SCENESETTER FOR CODEL BALLENGER'S VISIT TO

UNCLAS SECTION 01 OF 05 TEGUCIGALPA 000734

SIPDIS

SENSITIVE

STATE FOR H PASS TO CODEL BALLENGER
STATE FOR WHA/CEN, INL/LP, DRL/PHD, EB, AND CA
STATE PASS AID FOR LAC/CEN

E.O. 12958: N/A
TAGS: OREP PREL PGOV PHUM ECON SNAR HO
SUBJECT: SCENESETTER FOR CODEL BALLENGER'S VISIT TO
HONDURAS, APRIL 12-13



1. (SBU) Summary: Post welcomes the visit of CODEL Cass
Ballenger (R-NC, Chairman, House International Relations,
Western Hemisphere Subcommittee) to Honduras April 12-13.
Honduran President Ricardo Maduro, a little over half way
through his constitutionally mandated single four-year term,
faces a 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 Global War on Terrorism (GWOT) 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 solid supporter of the U.S. on GWOT.
The GOH has responded quickly to all USG requests regarding
terrorist threats and financing, although to date, no
terrorist assets have been found in Honduran financial
institutions. Honduras is also the only country in the
region, apart from Panama, to have signed and ratified all UN
and OAS counterterrorism conventions and protocols. Honduras
has also been aggressive in upgrading port security and
appears to be on track to comply with port certification
requirements in the U.S.'s Maritime Transportation Security
Act by July 1, 2004.

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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 the reconstruction of 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. These troops
are currently scheduled to return to Honduras this July when
Honduras' formal commitment to OIF ends. President Maduro
announced on March 16 that he would not seek to extend this
costly deployment for another year. Central American units
from El Salvador 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,

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Secretary Powell visited, to thank the GOH for its support of

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OIF. Their visits were well received and provided important
political support for Maduro's Iraq policy. As in most of
the region, the general public overwhelmingly opposes the
Honduran deployment. 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 the Western
Hemisphere to sign and ratify an Article 98 Agreement with
the United States. Honduras now has a civilian Minister of
Defense (MOD) and a Chief of the Joint Staff who heads the
Honduran Armed Forces (HOAF). In January of 1999, the
constitution was amended to abolish the position of military
commander in chief of HOAF, thus codifying civilian authority
over the military. Civilian control over the HOAF is
complete and civil/military relations are good. 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
interested in establishing an ability to further increase its
participation in international peacekeeping operations.
Honduras also stands ready to participate in a regional arms
"rationalization" process, but has announced that it will not
negotiate on a bilateral basis.

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Soto Cano Air Base - Joint Task Force Bravo
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5. (SBU) About six hundred U.S. service men and women and
fourteen civilian DOD employees are currently stationed at
Honduras' Soto Cano Air Base under the command of the
Combatant Commander, U.S. Southern Command (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 enables 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. (U) Honduras' geography places it squarely in the middle
of a major illegal drug trans-shipment zone, and the
trans-shipment of cocaine through Honduras by air, land, and
maritime routes continues. However, this trade has now begun
to face significant disruptions. In 2003, overall seizures
in Honduras were higher than the past five years combined and
in 2004 Honduras has already seized over 1,500 kilos of
cocaine.


7. (SBU) Corruption within the police, Public Ministry, and
the judiciary remain a primary impediment to successful law
enforcement cooperation. However, the GOH has moved forward
with the implementation of new units in support of the
strengthened Money Laundering Law, which was passed in 2002.
The National Council for the Fight Against Drug Trafficking
(CNCN) has renewed its commitment to lead the country's
counternarcotics efforts. Available funds to implement a
government approved master counternarcotics plan, though,
remain severely limited.

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Border Relations
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8. (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 a shared area 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.


9. (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. In 1999, Honduras
provoked Nicaraguan retaliation when it signed a maritime
treaty with Colombia recognizing the 15th parallel as its
maritime border. Nicaragua subsequently 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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10. (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. 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. Agriculture continues to
contribute significantly to the economy, particularly the
production of bananas, coffee, cultivated shrimp, melons and
other fruits, vegetables, and grains.


11. (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 since 2003. 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.


12. (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. After almost two years of
negotiations, the Maduro Administration signed a Letter of
Intent with the International Monetary Fund, which was
approved by the IMF's Executive Board on February 26, for a
new three-year arrangement for Honduras under the Poverty
Reduction and Growth Facility (PRGF). The IMF expects the
GOH to reach its Heavily Indebted Poor Countries (HIPC)
completion point by 2005 with good PRGF implementation. The
Paris Club needs to negotiate HIPC interim relief for
Honduras in April (a cancellation of 90 percent of the GOH's
debt payments falling due during the period until completion
point). 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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The Importance of CAFTA
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13. (SBU) The Honduran government, along with El Salvador,
Guatemala and Nicaragua, reached agreement on the terms of
the U.S.-Central American Free Trade Agreement (CAFTA) in
December 2003; Costa Rica closed its negotiations in January
and the Dominican Republic recently negotiated its market
access chapters in March. Honduras is hoping that the
Central American countries will have a signing ceremony with
President Bush in late May (once the required consultation
period with the U.S. Congress is completed) and to begin
national ratification shortly thereafter. The Honduran
government and private sector are concerned that election
year politics in the United States may delay ratification by
the U.S. Congress.


