SCENESETTER FOR AMBASSADOR SAUERBREY'S VISIT TO

UNCLAS SECTION 01 OF 04 TEGUCIGALPA 000344

SIPDIS

SENSITIVE

STATE FOR IO/SHA (LLUM) PASS TO AMB SAUERBREY
STATE FOR WHA AND WHA/CEN
STATE PASS AID FOR LAC/CEN

E.O. 12958: N/A
TAGS: OVIP PREL PGOV PHUM ECON SNAR HO
SUBJECT: SCENESETTER FOR AMBASSADOR SAUERBREY'S VISIT TO
HONDURAS, FEBRUARY 19-20


1. (SBU) Summary: Post welcomes the visit of Ambassador
Sauerbrey to Honduras February 19-20. Honduran President
Ricardo Maduro, half way through his constitutionally
mandated single four-year term, faces difficult task leading
a highly indebted poor country with numerous challenges.
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.

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Counterterrorism Cooperation
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2. (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 Congress has recently approved
two international counterterrorism (CT) conventions/protocols
and two OAS CT conventions (1971 and 2002). Once the
president signs the decrees and they are published in La
Gaceta (akin to the Federal Register),Honduras will have
become party to all 12 international and two OAS CT
conventions.

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Iraq and Other Key Foreign Policy Goals
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3. (SBU) The GOH is very supportive of USG foreign policy
goals, including Iraq. 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 are being rotated with a second
contingent this month. Central American units from El
Salvador, Nicaragua, and the Dominican Republic are also
serving under Spanish command. In August 2003, CJCS GEN
Myers and Secretary Rumsfeld visited Honduras, and in
November 2003, Secretary Powell 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. Honduras is also very supportive at
the UN, sharing our views on resolutions covering such key
issues as human rights, human cloning, and the Middle East.

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Bilateral Political/Military Issues
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4. (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. The HOAF has a new
focus on 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.

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Soto Cano Air Base - Joint Task Force Bravo
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5. (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.

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Counternarcotics
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6. (SBU) Honduras' geography places it squarely in the middle
of a major illegal drug trans-shipment zone. Honduras'
airspace is regularly violated by drug traffickers, who also
use go-fast boats to transit their cocaine through the
Western Caribbean region. In 2003, Honduras seized
approximately 5,700 kilos of cocaine. This is significantly
more than had been seized in the last seven years combined.

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Border Relations
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7. (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 has been 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. In December
2003, the ICJ ruled against the Salvadoran appeal, bringing
an end to the case. 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.


8. (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 2003 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.

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Economic Overview
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9. (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 they are now rising somewhat) 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.


10. (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.


11. (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.

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IMF Letter of Intent and CAFTA Positive Steps Forward
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12. (SBU) After almost two years of negotiations, the Maduro
Administration recently signed a Letter of Intent with the
International Monetary Fund for a three-year Poverty
Reduction and Growth Facility Program (expected to be
approved on February 18). The GOH, along with its four
Central American neighbors (Costa Rica, El Salvador,
Guatemala, and Nicaragua) also recently signed the
U.S.-Central American Free Trade Agreement (CAFTA). Maduro's
team is hoping that CAFTA can serve as a catalyst to spur
regional economic cooperation and integration.

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Supreme Court and Judicial Reform
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13. (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 2003 that the proposed amendment
was unconstitutional, which sparked a tense confrontation
between the Supreme Court and Congress. The issue receded
until recently when Congress passed a new amendment to the
Constitution again granting Congress the right to interpret
the constitutionality of laws it passes. A legal challenge
to this amendment is expected in the near future.

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Public Security/Human Rights
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14. (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, after initial success
of establishing a visible police presence, violent crime,
particularly homicides, continued at a high rate, although
there is evidence that the murder rate has fallen in the last
several months. 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, trafficking in persons, and other
organized crime activities.


15. (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 commercial sexual exploitation
in the U.S., Central America, and Mexico. USAID and Peace
Corps have both been involved in HIV/AIDS prevention.

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Consular Issues
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16. (SBU) Approximately 800,000 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 11,000 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, 35
American Citizens have been murdered in Honduras. There was
not much progress on most of these cases until 2003, but
there have now been 15 convictions in eight cases. Some
progress has been made on extradition cases involving
American Citizens residing in Honduras who are wanted for
felonies in the United States.

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Embassy Tegucigalpa
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17. (SBU) Embassy Tegucigalpa is a medium-sized post,
employing 140 U.S. citizens and 300 Hondurans among 20 USG
agencies. The 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