution Commission division would be
considered final and binding.


A Resistance to Change


9. (SBU) The Property Registry proposal recently ran into
some resistance within the Honduran Supreme Court. Under
the 1974 Property Registry Law, the courts ordered that the
National Registry be combined with the national cadaster (a
public record, survey, or map of the value, extent and
ownership of land as a basis of taxation). However, the
National Registry falls under the jurisdiction of the
Supreme Court, while the Ministry of Government and Justice
houses the national survey. In the last 28 years, neither of
these two government entities has been willing to give up
its jurisdiction to the other, so the registry and the
survey have remained separate, non-communicating entities.
Meanwhile, the cadastral survey was not maintained and
became outdated. The Maduro administration therefore had to
begin from scratch in early 2002. The proposed legislation
creating the INAP would pull both the registry and cadastral
survey from their respective ministries, moving them to the
new agency that would be independent of any ministry and
would fall under the authority of the executive branch.
Supreme Court Magistrates, despite participation in some of
the planning and recent regional land tenure seminar, have
indicated reluctance to relinquish control of, and revenues
from, land registration.


A National Survey and Registration System


10. (U) Former Tegucigalpa Mayor, Henry Merriam, is the
national coordinator for the World Bank-funded
Administration of Rural Areas Project (PAAR) under the
auspices of the Ministry of Agriculture, and is expected to
become the first director of the INAP. Under Merriam, the
PAAR has coordinated two pilot topographic, satellite and
global positioning system (GPS) surveys in the areas of
Comayagua and the Bay Islands. In the Islands, an Inter-
American Development Bank (IDB) sustainable development
project team, PMIB, under the auspices of the Ministry of
Tourism, was responsible for preparation of the USD 1.5
million catastral survey.

11. (SBU) The GOH intends to complete all future surveys
throughout Honduras directly through PAAR. After each
regional survey is completed, it will be integrated with the
local registry. This is when ownership of the surveyed land
will be accounted for and discrepancies and/or title
disputes will be flagged under the new system.

12. (SBU) In the Bay Islands, once the cadaster was
completed, the GOH began the process of determining land
ownership. This includes the process of joining the survey
results with the existing public registry, which is
anticipated to take 2 to 3 months to complete. In the Bay
Islands, is estimated that 5 percent of all land parcels
equivalent to roughly 32 percent of all land area is in
dispute. Of the roughly 12,000 total plots of land in the
Bay Islands, about half have been registered. There are
still almost 6,000 parcels to be titled and registered. The
remaining land to be titled is labeled as "occupied,"
meaning people live on it, but it is national land and no
title has ever been issued. The squatters will have to pay
the government just 10 percent of the assessed value of the
land in order to title and legally take possession of it. In
the second project area, Comayagua, surveys have been
completed in just 8 of the 21 municipalities. The remaining
surveys and process of rectification with existing
registries should be completed by July 2003.

13. (U) Upon completion of the surveying process, in order
to keep the cadaster current it must be merged with the
public land registry. This is no easy job given the aged,
disorderly state of the records. In the Bay Islands, for
example, public registry book volumes 3 and 5 are in pieces
in shoeboxes due to old age and rodent appetites.
Nevertheless, a new software system is being developed to
unify the cadaster and the registries and should be ready
for use by October 31, 2002. This computer system will have
computer generated survey drawings, digital satellite
downloaded imagery, and scanned registry documents. As an
attempt to combat fraud, the new land registry will not only
maintain an image of the parcel, but also a photograph of
the owner of record and a fingerprint. The proposed land
registry computer system will be able to cross-reference the
fingerprint and photos of the owner from any public registry
in Honduras. The project hopes to be able to issue real
documents to the public by January 2003. By February 2003,
the first registry link between the Bay Islands and
Comayagua computer systems should be connected and
communicating to one another.


A Financial Lift for the Municipalities


14. (U) Earlier this year, the Honduran Supreme Court
signed a decree which requires any party wishing to buy
property in the Bay Islands to present the cadaster for the
piece of property first, in order to prove the land is not
in dispute, before the transaction can take place. Though
the cadaster is currently only an administrative tool, under
the proposed legislation, the cadaster would become a legal
document as well. Since the cadaster in the Bay Islands
became effective, the municipalities on all three major
islands have seen an increase in tax revenues. On the
island of Utila until recently, the average tax collection
was 300,000 lempira a year (around USD 18,000). Thanks to
the cadaster, the municipality is now expecting to receive
6.5 million lempira (USD 388,600) annually. During the
first month, the municipality had reported receiving 4.5
million already (roughly USD 270,000). On the island of
Roatan, the municipality of Roatan should receive 16 million
lempira (USD 956,000) in tax revenue and the municipality of
Santos Guardiola expects 8.5 million lempira (USD 508,000).
The municipality on the island of Guanaja will benefit by 7
million lempira (USD 418,000) in annual tax revenue.


Implications for Amcit Land Disputes


15. (SBU) The Embassy continues to manage a caseload of
roughly 180 cases, of which 32 are active land cases and 22
are active commercial disputes. Of the total cases, we are
aware of 13 American citizen claims totaling 17
expropriation cases against the GOH (some Amcits have more
than one property case pending). Only three of those cases
have exhausted all legal avenues up through the Honduran
Supreme Court and would therefore not be eligible to apply
for the proposed arbitration process. On the face of it, it
appears that 13 of the 17 pending cases could qualify for
the arbitration process if requested by the American citizen
claimants. One case could potentially qualify for
arbitration if the Amcit's attorney files for
unconstitutional recourse with the Honduran Supreme Court to
reactivate her case. It would remain to be seen, however,
how the eligibility criteria would be enforced.

