HONDURAN PRESIDENT ZELAYA ON FUEL BID, CAFTA,

C O N F I D E N T I A L TEGUCIGALPA 000622 SIPDIS SIPDIS STATE FOR S, D, P, E, WHA, AND EB STATE FOR WHA/EPSC, WHA/PPC, AND WHA/CEN STATE FOR EB/TPP, INL/LP, AND IO/UNP STATE PASS USTR STATE PASS AID FOR LAC/CAM NSC FOR DAN FISK E.O. 12958: DECL: 03/30/2016 TAGS: PREL ETRD PGOV EPET SNAR MOPS PINR HO SUBJECT: HONDURAN PRESIDENT ZELAYA ON FUEL BID, CAFTA, NARCOTICS, GUATEMALA IN UNSC AND OTHER ISSUES Classified By: DCM - James G. Williard for Reasons 1.4 (B) and (D) ¶1. (C) Summary: On March 28, Ambassador and DCM met with Honduran President Mel Zelaya and Foreign Minister Milton Jimenez regarding Zelaya's June visit to Washington. DEA agents later joined the meeting for a candid anti-narcotics briefing. A relaxed Zelaya appeared to waiver somewhat on a proposed fuel import bidding process, eagerly anticipated the April 1 CAFTA implementation, acknowledged U.S. immigration reform efforts, supported Guatemala's bid for a UNSC seat, and signaled his understanding of U.S. concerns over Nicaraguan elections. Jimenez indicated progress on resolving border issues with Guatemala, Belize, and El Salvador and he announced GOH acceptance of U.S. military requirements under Article 505/GPOI. Zelaya pledged full support for DEA activities, particularly in pursuing heads of major narcotics organizations. The Ambassador suggested joint CAFTA promotion activities and asked Zelaya how the fuel bid process would lead to greater market liberalization. (Note: Despite Zelaya's stated reservations about the fuel bid process, post subsequently learned that Honduran Labor Minister Rixi Moncada had traveled on March 27 to Venezuela for meetings with Hugo Chavez, several ranking Venezuelan officials, and representatives of PetroCaribe and PdVSA. See septel and para 7 for more details). End Summary. -------------- Background -------------- ¶2. (C) The Ambassador met with Zelaya for over an hour and a half at the Presidential Palace. During their joint visit to dedicate the Container Security Initiative in Puerto Cortes the previous Saturday, Zelaya had asked the Ambassador for a DEA briefing that would identify heads of narcotics organizations who could be arrested. The Ambassador set up the DEA session, preceded by a discussion on preparing for Zelaya's Washington visit in June. Zelaya, accompanied by Minister Jimenez, appeared focused, friendly, and fully engaged on all issues. Zelaya repeatedly stressed the value of maintaining close, confidential communications with the 
Ambassador. Prior to his arrival in the presidential office, Zelaya's senior advisor stated that meetings with the Ambassador had priority over all other matters and that everything else could wait. -------------- Fuel Bid -------------- ¶3. (C) The contentious bid process to select a single national fuel importer was foremost on Zelaya's mind. Hours earlier, Zelaya, accompanied by Vice President Elvin Santos, had waded into a crowd of hundreds of demonstrators outside the palace, where he told transport workers that he supported their pleas for lower gas prices. However, Zelaya refrained from criticizing the oil companies and he seemed to indicate that the "licitation" process might be something different than simply a bid for a sole importer of fuel. Even the organizer of the populist march, Juliette Handal, toned down the rhetoric in calling for greater social justice. ¶4. (C) Zelaya told the Ambassador that, during his Washington visit, he hoped to dispel doubts about the fuel bidding process. He maintained that the GOH continues searching for alternative ways to bring down prices at the gas pump and would not be swayed by political considerations. The Ambassador outlined the importance of competitiveness, open and transparent communications, the importance of adhering to commercial rules, and the need to develop a process leading to market liberalization. Zelaya accepted the Ambassador's message, noting that he wanted to work with U.S. oil companies, not oppose them. Recognizing the difficulty in obtaining oil company participation in the bid process, Zelaya stated clearly that there could be no bid process without the multinationals. ¶5. (C) With regard to the hiring of American businessman Robert Meyering to develop the bidding process, Zelaya stated that no contract would be signed absent a guarantee of a price reduction by a specific date. (Note: The press had conflicting reports on March 30 on whether or not the contract had been signed, and details of the terms were not yet available. End Note.) ¶6. (C) Zelaya had earlier met with Vice President Santos, who recently returned from a Washington visit. Referring both to Deputy Secretary Zoellick and NSC Director for Latin America Dan Fisk, Zelaya appeared to have heard the message that the U.S. had several concerns with the bid process and the resulting monopoly and threat to U.S. company interests. ¶7. (C) Note: On March 30, Labor Minister Moncada informed the Ambassador that she traveled to Venezuela on the day prior to the Ambassador's meeting with Zelaya. According to Moncada, she had been directed at a very high level to urge Venezuela to participate in the fuel bid. She was apparently told to keep her visit quiet. In speaking to the Ambassador, Zelaya had made no mention of Moncada's trip, though he did allude to his belief that a country should