POTUS Meeting June 5 With Honduran President Mel

UNCLAS SECTION 01 OF 08 TEGUCIGALPA 000872

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA, WHA/PPC, WHA/EPSC, AND WHA/CEN
STATE FOR EB, INL, PM, OES, CA, PRM, AND DRL
STATE PASS USAID FOR LAC/CAM, LAC/RSD, AND EGAT
NSC FOR DAN FISK

E.O. 12958: N/A
TAGS: PREL ECON PGOV EPET SNAR EAID SENV KJUS HO
SUBJECT: POTUS Meeting June 5 With Honduran President Mel
Zelaya: Themes, Issues, and Areas of Bilateral Assistance


1. (SBU) SUMMARY: One hundred days into his term, President
Mel Zelaya remains somewhat of an enigma. On the positive
side, he has strongly supported CAFTA; cooperated fully with
the DHS/ICE deportation of illegal immigrants (nearly 200
daily); acted - with limited resources - to combat the
exploding drug and security problems; engaged in successful
negotiations with El Salvador (a traditional enemy) to
resolve the land border dispute (sea demarcation remains a
problem); and he voices strong support for the U.S.-Honduran
relationship. In addition, from the very first day of his
election, President Zelaya has relished the opportunity to
meet with President Bush, and he eagerly awaits the June 5
White House meeting. He made a point of receiving Attorney
General Gonzales at his first official meeting after the
inauguration - with Mexican President Vicente Fox and other
leaders waiting in the wings. President Zelaya has visited
the Embassy and the Ambassador's residence and his senior
advisors tell us that his meetings with the Ambassador have
priority over all other business. On May 4, he visited the
USS Underwood, the first U.S. Navy vessel to visit mainland
Honduras in twenty years. His words underscored his strong
affinity for the United States.


2. (SBU) On the not so positive side, Zelaya is seen by many
observers as disorganized, distrustful of many of his own
advisors/cabinet officials, prone to populism, and
influenced by divided counsel - including some with definite
leftist leanings. Because he made so many campaign
promises, the future is uncertain. It appears to Post that
Zelaya and a few key advisors believe that the only way
Zelaya can fulfill his promise to lower gasoline prices in
the short term is to strike a deal with Venezuela,
particularly with PetroCaribe. Although he claims this
would be an economic deal only, Zelaya is in a position to
be influenced by the political pressure that Chavez could
bring if/when Honduras becomes dependent on Venezuelan oil.
Zelaya has done little thus far to stem the rampant
corruption in Honduras, though there are bright signs in
reforming the tax system and actually collecting large sums
of tax money from elite economic interests paying little or
no taxes. END SUMMARY.

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Key Strategic Themes in Bilateral Relationship
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3. (SBU) The key strategic themes in our bilateral
diplomatic efforts in Honduras are: the rule of law
(including democratic institutions),regional security
(including transnational crime),economic development to
reduce poverty (through trade and investment, and investment
in human resources),and assistance to American citizens and
businesses. Overarching these goals is an emphasis on good
governance and attacking corruption, a focus that Zelaya
says he shares, as fraud/waste/abuse and the ineffective
administration of justice hampers progress in all these
areas. U.S. goals coincide with Zelaya's emphasis on public
security/rule of law, economic development, and natural
resources/environment (including the prevention insomuch as
possible of natural disasters).


4. (SBU) Over the weekend of May 5-7, the U.S. Center for
Hemispheric Defense Studies, with support from the U.S.
Military Group and other EmbOffs, held a National Security
Strategy workshop for GOH, opened by Vice President Santos,
presided by Minister of Defense Aristides Mejia, Chief of
Honduran Defense General Romeo Vasquez Velasquez, and

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leading members of military and police, as well as other
government officials. The workshop was a success, but
development of the full strategy and implementation will
take time and resources. Nevertheless, it is a critical
step and the foundation toward achieving success in regional
security and stability.

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Regional Issues, Venezuela Included
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5. (SBU) Zelaya is very sensitive to any appearance of U.S.
favoritism toward El Salvador. He is aware from press
reports of President Saca's push for major non-NATO ally
status for El Salvador and is very suspicious of how such a
determination could upset the balance of forces in the
region.


6. (SBU) The Zelaya Administration has pledged to support
Guatemala over Venezuela for the seat on the United Nations
Security Council.


7. (SBU) Post is working with Embassy Managua to see what
might be the most useful thing the Hondurans could do in
relation to the Nicaraguan elections. Due to the long
standing Caribbean maritime border dispute between the two
countries, Zelaya is unlikely to take significant action.
Nevertheless, having recently held elections, the GOH should
agree in principal and publicly to the importance of free,
fair, and transparent elections for the promotion of
democracy.


