Honduras: Readout of Secretary Gutierrez

UNCLAS SECTION 01 OF 03 TEGUCIGALPA 002195 SIPDIS STATE FOR WHA/CEN, WHA/ESPC, DRL/IL, AND EB/IFD/OMA STATE PASS AID FOR LAC/CEN STATE PASS USTR FOR WILLIAM CLATANOFF TREASURY FOR DORA DOUGLAS DOL FOR ILAB COMMERCE FOR MSIEGELMAN E.O. 12958: N/A TAGS: ELAB ETRD EINV EIND KTEX PGOV HO SUBJECT: Honduras: Readout of Secretary Gutierrez Bilateral Meeting with Minister of Trade Irving Guerrero ¶1. Summary: During an October 19 meeting in San Pedro Sula, Commerce Secretary Gutierrez and Honduran Trade Minister Guerrero concurred that Honduras is well on its way towards CAFTA implementation, having passed several key laws and proposed others. IPR protections remain a source of concern for both Honduras and the USG, and a new business-to- business dialogue should be fostered to move beyond the current situation. Customs reform will be a long-term process, and Honduras welcomes trade capacity building funds for this and other reforms as CAFTA is implemented. MCC continues to move forward, and will also assist Honduras to benefit from CAFTA. End Summary. ¶2. During his trade mission to San Pedro Sula, Honduras, Secretary Carlos Gutierrez and his team met with GOH SIPDIS Minister of Trade and Industry Irving Guerrero, to discuss CAFTA implementation in Honduras. Also present were Department of Commerce (DOC) DAS for Western Hemisphere Walter Bastian, DOC Assistant Secretary and USFCS Director General Israel Hernandez, DOC Chief of Staff Claire Buchan, Embassy Charge James Williard, Millennium Challenge Corporation Vice President John Hewko, and Senior Commercial Officer Mitch Larsen (notetaker). Honduras On Track -------------- ¶3. Minister Guerrero began by giving an overview of where Honduras stands with respect to CAFTA implementation. The Minister reported that the complete implementation package was currently in Congress, and that the IPR package is with Congress as well and that the required legal analysis of the bill ("dictamen") is ready. Legislation regarding Rules of Origin with respect to textiles is also with Congress, and a phytosanitary law has already been passed in Congress. Minister Guerrero finished by stating that effectively no one in Honduras is questioning CAFTA at this point, and that even labor groups are using the CAFTA legislation to their advantage. ¶4. After acknowledging that CAFTA passed by a large margin in Honduras and that the country is definitely ahead of the game with respect to moving forward on the FTA, Secretary Gutierrez asked the Minister to comment on Honduras' new labor code. Minister Guerrero said that the Honduran labor system dates back to 1950 and needs revision. He claimed that negotiations for a new labor code now rest with the Honduran Congress, a process complicated by the polarization between business interests in San Pedro Sula and government interests in Tegucigalpa -- a situation he said is unique in Central America. IPR Concerns -------------- ¶5. Secretary Gutierrez then discussed Presidential certification of CAFTA, noting that our Congress would closely scrutinize the Agreement. He also said he had been hearing concerns from U.S. and local companies with respect to IPR protection. He described his concern that Honduras is a "loose environment" where nearly 70 percent of software is pirated. He stressed this as a concern both now and in the future, and one that could particularly influence those companies considering where to invest. The Secretary thanked Honduras for moving forward with adoption of the Information Technology Agreement, and said that the U.S. would appreciate GOH help getting Guatemala and other CAFTA countries to move forward in this area. ¶6. Minister Guerrero noted Honduran concerns about IPR related issues, citing as an example U.S. firm Pfizer. Guerrero claimed that Pfizer patents for Viagra were "confusing" and "complicated", and that the GOH had brought in international experts to review national requirements with respect to these patents. Guerrero explained that in Honduras there is a perception of "threat", rather than "opportunity" in the IPR area. He called for balance between enforcement of IPR and access to affordable generic medicines. Guerrero referred to a new USAID project on IPR that may help to show the opportunities for Honduras. Regarding IPR for software, Minister Guerrero admitted that Honduras simply needs to find a way to better enforce existing laws. ¶7. Regarding generic medicines, the Secretary responded that while everyone wants access, not everyone can pay or wants to pay for that access. The challenge is to balance access with the need to maintain incentives to R&D and investment. On IPR as a threat rather than an opportunity, the Secretary pointed out that Honduras also benefits from IPR enforcement as its own companies with copyrights, patents, and other IP stand to benefit significantly. DAS Bastian added that the GOH may need a new message and proposed bringing down U.S. firms - like Pfizer, Abbott, Baxter, etc. - to arrange business-to-business solutions. Customs Modernization Still a Challenge -------------- ¶8. Guerrero said that the GOH is clearly moving in the right direction with its Customs Service, although he could not promise there would be no problems during the first six months of CAFTA implementation. The Secretary said that having U.S. Customs agents in Puerto Cortes -- the only port in the region with this presence -- would provide a big opportunity for Honduras. Minister Guerrero agreed, and welcomed the Secretary's visit, with President Maduro, to inaugurate the new Customs Office at Puerto Cortes, which would eventually house a staff of six U.S. Customs officials under the Container Security Initiative (CSI) Program. 9 Minister Guerrero acknowledged that Trade Capacity Building (TCB) funding and support thus far had been excellent, but wondered aloud what comes next. He stated that he was happy to see the participation of Eximbank, USTDA, SBA, and OPIC on the mission, but would like to see coordination with USTR to strengthen TCB moving forward because loans and other tools may simply not be enough. Textiles: A Work in Progress -------------- ¶10. The Secretary raised the issue of textiles, some portions of which still remain to be finalized. The Minister responded that the GOH has an agreement on pocketing fabric. The socks issue is in-process and, in the end, will need to be negotiated. Guerrero said the GOH has cooperated closely with Assistant USTR Regina Vargo in recent weeks and months and that she was comfortable with GOH progress. MCC Moving Forward -------------- ¶11. The Secretary introduced John Hewko, Vice President of the MCC. Hewko reported that the MCC Compact had been ratified in Congress, that there were only a few issues regarding implementation, and that he would be traveling from San Pedro Sula directly to Tegucigalpa in order to deal with a few remaining items. Overall, Hewko claimed that Honduras had been a model partner for the MCC. Encouraging Maduro to Attend Summit of the Americas -------------- -------------- ¶12. The Secretary asked Guerrero for his help in convincing President Maduro to attend the upcoming Summit of the Americas in Buenos Aires. He discussed plans for President Bush to host a breakfast with the CAFTA-DR presidents and said that President Maduro's absence would be a big disappointment. The Minister implied that the President was committed to the Summit and that it was important for him to be there, although the President was currently having some "issues" with Congress. (Note: Maduro has come under fire recently from his own party for his extensive international travels just weeks before what promises to be a closely- fought presidential election. End Note.) Guerrero said that the Honduran Congress had to approve the President's travel outside of the country, but he was convinced that if the Secretary mentioned it to President Maduro, he would indeed SIPDIS attend. ¶13. The Secretary closed noting that the private sector could contribute significantly to Honduran development, and expressed his hope that together we would all make CAFTA work. Guerrero agreed, and said the biggest future drivers of Honduran growth would be CAFTA and Central American integration. ¶14. Department of Commerce cleared this cable. Williard