FTAA: HONDURAS' EXPORT PRIORITY INFORMATION

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 002991 SIPDIS DEPARTMENT FOR EB/TTP/MTA/MST/KIM BARR AND WHA/CEN STATE PASS TO USTR: ANDREA GASH DURKIN, DAN FANTOZZI DOC FOR 4320/DOC/ITA/MAC/WH/ONIA/MCARILLO GUATEMALA FOR COMMATT:DTHOMPSON GUATEMALA FOR AGATT:FCOOLIDGE E.O. 12958: N/A TAGS: ETRD ECON EAGR ELAB PREL KTEX HO FCS SUBJECT: FTAA: HONDURAS' EXPORT PRIORITY INFORMATION REF: SECSTATE 209216 ¶1. As solicited in reftel, Post identifies the following export priorities for the Honduran government and private sector. The cable includes both non-agricultural products (mentioned in reftel) and agricultural goods. ¶2. According to its recently published economic plan, the Maduro administration will concentrate on developing export sectors with high potential to create jobs and related economic activity. This includes strengthening Honduras' existing export capacity in the apparel-assembly and agro- industrial sectors and diversifying exports from other light industry and agro-industrial enterprises and exploiting Honduras' natural resources (primarily forestry and mining). ¶3. Honduras is the largest exporter of textile and apparel products to the U.S. among Caribbean Basin Trade Partnership Act beneficiary countries and the second largest exporter in the region after Mexico. Industry representatives argue that duty free treatment for Honduran exports to the U.S. market is essential for the sector to be competitive with Asia when import quotas are eliminated in 2005. Honduras' apparel assembly industry primarily manufactures knit apparel and t-shirts. The Honduran government and manufacturing sector are interested in diversifying the industry to produce higher-value finished products like fashion wear and women's attire. ¶4. The GOH and industrial park operators are also seeking to diversify out of apparel and textile production and into other types of light industry, including footwear, automotive parts, electronics assembly, data processing services and wood furniture and other wood furnishings. To date, there has been limited success in attracting non- textile light assembly operations. Honduras is home to a few businesses producing wire harnesses and high-end doors and furnishings made from Honduran mahogany for export. Recently, a U.S. company manufacturing wire harnesses for U.S. automakers announced plans to hire 1,500 new employees. The company has also expanded into building high cost mail sorters for major U.S. buyers and has plans to expand into other high-value assembly operations. ¶5. Honduras is a major exporter of coffee, bananas and palm oil, which have traditionally been the leading sources of foreign exchange. Falling commodity prices and natural disasters have significantly impacted Honduras' export revenues. In recent years, and thanks in part to the Caribbean Basin Initiative, the Honduran government and private sector have expanded the agro-industrial export sector to include nontraditional agricultural products. There is significant investment in Honduras' melon industry (watermelon and cantaloupe) and seafood industry, especially for farm-raised and wild shrimp and other seafood products, especially spiny-tailed lobster. ¶6. USAID has enjoyed success with its agricultural diversification program run by FINTRAC, a U.S. company working with small farmers to diversify into profitable nontraditional agriculture exports (especially oriental vegetables and jalapenos). A USDA-funded hot water treatment plant for mangos began operating in April 2002, permitting Honduran mango producers for the first time to meet U.S. med-fly phytosanitary requirements. FINTRAC is working with Honduran farmers to develop a fledgling papaya for export industry. There is interest in expanding use of the mango hot water treatment plant to include papayas during the mango-growing season. ¶7. USDA has also worked with Honduran cheese producers to meet U.S. sanitary restrictions and qualify to export ethnic cheese products to the U.S. Honduran dairy producers are interested in increasing exports of ethnic cream to the U.S. and beginning exports of soft cheeses (mozzarella). ¶8. Other Honduran agricultural export interests include poultry products (especially white meat),beef, tobacco products (cigars),sugar, herbs and spices (parsely, oregano, black pepper, among others),blueberries and ornamental plants and flowers. Honduran exports of poultry products, beef, blueberries and spices are restricted because they do not meet U.S. phytozoosanitary regulations. The Honduran government has also been publicizing the fact that Honduras' North Coast has been declared free of the med- fly in order to take advantage of the U.S. market for fruits. Pierce