Identifier
Created
Classification
Origin
03TEGUCIGALPA2467
2003-10-22 00:02:00
CONFIDENTIAL
Embassy Tegucigalpa
Cable title:  

SCENESETTER FOR SECREATRY POWELL'S VISIT

Tags:  OVIP PREL PGOV ETRD PTER SNAR PHUM ELAB HO 
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C O N F I D E N T I A L SECTION 01 OF 09 TEGUCIGALPA 002467 

SIPDIS

STATE FOR S, D, P, WHA, EB, CA, INL, DRL, PM, AND WHA/CEN
NSC FOR SHANNON
STATE PASS AID FOR LAC/CEN

E.O. 12958: DECL: 10/21/2013
TAGS: OVIP PREL PGOV ETRD PTER SNAR PHUM ELAB HO
SUBJECT: SCENESETTER FOR SECREATRY POWELL'S VISIT


Classified By: Political Councelor Francisco Palmieri;
Reasons 1.5 (B) and (D).

C O N F I D E N T I A L SECTION 01 OF 09 TEGUCIGALPA 002467

SIPDIS

STATE FOR S, D, P, WHA, EB, CA, INL, DRL, PM, AND WHA/CEN
NSC FOR SHANNON
STATE PASS AID FOR LAC/CEN

E.O. 12958: DECL: 10/21/2013
TAGS: OVIP PREL PGOV ETRD PTER SNAR PHUM ELAB HO
SUBJECT: SCENESETTER FOR SECREATRY POWELL'S VISIT


Classified By: Political Councelor Francisco Palmieri;
Reasons 1.5 (B) and (D).


1. (C) Summary: Honduran President Ricardo Maduro, nearly
half way through his constitutionally mandated single
four-year term, faces an uphill battle in one of the poorest
and most corrupt countries in the Western Hemisphere. His
administration, having never been quite able to muster the
political support necessary to move forward on an ambitious
domestic agenda, has stalled and is making little progress on
the myriad challenges facing the nation. Bilateral relations
between the U.S. and Honduras are excellent; Honduras was the
first country in the Western Hemisphere to sign and ratify an
ICC Article 98 Agreement with the United States. Honduras'
support for the international counterterrorism effort is
steadfast and the Government of Honduras (GOH) has sent
troops to Iraq in support of Operation Iraqi Freedom. End
Summary.

--------------
Key Issues in Bilateral Relationship
--------------


2. (C) The central themes in our bilateral diplomatic efforts
in Honduras are combating international crime by
strengthening governance and attacking corruption, assisting
American citizens, fostering economic development, promoting
regional stability, promoting trade and investment, and
combating terrorism. However, the underlying difficulty to
realizing USG objectives is improving the administration of
justice and rule of law. President Ricardo Maduro's
government is rhetorically committed on all of these issues,
but has made very little substantive headway in addressing
the many problems Honduras faces. While Maduro has also
spoken out strongly on tackling corruption, he faces
formidable challenges from entrenched economic and political
interests in moving his reform agenda forward.


--------------
Status of the Maduro Government
--------------


3. (SBU) President Maduro faces relentless criticism from the
political opposition over his government's policies and
continued dissatisfaction from his own party's Members of
Congress because of his administration's technocratic and
insular style. Despite an excellent relationship with the
current President of Congress and his leadership team, the
Congress' rank-and-file membership is a focal point of
political opposition to his policies. Overall, the
unicameral body is a corrupt institution riddled with
avaricious politicians, and Maduro's National Party does not
control a majority. In July, Maduro's coalition partner, the
Christian Democrats, defected thereby denying Maduro a
majority in Congress. Ongoing political problems within his
own party are serious and are undermining his broader
political agenda. Maduro's technocratic cabinet is
politically tone-deaf and continues to eschew the necessary
political negotiations that are required to advance
legislation. Maduro's personal life has likewise intruded
into the political sphere. His October 2002 wedding to a
Spaniard was criticized by many Hondurans who viewed the
President as distracted by his personal life. A recent
public squabble between the First Lady and the very popular
Minister of Culture (Maduro's ex-fiancee) was an excruciating
embarrassment for the President.