16. (SBU) Post has found that even when an American citizen
receives a favorable court ruling, it is difficult if not
impossible to get the local municipalities to enforce the
rulings, such as the long standing case of the Valenzuela
family. The Honduran Supreme Court ruled in April 1992 in
the Valenzuela's favor, recognizing the Valenzuela's clear
title over the property known as "Jerico". However, the
local Mayor refuses to recognize the Supreme Court's ruling
and allegedly continues to allow the municipal land
registrar to register some Jerico lands under a different
name, "Capiro", but using the same known tax identification

17. (SBU) The level of alleged corruption in the Honduran
judicial system also remains high. In August 2002, American
citizens Jean and Roger Moore were forcefully evicted from
their home in the Bay Islands on Roatan (ref b).
Government officials openly admit the judge in the Islands
ignored legal guidelines and available evidence in allowing
this eviction to occur and in delaying the processing of
their requests for appeals and injunctions. It is possible
that Embassy advocacy and high level government and Supreme
Court attention in this case may help push it toward a just,
prompt resolution. However, it is indicative of the
frustrations that Amcit claimants face in these private (non-
expropriation) land disputes.

18. (SBU) Another important variable for the future is the
continuing problematic role that the National Agrarian
Institute plays in squatter cases. In some Amcit cases, INA
has agreed to expropriate land for land reform despite the
unsuitability of the land for agriculture and the lack of
funds to compensate the owners. In some cases, such as the
Norma Bogran case, INA has failed to pay compensation and
then reversed its expropriation decisions long after
communities have been built on the land, thus denying the
Amcit claimants both compensation and his or her property.
To add insult to injury in the Bogran case, the land was not
used by the landless farmers but was instead sold quickly to
wealthy Hondurans; the appeals court in this case recently
ruled that the statute of limitations was expired, even
though INA had waited ten years to reverse its expropriation
finding). Finally, INA (and the GOH as a whole) do not have
a consensus on how to deal with conflicting land claims that
involve Garifuna and other indigenous groups. All that
said, the Embassy has not seen any new INA cases arise since
the advent of the Maduro administration.


USG Assistance


19. (SBU) The lack of a clear property ownership system is a
major problem in Honduras and a constraint in providing
access to assets by the poor. Security of property rights
is an essential element of a sound environment for broad-
based economic growth. USAID is actively involved in
supporting the policy debate surrounding land administration
and land-use planning issues. Through the Honduran
municipal association, USAID has financed the creation of
mayoral commissions that participate in the policy dialogue
of specific issues with their respective legislative
commission counterparts. In the case of legislative bills
that have been introduced in the Honduran Congress, such as
the land-use planning framework, these commissions have
engaged in working sessions to address specific policy
issues. Similar commissions will be established once the
land administration bill is introduced. USAID is also
organizing study tours around these land issues for the
benefit of both the legislative and mayoral commissions.

20. (SBU) In 2001, USAID sponsored a study to assess the
property registration system in Honduras. This study was
conducted by Instituto Libertad y Democracia (ILD) and the
Honduran Counsel for the Private Sector (COHEP). The Public
Affairs section of the Embassy has supported this work with
distribution of Hernando De Soto's book The Mystery of
Capital. On July 16, Embassy PAS held an Interactive
Dialogue Program (video conference) with Hernando de Soto.
The Honduran interlocutors included: Luis Cosenza, Minister
of the Presidency, Sergio Zavala, Attorney General, Miguel
Pastor, Mayor of Tegucigalpa and Segisfredo Infante editor
of the daily newspaper, la Tribuna. Former Ambassador Frank
Almaguer served as moderator for this dialogue. The Embassy
received wide press coverage of the event.

21. (SBU) Last February, ILD presented the findings of the
ILD/COHEP study to President Ricardo Maduro, the Economic
Cabinet and other institutions. There was consensus among
government officials of the importance of implementing a
sound property registration system in Honduras, and the work
to date on development of the INAP and trying to improve
land cadasters and the land registry reflects this

22. (SBU) ILD is proposing follow-on work to the 2001
registration project. Full implementation of the ILD program
takes place in five phases: awareness, diagnosis (assessment
done by ILD/COHEP in 2001), reform design, implementation,
and capital formation and good governance. On October 14,
ILD met with GOH officials (Arturo Alvarado, Ministry of
Finance and Ricardo Callejas, President of the Commission
for Modernization of the State) to present the proposal for
the "reform design" phase, with an estimated cost of USD 6
million. Implementation costs (phase 4) can range between
USD 50 million to USD 80 million.

23. (SBU) On September 24-26, the Fourth Meeting of the
Central American Legislators Group (Red Centroamericana de
Legisladores) took place in Tegucigalpa. The main objective
of the event was to promote awareness of the need for
national and regional legal frameworks that support
decentralization processes and good local governance.
Approximately 140 participants, consisting of legislators,
mayors, and heads of land registries discussed land
administration policy and municipal management issues,
experience with land cadasters, land tax policies, land
titling and management. This event was sponsored by USAID and
the IDB.

24. (SBU) GOH officials remain in close contact with the
Economic Section of the Embassy and USAID on their plans and
possible obstacles. They have asked for continued
assistance, as feasible, in raising public awareness of the
importance of improved land tenure and property rights. The
GOH is also working closely with the World Bank, IDB and
other donors to seek funds for the cadastral and land
registration projects.