8. (SBU) USG officials should continue to underscore the
concern Washington places on Chavez-run Venezuela,
suggesting that there are possible consequences in terms of
getting sympathetic responses to problems when a country
expands its relationship with the Chavez government.

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Immigration: Reform, TPS, and Deportations
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9. (SBU) Immigration Reform: GOH immigration reform remains
a major problem - no change from the Maduro Administration.
Just recently a new Immigration Director was appointed.
Reform to immigration moves at a painstakingly tedious pace
despite best USG diplomatic efforts. DHS/CIS Office of
Refugee, Asylum and International Relations has discussed
providing possible technical assistance to assist Honduran
immigration reform.


10. (SBU) Temporary Protective Status (TPS): Honduras'
number one earner of foreign exchange is remittances from
the U.S. (about USD 1.5 billion in 2005). Given the
difficult economic conditions in Honduras, the government
wants TPS to continue indefinitely. The program allows
about 80,000 Hondurans who were in the U.S. at the time of
Hurricane Mitch in 1998 to remain in the U.S. temporarily.
The authorization has been renewed annually and currently
runs out in 2007. Interestingly, according to recent
Honduran press reports, fewer than 5,000 Hondurans have re-
subscribed to TPS. Some argue that under TPS Honduras
enjoys privileged status that other deserving countries do
not. The GOH is hopeful that possible U.S. immigration
reform will include expanded temporary work visas.


11. (SBU) Deportation: Honduras has fully cooperated, but

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the U.S. is still seeking to increase the number and size of
flights to Honduras, mainly by opening the San Pedro Sula
airport to Justice Prisoner and Alien Transportation System
(JPATS) aircraft (the San Pedro Sula airport can accommodate
larger airplanes). Working with the International
Organization for Migration (IOM),Post has engaged the GOH
by urging them to permit JPATS flights into the northern
city of San Pedro Sula and to open a Center for Returned
Migrants there. All JPATS flights now must use
Tegucigalpa's very difficult airport, which can not land the
largest JPATS planes and is closed more often by weather
than is San Pedro Sula's airport.


12. (SBU) The GOH has agreed in principle to this request,
but seeks USG assistance to refurbish an old terminal for
these purposes (USD 50,000) and to help cover operating
costs of the two centers (USD 100,000 per year). Post
strongly believes meeting these requests would advance U.S.
interests by permitting additional removals of Hondurans
unlawfully present in the United States. The GOH has been
noticeably cooperative in documenting its own nationals who
are illegally in the United States and Post believes
providing support for the San Pedro Sula facility would also
help to cement that support. DHS/ICE/DRO has indicated a
willingness to pay a processing fee for each Honduran
documented by Honduran consuls in the United States so that
they may be deported. Post recognizes there may be legal
limitations on the extent to which we can dictate how and
where those fee monies should be spent, but also urges
DHS/ICE/DRO to design a mechanism to permit money to flow to
the opening and operation of the San Pedro Sula facility (as
well as operating the Tegucigalpa center).

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Drugs, Gangs, and Security
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13. (SBU) Counternarcotics and Counterterrorism: POTUS may
want to ask Zelaya what he plans to do about the nearly out
of control narcotics problem in certain regions of his
country. This will likely result in Zelaya asking for
desperately needed help. What we need is a specific GOH
plan of action and clearly identified requirements to
consider. The most pressing need for the GOH is maritime
patrol aircraft, but the GOH also needs support for their
response ability, intelligence capabilities, and continued
State/INL funding (which is drying up) to strengthen the
collection of evidence, investigative capacity on money
laundering, and successful prosecutions. SOUTHCOM has said
it does not have any counternarcotics money available to
Central American partners, although helicopters from Soto
Cano air base have provided airlift support in counter-drug
operations. DHS/CBP and the Coast Guard have both assisted
the GOH, but more help is needed to stem the massive flow of
drugs through the Central American transit zone.


14. (SBU) The GOH is a party to all 12 UN and two OAS
counterterrorism conventions/protocols in effect. USG
agencies may have money available for assistance on
counterterrorism issues. For example, the Honduran Customs
Service (DEI) is seeking support to install container
scanning equipment at land borders. This would extend the
coverage of the highly-successful Container Security
Initiative at the maritime port of Puerto Cortes to land
entries, both facilitating trade and improving security.
Another possible project could be to develop the facility at
Mocoron to pursue narcotrafficers in the Mosquitia

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(northeastern region of Honduras most prevalent in narcotics
operations); this concept could be expanded to go after arms
smugglers involved in terrorism in the region. In order for
such projects to be successful, however, they must be
preceded by real GOH military transformation.