4. (SBU) The President's popularity remains low. Faced with
negligible progress in his efforts to promote economic growth
or reach an IMF agreement, Maduro's team is hoping that a
U.S.-Central American Free Trade Agreement (CAFTA) can serve
as a catalyst to spur regional economic cooperation and
integration. Public security is one area that the public has
awarded grudging credit to Maduro's team. He has fulfilled
his promise to launch a "zero tolerance" law and order
campaign. Notwithstanding his crackdown on street crime,
criminal investigations are usually inadequate and case
closure rates, in particular for homicides, remain extremely
low.

--------------
Counterterrorism Cooperation
--------------


5. (SBU) Maduro is a good and reliable friend of the U.S. on
counterterrorism. The GOH has responded quickly to all USG
requests regarding terrorist threats and financing, and to
date no terrorist assets have been found in Honduran
financial institutions. The GOH, however, still needs to
take action to sign and/or ratify the two outstanding
international conventions/protocols and two OAS conventions
(1971 and 2002) against terrorism. It is also of vital
importance for Honduras to improve security at its maritime
ports, particularly Puerto Cortes.

--------------
Iraq
--------------


6. (C) The GOH is very supportive of key USG foreign policy
goals and is a member of the Coalition of the Willing. In
support of Operation Iraqi Freedom (OIF),the GOH deployed
some 370 troops to the vicinity of An Najaf as part of the
Spanish Brigade operating under the Polish Division. The
troops departed Honduras August 10-13 and are scheduled to be
rotated with a second contingent in February 2004. Central
American units from El Salvador, Nicaragua, and the Dominican
Republic are also serving under Spanish command. In August,
CJCS GEN Myers and Secretary Rumsfeld visited Honduras to
thank the GOH for its support of OIF. Their visits were well
received and provided important political support for
Maduro's Iraq policy.


7. (C) While President Maduro has consistently supported
overall USG foreign policy objectives, particularly U.S.
efforts to create a stable and peaceful Iraq, the general
population at large, however, is far less enthusiastic.
Recent polls demonstrate that a majority of Hondurans do not
support the troop deployment to Iraq. If Honduran troops
suffer casualties there, the Maduro government will be
subjected to intense domestic criticism which could undercut
its staying power in Iraq.

--------------
Bilateral Political/Military Issues
--------------


8. (U) Honduras was the first country in all the Western
Hemisphere to sign and ratify an Article 98 Agreement with
the United States. In January of 1999, the constitution was
amended to abolish the position of military commander in
chief of the Honduran Armed Forces (HOAF),thus codifying
civilian authority over the military. Honduras now has a
civilian Minister of Defense (MOD) and a Chief of the Joint
Staff who heads the HOAF. Civilian control over the HOAF is
complete. This transition has resulted in greater
transparency and fiscal accountability.


9. (SBU) The current MOD, Federico Breve, enjoys a good
relationship with the HOAF military leadership, but the
Office of the Minister of Defense continues to lack a staff
that could provide institutional memory and continuity
between the change in political administrations. Despite
some reticence from the HOAF, President Maduro (together with
MOD Breve) have reoriented the armed forces away from a more
traditional focus towards the new wide range of
trans-national threats, including counterterrorism,
narcotrafficking, and combating international criminal
organizations. The HOAF is also interested in establishing
an ability to participate in international peacekeeping
operations and is seeking USG assistance through the Enhanced
International Peacekeeping Capabilities (EIPC) initiative.