never negotiate from a standpoint of weakness. Zelaya then added that at times it might be useful to refer to the Venezuelan option. The Ambassador cautioned Zelaya that he needed to consider how people in Washington react to such references. End Note. -------------- CAFTA -------------- ¶8. (C) Zelaya underscored the value of CAFTA to Honduras and the opportunities the agreement will offer. While expressing sensitivity to perceived "U.S. favors" extended to El Salvador, Zelaya recognized that Honduras needs to make CAFTA work in order to compete with El Salvador and other nations. He noted that CAFTA opens the doors and windows of Honduras to U.S. investment and he stressed the importance of the Port of Cortes Container Security Initiative as well as opportunities to develop agriculture, the maquila industry, and tourism. Zelaya also referred to the possibility of expanding Soto Cano Air Base (Palmerola) to include commercial use - a topic Zelaya discussed with SOUTHCOM General Craddock several weeks ago. Zelaya said he wants to talk about CAFTA during his June visit to Washington and the Ambassador noted opportunities to jointly promote CAFTA during that visit. -------------- Narcotics -------------- ¶9. (C) Zelaya warmly received the DEA Country Director and Deputy Director, congratulating them on the recent seizure of some three tons of cocaine in international waters that involved both the U.S. Coast Guard and the Honduran Navy. In response to Zelaya's request, DEA named several specific major drug organization leaders operating in Honduras. One of those names surprised Zelaya, who has known the individual for many years. Zelaya concurred with DEA on various suggestions regarding cooperation with telephone companies, broader authorities for prosecutors, consolidation of anti-drug police forces, and general support for anti-drug operations. Zelaya requested that DEA prepare a plan of action for his consideration, to be coordinated with the Minister of Public Security. Zelaya mentioned the possible convening of the Security Minister, Supreme Court President, Attorney General, and others to discuss ways to better deal with narcotics chiefs. Zelaya saw little gain by simply arresting low level traffickers. -------------- Other Issues -------------- ¶10. (C) Zelaya and Jimenez commented on a range of other issues: -- After listening to latest developments on U.S. immigration reform, Zelaya nodded his understanding and stated that Honduras would never defend illegal immigration. -- Zelaya readily accepted the Ambassador's demarche on Guatemala's candidacy for the UN Security Council. He said it was logical that the Central Americans support Guatemala and he concurred with Jimenez contacting the Panamanian Foreign Minister to urge Panama's support for Guatemala. (Note: Jimenez suggested that Costa Rica's support for Guatemala may not be firm. End Note.) -- Zelaya listened to the Ambassador's comments about the importance to the U.S.of Nicaraguan election. Zelaya agreed to look very closely at the political situation in Nicaragua in establishing a position on the elections. -- The Ambassador reminded Zelaya of the Center for Hemispheric Studies' facilitation of a conference on building a national security strategy to be held outside Tegucigalpa on May 5-7 - a conference set up by the U.S. Southern Command. Zelaya confirmed his interest in attending a portion of the event. -- Jimenez stated that good progress is being made on border dispute issues. He has participated in discussions with Belize and Guatemala. Jimenez said that he hopes for an agreement with El Salvador on border issues, perhaps in April. -- Jimenez also confirmed GOH acceptance of conditions related to the acceptance of U.S. military equipment contained in our diplomatic note on Article 505/GPOI. -------------- Comment -------------- ¶11. (C) Comment: Zelaya's cooperation on CAFTA, immigration, anti-narcotics, Guatemala/UNSC, and other issues appears firm and consistent. The fuel bid issue, however, raises doubts about his style and candor. While appearing to be open and frank, Zelaya gave us no indication that his Labor Minister was in Venezuela discussing the actual terms of a possible PetroCaribe deal at the very moment he conveyed his reservations about the bid process. Zelaya's almost mocking reference to the fuel bid process netting a mere 1 Lempira reduction at the pump, belies his possible signing of a high-priced contract the next day with the American advisor who is promoting the bid scheme. Zelaya's "shoot from the hip" style is often difficult to fathom and leaves us guessing as to whether he misunderstands complex issues, deliberately deceives his audience, simply lacks experience in diplomatic communications, or acts on the last message received from his mixed group of advisors. It could also be that Zelaya is much smarter and politically astute than others might think, leading opponents to underestimate his abilities. Perhaps, Zelaya may be maneuvering out of the bid process by having it fail, blaming the contractor, and then resorting to more liberal market approaches. Or, perhaps he has already arranged a deal with PetroCaribe to help him achieve his political imperative to lower gas prices. The direction this process takes over the next two/three months will tell us much about Zelaya's leadership. End comment. Ford