15. (SBU) Initiation of a Special Anti-Gang Unit: Currently
the Narcotics Affairs Section (NAS) is in the process of
initiating a Special Anti-Gang Unit to be comprised of
Police Officers from various existing Gang Units as well as
two prosecutors from the Public Ministry's Organized Crime
Unit to specifically target gang activities. The anti-gang
proposal will address several aspects of this serious
problem to include the following: education, prevention,
interdiction, rehabilitation, and re-insertion into society.
It is estimated that in order to properly address, manage,
and maintain this Unit, it would take approximately USD
500,000. Just recently, USD 127,000 was repositioned for
the new Special Anti-Gang Unit. In addition, beginning this
month, NAS and the Public Affairs Section will lead Embassy
efforts in assisting the San Pedro Sula community in an anti-
gang pilot project. This project will consist of a media
campaign informing youth and others of the dangers of
belonging to gangs, as well as help in avoiding membership
and in successfully terminating gang affiliations.
Unfortunately, INL may not have funds next year to continue
the contract of the sole American in charge of the Embassy
NAS office.

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Fuel Prices and PetroCaribe
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16. (SBU) As reported in previous cables, Honduras
continues to move towards a state-run fuel import regime,
under which it proposes to establish a government body to
select one company to supply all the nation's fuel demands
by August 2006. Awarding such a monopoly on importation of
all fuel to a single company could require current
importers, including U.S. companies ExxonMobil and
ChevronTexaco, to break existing import contracts. In
addition, these two U.S. firms -- which are the owners of
the majority of fuel storage capacity in Honduras -- might
then face a GOH demand that they share use of those supply
facilities. Venezuelan national fuel company PDVSA has a
clear advantage to winning the national bid through their
plan PetroCaribe, which offers up to 40 percent financing,
and may have an early in-road through reported deals with
Honduran parastatal energy company ENEE and the Honduran
private fuel importer and distributor DIPPSA. Honduran
actions stem from strong internal political demands to
reduce gas prices. The GOH has also expressed a strong
interest in pursuing energy diversification, notably
including alternative and renewable fuels such as sugar-cane
ethanol, wind power, micro-hydro and full-scale
hydroelectric projects, and biodiesel from African Palm
plants.

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Environmental Concerns
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17. (SBU) Forestry/Illegal Logging Issues: Zelaya has a very
strong personal attachment to the environment and wants to
rid the country of illegal logging and damage to the forest.
Zelaya has this policy despite, or perhaps, because of, his
time as head of the Honduran Logging Association. Forest

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sector monitoring and enforcement are difficult due to
inadequate knowledge of forest resources and ambiguous
ownership rights. Illegal logging continues to flourish
because of limited prosecution and lenient penalties for
forest crimes. He has not specifically asked for U.S. help,
but he may do so. The Embassy is seeking greater details on
President Zelaya's plans for monitoring illegal logging so
that State/OES can look into providing assistance through
the POTUS Initiative Against Illegal Logging.


18. (SBU) Illegal logging has been a persistent problem in
Honduras for many years, particularly with precious
hardwoods such as Mahogany, which is extracted by the
truckload from isolated sites in the eastern part of the
country. The GOH owns the majority of the country's forests
and is therefore ultimately responsible for their protection
and at fault for the years of illegal logging that has
occurred in Honduras. The GOH has historically done very
little in practical terms to stop illegal logging. More
recently, the Zelaya Administration has publicly declared
that proper forestry practices is one of its highest
priorities and has mobilized the Honduran Army to curb both
illegal logging and forest fires.

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USG Programs and Bilateral Assistance
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19. (SBU) Central American Free Trade Agreement (CAFTA):
CAFTA entered into force on April 1 for Honduras. In
Honduras, CAFTA is strongly supported by most of the private
sector, especially the textile and apparel industry. CAFTA
was supported by not only the outgoing National Party, but
also by the Liberal Party and two of the three smaller
parties in Congress. Only one small leftist political party
(UD) voted against the agreement. The agreement has also
been opposed by some NGOs, labor unions, and rural
(campesino) groups, who are concerned that small-scale
Honduran farmers will be unable to compete with subsidized
U.S. agricultural products.