10. (C) While supportive of U.S. efforts, President Maduro
and his military advisors are very aware that Nicaragua and
El Salvador have received large amounts of FMF funds. They
are likely to question why Honduras, even though it has been
a staunch political and military supporter in the region, has
not received any funds for many years. (Note: Honduras is
scheduled to receive USD 168,000 in fall-out FMF funds made
available from countries who have not completed Article 98
Agreements with the USG, although it remains unclear when
this money will be dispersed. End Note.)


11. (SBU) In January 2002, Honduras formally requested 6
UH-1H helicopters through the EDA program. However, because
of changes in U.S. law, the cost of the helos rose from about
USD 700,000 to USD 4.2 million - an amount the GOH was unable
to afford. The original Letter of Agreement expired some six
months ago. In early August, however, MOD Breve renewed his
request for UH-1H helicopters, and also asked if there was
any way to get them either free (i.e. under section 516 as
grant aid at no cost to the GOH),or at an extended payment
plan, i.e. 15 years. The AMB and country team strongly
support any assistance in this area since the principal use
for these helos would be to support GOH counternarcotics
operations. The current Honduran fleet of UH-1H helicopters
is in poor condition with a limited life expectancy.

--------------
Soto Cano Air Base - Joint Task Force Bravo
--------------


12. (SBU) Five hundred sixty-five U.S. service men and women
and eleven civilian DOD employees are currently stationed at
Honduras' Soto Cano Air Base under the auspices of SOUTHCOM
as Joint Task Force Bravo. In 1954, the USG and GOH signed a
Bilateral Military Assistance Agreement that set forth their
intention to work closely together to foster peace and
security in the Western Hemisphere. The ICC Article 98
Agreement with Honduras is therefore a particularly important
accomplishment and will enable our military forces to
continue to work together in such areas as disaster relief,
joint training exercises, and counternarcotics missions.

--------------
Cerro La Mole Radar
--------------


13. (C) In 1993, the U.S. entered into an agreement with the
GOH regarding the maintenance of the radar located at Cerro
La Mole, under which the U.S. military agreed to pay 75
percent of maintenance costs up to USD 400,000 per year. To
date, the U.S. has paid nothing under the agreement, (OSD/CN
cited U.S. law that does not allow the USG to fund radars
operated by foreign nationals) and the issue continues to be
a sore spot between the U.S. and Honduran militaries. The
Embassy has pressed DOD and State on how best to resolve the
U.S. obligation, and recommended that the U.S. either replace
the radar with a solid state version (TPS-78) or with another
TPS-70 transferred from counterdrug programs. When
operational, the radar provides a view of the
Honduras-Nicaragua-El Salvador border areas and the Gulf of
Fonseca on the Pacific Ocean, a corridor that cocaine laden
aircraft regularly exploit on their illegal flight paths to
Guatemala, Belize, and beyond. A functioning radar in this
location could greatly enhance Honduran capability to
intercept and track these illegal flights. The MOD and CHOD
have agreed to share all data from this radar with the U.S.
and with its neighbors. Additionally, this radar would be a
much-needed first step in eliminating the 10 mile "no fly"
(without advance notice) corridor between the Honduran and
Nicaraguan border - currently a safe haven for illegal
flights. The Country Team strongly supports current efforts
to transfer a radar from Venezuela (currently being
dismantled) through EDA to Honduras in December of this year.

--------------
F-5's for MANPADS?
--------------


14. (C) Honduras maintains a fleet of aging F-5 aircraft as
part of its overall defense structure, providing Honduras
with the most lethal air force in the region. Honduras has
been encouraged to reduce or eliminate its fleet of F-5's as
a quid-pro-quo to Nicaragua, which is being pressured to
significantly reduce its stock of Man Portable Air Defense
Systems (MANPADS). Honduras has strongly rejected these
efforts, suggesting that its fleet of F-5's should not be
linked in any way to steps on the Nicaraguan MANPADS, which
are a potential terrorist weapon. These issues were
discussed, but not linked, at an August 11 regional
disarmament conference hosted by Managua that focused on
reducing small arms and MANDPADS. Honduras is not opposed to
discussing the future of its F-5 aircraft in the context of
regional disarmament. However, any bilateral discussions
with Nicaragua on that topic have so far been unacceptable.

