HONDURAS: DIPPSA SALE MAY GO TO TRAFIGURA, BUT

C O N F I D E N T I A L SECTION 01 OF 03 TEGUCIGALPA 001238

SIPDIS

SIPDIS

STATE FOR EB/ESC, WHA/EPSC, WHA/PPC, AND WHA/CEN
STATE FOR D, E, P, AND WHA
TREASURY FOR DDOUGLASS
STATE PASS AID FOR LAC/CAM
NSC FOR DAN FISK

E.O. 12958: DECL: 07/11/2016
TAGS: EPET ENRG PGOV PREL PINR HO
SUBJECT: HONDURAS: DIPPSA SALE MAY GO TO TRAFIGURA, BUT
PDVSA CONNECTION REMAINS

REF: TEGUCIGALPA 1101 AND PREVIOUS

Classified By: Ambassador Charles A. Ford for Reasons 1.4 (b) and (d).


1. (C) Summary: The draft Terms of Reference (TOR) for the
national bid were reportedly sent by bid consultant Robert
Meyeringh to the GOH for review June 29. Ambassador has
called for an appropriate and CAFTA-consistent review and
comment period of the TOR once they are formally released
(expected by July 14). Meanwhile, the owner of Honduran
retailer DIPPSA has now indicated that at least a partial
sale of the company is imminent. He indicated he has an
"MOU" with Dutch oil trading company Trafigura Beheer B.V.
for a 50 percent purchase of DIPPSA. (Note: Trafigura is a
company accused of violating oil sanctions on Iraq under the
U.N. Food for Oil program, and has historical connections to
both bid consultant Robert Meyeringh and the Government of
Venezuela. End note.) Venezuelan state energy company PDVSA
remains a possible suitor, and a network of PDVSA (or PUMA, a
Trafigura affiliate) gasoline stations and storage networks
would set either company up to be a prime candidate to win
the upcoming national bid for Honduras, fuel supply. END
SUMMARY.


2. (C) At a June 29 press conference, U.S. citizen consultant
Robert Meyeringh described in general terms but did not
publicly release the Terms of Reference (TOR) for the
upcoming national bid. The consultant has reportedly sent a
copy of the draft document to the GOH for a legal review
period of at least fifteen days. EconChief quickly contacted
Presidential Ministers Yani Rosenthal and Enrique Flores
Lanza to request a public comment period for the TORs
following publication, pursuant to Chapter 9 of the CAFTA
treaty (on public bids). (Note: Post's reading of the
treaty suggests that potential bidders have a minimum of ten
days to submit comments or questions, and can expect written
responses from the GOH prior to closure of the established
bidding window. End Note.) In a phone call to EconChief,
Flores Lanza undertook to comply fully with all transparency
requirements indicated in CAFTA, but in a formal July 6
written response committed only that the bid would be
&published and released to all the identified parties.8


3. (C) As one of the few firms with sufficient storage
capacity to facilitate nationalized imports, Honduran
retailer DIPPSA continues to play a potentially key role in
the upcoming national bid for all the country,s fuel needs
(reftels). (Comment: Post understands that DIPPSA has a
300,000 barrel storage capacity in Tela, on the Atlantic
coast, and 420,000 barrel capacity in the Pacific's Gulf of
Fonseca, the latter shared 50/50 with U.S. firm Esso but
operated by DIPPSA. Per Esso representatives, the combined
capacity may be enough to hold the country,s regular and
premium gasoline supplies for two-to-three weeks. A company
seeking to participate in the national bid could then bid and
win on refined gasoline without having to face a potential
standoff with Texaco over the use of their facilities. End
Comment).


4. (C) On July 6, DIPPSA owner Henry Arevalo met with the
Ambassador and EconOffs and indicated that a recent PDVSA
delegation had inspected DIPPSA storage facilities on both
the Atlantic and Pacific coasts and reportedly made inquiries
about access to those facilities. According to Arevalo,
however, this delegation did not make a formal offer to
purchase DIPPSA. On previous occasions Arevalo was
repeatedly led to believe PDVSA intended to purchase DIPPSA,
either directly, or through various front-company structures.
(Comment: Post now believes at least one of these
companies, PetroCARSA, was a hollow shell, created by
dealmaker (or con-man) Adrian Recca to promote the DIPPSA
sale. Arevalo recently found out that PetroCARSA is
majority-owned by Recca and is capitalized at a mere USD
1,300. Recca is believed to be representing the interests of
former President of Honduras Rafael Leonardo Callejas. End

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comment.) PDVSA has previously had at least one other
high-level delegation arrive in Honduras, on June 10th,
headed by PDVSA Vice President Alejandro Granado and Managing
Internal Director Asdrubal Chavez, among others. Both men
also share board membership in PDVSA,s U.S. subsidiary,
CITGO. Chavez is a first cousin of Venezuelan President Hugo
Chavez. Unconfirmed reports indicate PDVSA representatives
also visited Honduras the week of July 3.


