HONDURAS CONTINUES TO SUPPORT MEXICAN ENERGY PLAN;

C O N F I D E N T I A L TEGUCIGALPA 000326

SIPDIS

SIPDIS

STATE FOR EB/IFD, WHA/EPSC, INR/IAA, EB/ESC, AND WHA/CEN
TREASURY FOR DDOUGLASS
STATE PASS AID FOR LAC/CAM

E.O. 12958: DECL: 02/21/2016
TAGS: ASEC CASC ECON EFIN ELAB ENRG EPET HO PGOV
SUBJECT: HONDURAS CONTINUES TO SUPPORT MEXICAN ENERGY PLAN;
MANEUVERS TO ATTRACT PROPOSED REFINERY

REF: A. MEXICO 00620


B. TEGUCIGALPA 02529

C. SECSTATE 12416

Classified By: EconChief PDunn for reasons 1.5 (B and D)


1. (SBU) SUMMARY: Vice President Elvin Santos reiterated
Honduras, strong support for the proposed Mexican fuel
initiative, echoing the GOH,s positive comments to A/S Wayne
in January. Meanwhile former minister of Trade and Commerce
Irving Guerrero has initiated talks with an American company
over locating a possible refinery in Honduras. An
International Development Bank study to identify the best
location for a Central American refinery is due in May. END
SUMMARY.


2. (U) The proposed Mexican Energy Initiative (ref a)
continues to be of high interest to GOH officials. When the
plan was first unveiled by Mexican President Vicente Fox at
the Summit of the Americas at Mar del Plata in October 2005,
the GOH administration of former President Ricardo Maduro
reacted positively to the plan (ref b). The current
administration of Manuel "Mel" Zelaya Rosales showed
continued interest in early meetings with A/S Wayne in
January (ref c).


3. (C) Since the Zelaya administration took office on January
27, Vice President Elvin Santos has continued to cite the
Mexican initiative as a key part of Honduras, energy plan
for the future. Santos was named the head of a Commission to
investigate options to lower fuel prices even before the
change of administration. The planned refinery holds the most
interest for the GOH, due to the potential to exercise more
control over the production and distribution of fuel as well
as the potential for job creation if the refinery is located
in Honduras.


4. (C) Ex-Minister of Commerce and Industry Irving Guerrero
has stayed involved in the issue. In separate meetings with
Ambassador, EconOff, and EconChief, Guerrero indicated that
he had been in talks with American oil company Occidental
Petroleum (Oxy). Per Guerrero, Oxy had been in talks with
the Government of Panama about building a refinery there
before Guerrero approached them to consider Honduras.
Embassy Panama has confirmed that Oxy signed an MOU with the
GOP regarding a refinery in 2005.


5. (C) Guerrero indicated that his talks with Oxy, while in
an early stage, were showing promise. He was convinced that
once Oxy understood that Panama has not harmonized their
gasoline standards with the rest of Central America (as
Honduras has done),they will realize that the project's
economics are much better in Honduras. In addition, if
rampant smuggling and corruption are to be avoided in the
region, there must be reasonable tax and tariff harmonization
for gasoline, which Guerrero believed the GOP is politically
unwilling to take on. Finally, he reiterated his oft stated
conviction that Honduras, position in the center of Central
America, with port development opportunities on both coasts,
is unparalleled in the region.


6. (C) Guerrero,s next steps will be to exchange documents
with Oxy that may include a draft MOU. With documents in
hand, Guerrero indicated he would ask for a meeting with
Ambassador to discuss the matter. Interestingly, he stated
that he would bring along a high-level Liberal Party
&friend8 that was also very interested in the deal.
(Comment: Post suspects that this person may be Vice
President Santos). Guerrero apparently wants to build support
for the Oxy deal in Honduras before the planned released (in
May) of an International Development Bank study identifying
the best location for a Central American Refinery.
Ford