--------------
Border Relations
--------------


15. (SBU) Honduras has border disputes with its three Central
American land neighbors and its seven maritime neighbors.
Maduro is personally engaged with his Presidential
counterparts to address these issues. Its land and maritime
disputes with El Salvador and Nicaragua are the most heated.
The Gulf of Fonseca on the Pacific coast is a particularly
difficult point. A 1992 International Court of Justice (ICJ)
ruling laid out shared areas of control in the Gulf of
Fonseca and established the land border between Honduras and
El Salvador, although El Salvador has been slow to implement
the ruling. In September 2002, El Salvador requested a
revision of the 1992 ICJ ruling. Honduras has responded to
this request and remains confident the Court will not revise
its original ruling. In the interim, the Organization of
American States (as a neutral third party) is providing both
nations technical assistance to help them implement the
non-disputed elements of the ICJ's ruling.


16. (SBU) On the Caribbean coast, Honduras and Nicaragua have
a long-standing maritime border dispute over the 15th
parallel. In the past, the dispute has threatened to derail
trilateral counternarcotics operations. Honduras provoked
Nicaraguan retaliation when it signed a maritime treaty with
Colombia recognizing the 15th parallel as its maritime border
in 1999. Nicaragua filed an ICJ case over the maritime
border and more importantly in 1999 slapped a punitive 35 per
cent tariff on Honduran goods. This tariff remained in place
until April of this year despite a Central American Court of
Justice ruling that it was illegal. Only after Honduras
responded with a retaliatory tariff, threatening Nicaraguan
exports, did Managua rescind the tax. Tensions still exist
between the GOH and Nicaragua over this issue, hampering
regional integration and couternarcotics efforts.

--------------
Economic Overview
--------------


17. (SBU) Honduras, with a per capita income of USD 950, is
the third poorest country in the Western Hemisphere ahead of
only Nicaragua and Haiti. The economy is still growing
(about 2.5 percent per year) but slower than the population
growth rate of 3.5 percent per year. Social indicators are
improving, but two-thirds of all Hondurans live in poverty
and average education levels are very low. Historically low
world coffee prices have hit rural areas particularly hard
(although up some this year, coffee prices are still below
the cost of production, forcing major cutbacks in planting,
fertilizing, harvesting and investment). The economy
continues to be dominated by agriculture, particularly the
production of bananas, coffee, cultivated shrimp, melons and
other fruits, vegetables and grains.


18. (SBU) The apparel assembly (maquila) sector grew
dramatically in the 1990s reaching peak employment in 2000 of
about 120,000 people. Activity slowed after 2001 because of
the U.S. economic slowdown in 2001-2002 and increased
competition from Asia, but the sector appears to be
rebounding this year. While there has been some economic
diversification (melons, cultivated shrimp, palm oil),there
continues to be a large subsistence farmer population with
few opportunities other than illegal immigration to the U.S.
The Honduran government's desire to attract new types of
foreign investment has been hindered by the stagnant economy
and a wide range of investment climate/competitiveness
problems.

19. (SBU) Remittances from Hondurans abroad, particularly the
U.S., continue to grow rapidly and have become the most
important source of foreign exchange. The U.S. is Honduras,
largest trading partner. The roughly 150 U.S. companies that
do business in Honduras constitute the largest block of
foreign direct investors.