5. (C) Arevalo maintained that without additional resources
he will never be able to survive the upcoming national bid
process, nor sustain continuing operating losses as his
company is obliged to continue absorbing GOH-mandated price
freezes on gasoline pump prices. Selling 50 percent of the
company (for approximately USD 30 million) to a global player
will allow his business to survive. (Comment: Other
observers have speculated that Arevalo is "in over his head"
with the over USD 50 million in debt he assumed when he
bought out former partner Jose Lamas earlier this year, and
that he desperately seeks a white knight to re-capitalize the
venture. End Comment.) Arevalo continued to play down a
potential purchase by PDVSA, however, and indicated that
discussions were further along with oil trader Trafigura
Beheer B.V., a Dutch oil trading and storage company. Per
Arevalo, auditors from Trafigura were currently in DIPPSA
facilities doing due diligence analysis. Bid consultant
Meyeringh, in one of his many complex relationships, was a
former employee and investor in Trafigura,s COPENSA
subsidiary, and helped them develop their storage facilities
in Guatemala. When asked previously, Meyeringh admitted that
he is a partner, but a "very minor one" who exercises no
management functions. It is unclear whether Meyeringh in any
way facilitated Trafigura's interest in Honduras.


6. (C) Headquartered in Holland, with principle trading
offices in Switzerland, Trafigura has over 55 trading offices
in 36 countries, and specializes in the transport, storage
and retail of petroleum products. In Central America,
Trafigura owns considerable storage facilities in Guatemala
(through COPENSA),and a growing network of PUMA branded
retail gasoline stations throughout Guatemala, El Salvador,
and Honduras. Combined with DIPPSA, the company would have
in Honduras over 130 gas stations, strategically placed
storage facilities, and a truck fleet.


7. (C) Trafigura,s owner, Wilmer Ruperti Perdomo, is rumored
to have close connections with Venezuelan President Hugo
Chavez, and played a key role helping Chavez survive the
potentially devastating oil strikes in 2002 and 2003. In
2005, press reports indicated that PDVSA was double billed by
Trafigura for a fuel shipment valued at USD 14 million, but
an ensuing investigation by PDVSA was inconclusive (COMMENT:
The implication was that Chavez was rewarding his confidant.
END COMMENT). Trafigura, founded in 1993 by former employees
of Marc Rich,s oil trading company Glencore, was also
implicated in the 2001 UN oil- for-food scandal.


8. (C) On July 7, the Ambassador and EconOff met with Banco
Atlantida President Guillermo Bueso; Atlantida is one of two
banks that Arevalo says lent him money to complete the
purchase of DIPPSA earlier this year. Bueso confirmed
Trafigura's interest in purchasing DIPPSA, but said that his
bank had first option to purchase up to 10 percent of DIPPSA
in the event of a sale. (COMMENT: He also said another bank
had a 10 percent option. This conflicts with Arevalo,s
account, when he maintained that he had control of all the
shares. According to Arevalo, the bank attempted to acquire
such rights, but was beaten back with the assistance of
another powerful banker, Jorge Bueso. END COMMENT).


9. (C) Guillermo Bueso went on to detail a potential exit
strategy from the fuel situation that he will outline to
Honduran President Jose Manuel &Mel8 Zelaya Rosales this
week. Bueso believes that Zelaya should await the results of
the bid, than declare them uncompetitive while moving

TEGUCIGALP 00001238 003 OF 003


aggressively to review the entire price-setting formula.
With all parties around the same table and a sense of
urgency, Bueso believes that Zelaya could find savings while
providing a clear path to market liberalization. (COMMENT:
This plan is very similar to Post's own thinking. END
COMMENT).


10. (C) COMMENT: A DIPPSA sale to Trafigura may be the lesser
of two evils. While Trafigura could patch together an
impressive network of storage, transport and retail fuel
facilities in Central America, it would be difficult for it
to tap into the preferential financing offered by PDVSA
through PetroCaribe. But, given its historical ties to
PDVSA, Trafigura could be well-positioned to win some portion
of the upcoming national bid, and could still help distribute
Venezuelan fuel to FMLN and Sandinista municipalities in El
Salvador and Nicaragua. Post has no evidence to indicate --
but does not discount the possibility -- that Trafigura in
this case could be working in concert with PDVSA. Post notes
that Arevalo has visited Venezuela recently, and might have
encouraged such a Trafigura/PDVSA alliance to give him the
fig-leaf of commercial respectability he seeks. A Trafigura
investment could allow for PDVSA access to the Honduran
market, without the negative political connotations of a deal
with PDVSA itself. On the other hand, Trafigura affiliate
Puma is aggressively expanding in Central America, and it
remains possible that Trafigura is interested in a
partnership with DIPPSA simply to continue that growth
strategy.


11. (C) COMMENT CONTINUED: It remains to be seen if
Atlantida's Bueso can affect the outcome of a game that
appears to be entering its seventh inning stretch. If the
national bid is allowed to proceed to conclusion, then fails
for not delivering the savings, it is hard to believe that
the forces backing the bid will stand idly by while another
option is pursued. However, if President Zelaya can manage
this transition with authority, and actually find real
savings by reforming the admittedly inefficient national
pricing formula for gasoline, he may yet be able to turn the
situation in his favor. END COMMENT.

FORD
FORD