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