-------------- --------------
Stubborn Fiscal Deficits Endanger IMF Program/Debt Relief
-------------- --------------


20. (C) President Maduro inherited a stagnating economy and
seriously deteriorated government finances from the previous
administration. The difficult negotiations with the IMF have
dominated much of Maduro,s time and that of his economic
cabinet since assuming office. The GOH has passed two tax
packages in two years in order to stabilize the government's
finances and reach a badly-needed agreement with the IMF, but
have so far balked at measures that will rein in spending
(particularly halting the uncontrolled growth in teacher and
doctor salaries) and create a professional civil service.
The Maduro administration and Congress, however, are hesitant
to push through these needed reforms because of political
opposition from teachers and medical workers who currently
benefit from special legislation that gives them annual
salary increases well above inflation. In recent months, it
also has become apparent that the tax measures were not
sufficient to significantly improve revenue collection and
meet government targets. In addition, the IMF has pointed to
repeated debt forgiveness legislation for farmers as
undermining the government's finances as well as the banking
system. USG assistance is being provided to the GOH for both
improvement in tax administration and implementation of civil
service reform.


21. (SBU) Significant multilateral and bilateral donor
disbursements (USD 140 million) will be held up until a new
IMF program is in place. There is also pressure on the GOH
to make renewed Paris Club debt service payments (USD 100
million per year) and the lack of an IMF agreement is
delaying Honduras, attainment of the completion point for
Heavily Indebted Poor Country (HIPC) debt relief (USD 900
million in present value terms). Starting in July 2003,
Honduras has had to resume payments of debt service on old
DOD loans to avoid a cut-off of USG assistance under the
Brooke Amendment. With the lack of an IMF agreement, old
Eximbank loan payments also became past due, and the agency
has now gone off-cover for official loans to Honduras.

--------------
CAFTA, Trade Capacity Building, and the MCA
--------------


22. (SBU) In the CAFTA negotiations, the Honduran government
is seeking to (1) make permanent the market access provided
under CBTPA; (2) improve its textile and apparel sector's
ability to compete with Asia as worldwide quotas are lifted;
(3) increase its market access in the U.S. in products such
as sugar, poultry, beef, and dairy, and (4) protect its
agricultural sector from massive disruptions as much as
possible. The most controversial chapter of the agreement
for Honduras is agricultural market access. The Honduran
Trade Ministry has repeatedly asked the Embassy to urge USTR
to "broaden its focus from commercial advantage to economic
development." The Honduran delegation has also been seeking,
in the context of the CAFTA agreement, a temporary entry
program for unskilled laborers; this would be unacceptable to
the US delegation, because of its inherent change to
immigration policy and strong U.S. Congressional opposition.


23. (SBU) In discussing CAFTA, President Maduro may request
large financial grants for the Central American countries to
ease the adjustment to free trade with the U.S. (pointing to
the example of the large financial transfers provided to
Spain and Portugal as part of their accession to the European
Community.) Much of USG assistance to Honduras focuses
heavily on assistance to the trade ministry, agricultural
diversification, micro-enterprise development, and other
trade capacity projects. This bilateral assistance is
supplemented by large and active programs by the World Bank,
Inter-American Development Bank and other bilateral and
regional donors. However, the Honduran government has been
arguing for far greater sums and may prepare a Millennium
Challenge Account proposal for trade adjustment (Honduras
appears to have a good chance at qualifying in the first year
for the MCA, its fiscal problems notwithstanding.) Finally,
Honduran interlocutors may repeat a request made earlier in
the year that the USG fold into CAFTA some incentives for US
companies to invest in Central America, such as tax
incentives provided to companies in the 1960s to invest in
Puerto Rico.


24. (SBU) CAFTA ratification problems in Honduras are not
expected, as long as the final agreement provides strong new
opportunities in textiles and apparel, and some market access
openings for non-traditional Honduran agricultural exports to
the U.S. In the U.S. Congress, concerns about labor rights
enforcement are expected to be centered on countries other
than Honduras, but we have been urging the GOH to do what it
can to improve enforcement of core labor rights and
environmental protection in Honduras. At the beginning of
2003, the USG banned exports of harvested shrimp from
Honduras because of lack of adherence to laws on the
protection of sea turtles.