14. (SBU) The CAFTA agreement is strongly supported by the
Honduran private sector. The CAFTA textile chapter is
perceived as absolutely vital to the survival of the textile
and apparel sector in Honduras after worldwide quotas are
eliminated in 2005. The CAFTA agricultural chapter is
expected to liberalize agricultural trade gradually while
protecting Honduran farmers from sudden disruptions caused by
subsidized imports. The agreement also will spur
modernization in government procurement and services, and
will help lock in the GOH's structural reforms in areas such
as telecommunications. Honduras is already seeing about $200
million in new foreign investment as a result of CAFTA, just
this year. While the agreement will require some politically
sensitive changes to legislation and there is a small, but
vocal, leftist opposition led by the Popular Block, which
includes NGOs, unions, and a leftist political party,
Honduran ratification is expected to be relatively easy.

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Supreme Court and Judicial Reform
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15. (SBU) In 2000, the GOH initiated substantial judicial
reforms intended to allow the Supreme Court to develop into
an independent branch of power, unlike any of its predecessor
courts since democracy was restored in 1982. While the new
court is pro-reform in orientation and has fought for its
prerogatives, its performance of late, under the leadership
of its President, Vilma Morales, has been a disappointment.
There continues to be a high level of political manipulation
in the court's proceedings and the issue remains open as to
whether or not 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 National 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, although
the amendment has yet to be printed in the official register
(La Gaceta) and therefore is not yet law. Judicial
corruption remains an ongoing problem and the President of
the Court has not acted decisively to root out and punish bad
judges.

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Public Security/Human Rights
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16. (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
intolerably high 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 six months or so. The U.S. 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, expand the
frontier police, and improve prosecutional and forensic
capacities. 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.


17. (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. On April 5, 2003, 68 persons, 61 of them gang
members, were killed in a violent incident at El Porvenir
prison near La Ceiba. Reports produced by the Public
Ministry, a Special Commission of the Honduran National
Council for Internal Security (CONASIN),and the Human Rights
Commissioner put the blame for the vast majority of deaths on
government security forces (police and military under police
command) and nongang member inmate trusties.


18. (SBU) While Honduran labor law is deficient in some
areas with respect to International Labor Organization core
conventions, the main issue for the protection of labor
rights, including freedom of association and collective
bargaining, is the effective enforcement of existing laws.
There are serious problems with child labor in several
industries, particularly melon, coffee, and sugar cane (but
not in the maquila sector),as well as in the informal
economy, 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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Corruption and Rule of Law
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19. (SBU) Honduras remains one of the most corrupt countries
in the Western Hemisphere and 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. 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 solicit and/or remain open to offers of bribes. The
Attorney General's office has been unwilling, or unable, to
prosecute high-profile cases, with the notable exception of
several sitting congressmen recently accused of drug
trafficking and other offenses. The selection of Ovidio
Navarro as the new Attorney General was also a clear
political move orchestrated by those with a direct interest
in the status quo. Given the scope of the problem, any
public discussion about the country's pervasive corruption is
a positive development.

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USAID Programs
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20. The Central America and Mexico (CAM) Regional Strategy
focuses bilateral and regional USAID investment on the three
performance "arenas" of Ruling Justly, Economic Freedom, and
Investing in People, and is closely aligned with the
Millennium Challenge Account (MCA). USAID supports the
Ruling Justly objective by increasing the responsiveness and
accountability of public institutions, while also building on
successful municipal development programs to create better
models for governance, justice reforms, and transparency and
participation. In the arena of Economic Freedom, there is a
concerted focus on trade policy and preparations to ready
Honduras' participation in the CAFTA and FTAA. USAID strives
to bridge agricultural production in rural areas with
relatively higher value processing and marketing enterprises
in urban centers. The integrated natural resource management
program emphasizes sustainable land and water-use,
biodiversity, and reduced disaster vulnerability. Also, to
support the Investing in People objective, the health program
aims toward improving reproductive health, family planning,
child survival, prevention of HIV/AIDS and other infectious
diseases, and household food security. Seeking a
better-educated Honduran work force through expanded access
at the pre-school, middle school, and upper secondary levels
(grades 10-11) is done using alternative delivery systems and
implementing the Centers for Excellence in Teacher Training
(CETT) Presidential Initiative. USAID is also assisting GOH
efforts to develop quality education standards, testing, and
evaluation.

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Consular Issues
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21. (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
U.S.'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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22. (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 FY04 budget of USD 45 million. The Mission
maintains a Consular Agent in Honduras' second city and
industrial center, San Pedro Sula.
PALMER