HONDURAS FY06 USDA FOOD ASSISTANCE PROPOSAL

UNCLAS TEGUCIGALPA 001823

SIPDIS

USDA/FAS/EXPORT CREDITS FOR MARY CHAMBLISS, DEPUTY ADMINISTRATOR
AND PPD DIRECTOR RON CROUSHORN, PROGRAMMING DIVISION
USDA FOR FAA/WHAO/JBAILEY
GUATEMALA FOR AGRICULTURAL COUNSELOR

E.O. 12958: N/A
TAGS: EAGR EAID HO
SUBJECT: HONDURAS FY06 USDA FOOD ASSISTANCE PROPOSAL

REF: SECSTATE 139203


1. FAS/Tegucigalpa requests an FY 2006 Food For Progress (FFP)
government-to-government grant of USD 9.4 million for Honduras.
We request the following donated commodities: USD 3.4 million
soybean meal, USD 5 million yellow corn, USD 0.7 million red
beans (for direct feeding),USD 0.3 million milled rice (for
direct feeding).


2. Corn and soybean meal will be monetized and the proceeds
will be used to continue Post-guided strategy of food security,
rural development, CAFTA-DR implementation, and administrative
support. We propose four programs be supported with the donated
commodities.


A. Direct school feeding: The Government of Honduras (GOH)
already carries out a very successful direct feeding program.
However, with continued high levels of poverty, the fuel crisis,
and the threat of drought, the need for additional food is
urgent to meet basic nutrition goals for school-age children.
The beans and rice will be devoted to direct feeding through the
Escuela Saludable program (supported in the FY05 Agreement).


B. Implementation of the National Agricultural Policy: The
Ministry of Agriculture and Livestock (SAG) has developed a
national agricultural policy for the short, medium, and long
term. Since FY03, USDA has supported plans to implement those
agricultural policies. Roughly one half of the monetized
proceeds will be used to strengthen the implementation of those
policies. FY06 funds will continue to support the
implementation of ongoing programs, including agribusiness
development, agricultural information, agricultural
diversification, and good agricultural and food manufacturing
practices.


C. CAFTA-DR Implementation: Roughly one half of the monetized
proceeds will be used to support Trade Capacity Building
activities in support of CAFTA-DR. The primary area would be
capacity building in sanitary and phytosanitary systems,
especially within the GOH.


D. FFP Technical Assistance Office: A small portion of the
monetized proceeds will be used to support SAG's FFP program
administration.


3. Justification: First, Honduras is the third poorest country
in Latin America. Roughly two-thirds of Hondurans live below
the poverty line, and close to half live in extreme poverty.
Honduras is slowly overcoming the effects of a long-term
economic crisis caused by cyclical low commodity prices for
traditional commodities (bananas, coffee),droughts, and floods.
The agricultural and livestock sector, traditionally the most
important area of economic activity in Honduras, accounted for
13 percent of GDP in 2003, and employed more than 35 percent of
the work force. Honduras' potential in agriculture can and
should be developed so it can be the driving engine in Honduras'
economic development.


4. Second, the GOH is actively promoting economic openness as
well as private sector investment as a key element of its
national development strategy. The GOH is a strong and
dependable ally of the United States' global war on terrorism.
In international multilateral fora, especially the United
Nations, Honduras is the most consistent Latin American
supporter of U.S. positions.


5. Third, Honduras has been a major supporter of CAFTA-DR, and
was one of the first to approve the Agreement. FFP proceeds
will be used for trade capacity building efforts under CAFTA;
these efforts will facilitate U.S. exports to Honduras, as well
as Honduran exports to the U.S. The USG made commitments to
trade capacity building as part of CAFTA-DR, and a FFP would
provide additional resources for rapidly implementing effective
programs that will benefit both sides.


6. AgCounselor has discussed this proposal with USAID Honduras,
which has cleared this cable. USDA and USAID look forward to
cooperating in carrying out development projects in Honduras so
as to enjoy synergies and avoid duplication.

Williard