--------------
Counternarcotics Issues
--------------


25. (C) Honduras' geography places it squarely in the middle
of a major illegal drug trans-shipment zone. Current U.S.
estimates are that between 80-100 tons of cocaine transit the
country annually on the way to the U.S. market. Honduras'
airspace is regularly violated by drug traffickers, who also
use go-fast boats to transit their cocaine through the
Western Caribbean region. Heroin and marijuana are likewise
trafficked through Honduras on a lesser scale, although
heroin trafficking appears to be increasing. Recently, the
Embassy has noted an increase in drugs-for-guns bartering
between Colombian terrorist organizations and local Honduran
smugglers.


26. (C) Honduras, under heightened Embassy pressure to
increase its effectiveness on narcotics interdiction after
disappointing results in 2001 and 2002, has risen to the
occasion. The GOH has seized approximately 4,962 kilos of
cocaine this year, more than the previous five years
combined. While seizure rates have expanded significantly
this year, endemic corruption in the judiciary, Public
Ministry (Attorney General's office),and the police continue
to hamper long-term efforts to increase the rule of law and
effectively prosecute, sentence, and incarcerate drug
traffickers. Despite the increased seizures, there does not
appear to be any drop-off in the amount of drugs transiting
the country.


27. (C) Under pressure from the USG to interdict more drugs,
the Honduran Air Force shot-down an intruding Colombian
aircraft carrying approximately 942 kilos of cocaine in
April, killing the plane's two Colombian crewmembers.
SOUTHCOM temporarily suspended sharing of air-track
information pending reconfirmation from the GOH that Honduras
has a "no shoot-down" policy. The Embassy obtained such
assurances and the GOH has stated unequivocally that the
incident was an aberration. Honduras is fully aware that
under U.S. law, the USG is not allowed to share tactical
air-track information with countries that employ a shoot-down
policy. SOUTHCOM has since restored sharing air-track
information with the GOH.
--------------
Anticorruption
--------------


28. (C) Honduras was recently ranked 106 out of 133 counties
surveyed by Transparency International, an NGO that tracks
international corruption issues. Only Ecuador, Haiti, and
Paraguay scored lower in the Western Hemisphere. U.S. policy
to combat endemic corruption has struck a nerve in Honduras,
especially any mention of our visa revocation authorities.
Politicians in Congress and certain business elements feel
the U.S. is attacking them. Maduro has stated he is willing
to address corruption, even if it will cost him political
support within his party, but real achievements to date have
been lacking. Of particular concern are individual judges
and prosecutors who remain susceptible to offers of bribes.
Also, the current Attorney General, whose term expires in
March 2004, is simply unwilling to prosecute high-profile
cases. Given the scope of the problem, any public discussion
about the country's pervasive corruption is a positive
development.

--------------
Money Laundering and Bank Failures
--------------


29. (C) Strengthened money laundering legislation, with an
anti-terrorist financing clause, was passed in early 2002 and
the GOH followed up rapidly with creation of a Financial
Information Unit (FIU) for investigation of financial crimes.
Currently, over 150 potential cases of money laundering are
under investigation. However, without greater participation
from the slow and corrupt Public Ministry responsible for
prosecuting such cases, results will be minimal.


30. (C) Weakness of the financial system remains a key
concern The GOH took over the two most troubled banks in May
2002 (one has since been closed),arranged for the absorption
of a third undercapitalized bank, and is actively promoting
mergers among the remaining 20 private banks.

--------------
Supreme Court and Judicial Reform
--------------


31. (SBU) The current Supreme Court is developing into an
independent branch of power, unlike any of its predecessor
courts since democracy was restored in 1982. It is
pro-reform in orientation and fighting for its prerogatives.
A key emerging issue is whether it can become a fully
independent and co-equal branch of political power,
consistent with the separation of powers provision in the
Honduran Constitution. The established political order is
fighting that prospect with vigor. In fact, the Congress
seized the political opportunity to introduce legislation
that would amend the constitution to give itself the power to
interpret the constitutionality of the laws it passes. The
Supreme Court ruled in May that the proposed amendment was
unconstitutional, which sparked a tense confrontation between
the Supreme Court and Congress. Congress, however, refrained
from any precipitous action and the issue has since receded.

