Identifier
Created
Classification
Origin
03TEGUCIGALPA2765
2003-11-25 16:26:00
UNCLASSIFIED
Embassy Tegucigalpa
Cable title:  

THE NATIONAL DIALOGUE: SETTING OBJECTIVES FOR A

Tags:  ECON EFIN EAID ELAB EIND PGOV SOCI HO 
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UNCLAS TEGUCIGALPA 002765 

SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, EB
DOL FOR ILAB

E.O. 12958: N/A
TAGS: ECON EFIN EAID ELAB EIND PGOV SOCI HO
SUBJECT: THE NATIONAL DIALOGUE: SETTING OBJECTIVES FOR A
BETTER HONDURAS

UNCLAS TEGUCIGALPA 002765

SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, EB
DOL FOR ILAB

E.O. 12958: N/A
TAGS: ECON EFIN EAID ELAB EIND PGOV SOCI HO
SUBJECT: THE NATIONAL DIALOGUE: SETTING OBJECTIVES FOR A
BETTER HONDURAS


1. Summary. On October 27, President Ricardo Maduro
received the results of the National Dialogue which, by means
of consensus, attempts to prioritize national objectives in
order to benefit the most vulnerable groups of society.
Following the idea that the National Dialogue should be
participatory in nature, representatives from 298
municipalities throughout Honduras participated in nine
different workshops. The result was a voluminous document
that presented ideas for both the short and long term. Among
the themes covered in the National Dialogue were: political
and institutional development; justice and security of
democracy; human capital and social development; and creating
sustainable economic growth that benefits all classes. End
Summary.


2. Perhaps the most notable development is that of a fiscal
pact which seeks to increase much-needed government revenues.
The proposed pact advocates for and is aligned with many of
the recommendations made by the IMF and includes methods to
facilitate the collecting and paying of taxes, as well as
eliminating many unnecessary tax exemptions. Other issues
addressed in the pact include the reigning in of public
expenditures and an increased level of fiscal transparency.


3. A law currently being drafted on the fiscal pact as a
result of the National Dialogue addresses the aforementioned
areas of concern. Article 3 of this draft law attempts to
tackle the problems concerning the intake or lackthereof of
government revenues. (Note: Due to the fact that the GOH can
not support financially its own spending and relies heavily
on foreign aid, large strides made in this area could benefit
Honduras greatly. End Note). Items proposed under Article 3
include: introducing a simplified system to tax the informal
sector; a gradual end to unnecessary tax exemptions, which
includes limiting future exemptions for emergency purposes
only; a general widening of the tax base; and applying
control measures in order to combat and reduce tax evasion.
President of Congress, Pepe Lobo, has recently come out
publically stating that Congress would not support any
measures relating to tax increases or reforms, mostly due to
political pressure relating to IMF requirements.


4. Article 4 of the draft law addresses the issue of better
controlling government expenditures. Under this law
government expenditure would be limited to 18 percent of the
country's GDP, and could only be exceeded if deemed necessary
for the strict use of covering basic social services such as
health, education, and security. Other proposed reforms under
this article include: reducing the amount of subsidies
offered to businesses, only keeping those necessary to
support low-income households; gradually reducing public debt
as a percentage of GDP; transferring control of human,
economic, and natural resources in an effort to decentralize
in order to create efficiencies in administration.


5. The principal objective of the National Dialogue relating
to the fiscal pact was to identify problems within the
current system. The draft law addresses these issues and
attempts to increase revenues, decrease spending, and create
efficiencies in administration, without raising the tax rate.
The fiscal pact is an ambitious plan that if accomplished,
would widen the tax base, eliminate unnecessary subsidies and
exemptions, and create a more modern GOH that would benefit
the country as a whole.


6. Comment: The likelihood of such a law passing would
require a broad coalition in order to push the bill through
Congress. As such, the lack of political will among members
of Congress will unequivocally dilute the effectiveness of
rosy, rhetorical dialogue producing an end result that falls
well short of its initial goal. End Comment.

Palmer