--------------
Public Security/Human Rights
--------------


32. (SBU) Upon taking office on January 27, 2002, President
Maduro's first act was to fulfill his main campaign promise
-- a zero tolerance campaign against the country's
out-of-control crime situation. He deployed more than 5,000
soldiers to the streets to support the police. The public
responded enthusiastically. However, despite the initial
success of establishing a visible police presence, violent
crime, particularly homicides, continues at a high rate.
Public support is fading and the campaign needs some visible
victories to restore confidence in the government's program.
The USG is helping the Maduro government establish an
anti-kidnapping unit, increase intake/training of police
recruits, create a model tourist police force, boost its
counternarcotics efforts, and expand the frontier police.
The country's geographic position makes it an obvious
strategic transit point for narcotics trafficking, alien
smuggling operations and other organized crime activities.


33. (SBU) Extrajudicial killings, especially of
children/young adults since 1998, have been a source of
serious concern and only recently has the GOH begun to take
steps to investigate the hundreds of unsolved cases. Human
rights groups regularly accuse former security force
officials and the business community of colluding to organize
"death squads" to commit these summary, and arbitrary
executions. There are also serious problems with child labor
in several industries, particularly melon, coffee, and sugar
cane (but not the maquila) sectors, and trafficking in
persons of women/children for prostitution in the U.S. and
children for commercial sexual exploitation in Central
America. USAID and Peace Corps have both been involved in
HIV/AIDS prevention.

--------------
Consular Issues
--------------


34. (SBU) At least 600,000 Hondurans, both legal and illegal,
live in the U.S., a fact that places immigration issues high
on the bilateral agenda. (The population of Honduras is 6.5
million.) There is deep appreciation for the USG's extension
of Temporary Protected Status (TPS) in the U.S. and interest
in possible congressional action on the proposed Nicaraguan
Adjustment and Central American Relief Act (NACARA),which
would give immigration parity for Hondurans. With
approximately 18,000 American citizens residing in Honduras
and many thousands visiting Honduras annually for tourism and
business, American Citizen Services are a key part of the
Embassy's work. Since 1995, 37 American Citizens have been
murdered in Honduras. There has been little progress on
these cases and to date, only two convictions have been made.
However, in the last year the GOH has increased cooperation
with the Embassy on the remaining cases, including
establishing two prosecutors to further the GOH's effort.
Also, little progress has been made on extradition cases
involving American Citizens residing in Honduras who are
wanted for felonies in the United States.

--------------
U.S. Investment Faces Problems
--------------


35. (SBU) Maduro,s administration understands the need to
increase foreign (and domestic) investment to spur economic
growth, but so far has placed its emphasis on the more
immediate problems of political and judicial reforms, the
fiscal deficit, and needed improvements in security,
education and health. The government identified tourism,
agribusiness, and forestry as important sectors that could
create much-needed jobs.


36. (SBU) Much still needs to be done to declare Honduras
"open for business" for new sectors. Although the Maduro
Administration has begun significant changes, Honduras still
suffers from poor and expensive infrastructure such as
telecommunications, electric power and transportation, a weak
legal system, threats to personal security, weak education
and health delivery systems, land tenure problems, and
opposition to large foreign investments by well-connected
vested interests.

--------------
Embassy Tegucigalpa
--------------


37. (SBU) Embassy Tegucigalpa is a medium-sized post,
employing 140 U.S. citizens and 300 Hondurans among 20 USG
agencies. Our Peace Corps program, with more than 245
volunteers, is one of the world's largest, and the USAID
mission had a FY03 budget of USD 45 million. The Mission
maintains a Consular Agent in Honduras' second city and
industrial center, San Pedro Sula.


Palmer