20. (SBU) Zelaya's team hopes that CAFTA will lead to faster
economic growth and serve as a catalyst for regional
economic cooperation and integration. The agreement is
absolutely vital to the survival of the textile and apparel
sector in Honduras now that worldwide quotas have been
eliminated. It is estimated that in 2004 Honduras received
at least USD 200 million in new foreign investment, most of
it from the United States, as a result of the anticipated
benefits of CAFTA. The agreement's agricultural chapter
will liberalize agricultural trade gradually while
protecting Honduran farmers from sudden disruptions caused
by subsidized imports. The agreement also will spur
modernization in government procurement and services and
will help lock in the GOH's structural reforms in areas such
as telecommunications.


21. (U) Millennium Challenge Account: In 2004, Honduras was
chosen as one of sixteen countries eligible (out of 75
considered) to apply for assistance from the Millennium
Challenge Account. In June 2005, the Millennium Challenge
Corporation (MCC) approved $215 million in funding over five
years for a Transportation Project and Rural Development
Project in Honduras. The Compact entered into force on
September 29, 2005, and the first disbursement of USD 1.6
million was made in February 2006. MCA-Honduras is the
government entity responsible for implementing the program.

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Three major procurements are currently in process: Farmer
Training and Development, Procurement Supervisor, and the
Transportation Project Manager. The contract for the Farmer
Training and Development is expected to be awarded in late
summer and will be the first activity to show tangible
results.


22. (SBU) MCC Vice President for Operations John Hewko will
visit Honduras May 15-17 to emphasize to President Zelaya
that all Compact implementation must be transparent,
competitive, and apolitical. In addition, Hewko will stress
that the Compact was designed to work in coordination with
the efforts of the GOH and other donors to enable Honduras
to take advantage of the opportunities presented by CAFTA.
This requires GOH policies in agriculture and transportation
to reinforce the projects being funded under the Compact.
Unfortunately, initial policy statements indicate that GOH
policies and budgets are not investing the necessary
resources to complement the projects being funded by the
Compact.


23. (SBU) PL 480 Title II: It appears that the Food For
Progress program that has benefited a half million very poor
Hondurans (two-thirds of the country is poor) will end in

2008. The Embassy is working with USAID headquarters on
this, but the funds may not be available to continue the
program. Post has reason to believe that Zelaya intends to
raise this subject with POTUS.


24. (SBU) Seized assets as leverage for fishery and
environmental issues: The USG will transfer USD 500,000,
which represents 50 percent of the net forfeited assets from
the McNab case regarding conspiracy, smuggling, and money
laundering charges in connection with importing undersized
lobsters into the U.S. in violation of Honduran law. The
GOH must ensure that all funds transferred under this
agreement are used by the Fisheries Section of the
Agriculture Ministry. Another Post initiative is trying to
get the GOH seized assets office to turn over a seized boat
to the fisheries inspectors, further improving their
inspection and monitoring capacity, while reinforcing their
good behavior in becoming a functioning government entity.
Both of these efforts could not only improve environmental
protections and reduce the chance of violations by Honduran
seafood and shellfish fishermen, but they could also send a
strong signal of how doing the right thing (such as
convicting smugglers, seizing criminal assets, and reforming
law enforcement agencies) can lead to increased resources
and therefore a better GOH ability to deliver services to
its people.


25. (SBU) Bird Flu prevention - USG provides USD 100,000:
Since 2001, through SOUTHCOM's Humanitarian Assistance
Program, the USG has been conducting a Disease Surveillance
project in Honduras, Guatemala, and El Salvador, in
conjunction with the U.S. Army Center for Health Promotion
and Preventive Medicine - West, to precisely try to identify
problems soon enough to act and hopefully prevent them from
becoming bigger problems if they hit any of these countries.
USD 100,000 has recently been allotted to assist public
health personnel in Honduras to carry out diseases
surveillance programs specifically on "Bird Flu".


26. (U) Global Peacekeeping Operations Initiative (GPOI):
GPOI funds for Honduras, El Salvador, Nicaragua, and
Guatemala will be used to provide peace support operations
training and equipment for use in the Central American Armed

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Forces Confederation (CFAC) peacekeeping battalion such as,
but not limited to, computers, audio/visual, and vehicles;
transportation of personnel to the Coban Regional
Peacekeeping Training Center in Guatemala; and for other
related activities. Honduras will receive $495,521 in
individual soldier and communications equipment from the
State contractor. The State equipment includes helmets,
flak jackets, billy clubs, whistles, GPSs, compasses,
handheld radios, base stations, HF radios, etc. This
equipment is scheduled to arrive in Honduras in May, with a
donation ceremony to be held at the end of May. There is
also an additional approximate USD 845,000 allotted for
larger items at a later date.

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Pending issues for Bilateral Consideration
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27. (SBU) Mutual Legal Assistance Treaty (MLAT): The Embassy
has encouraged the GOH to become a party to the OAS MLAT, as
well as the Optional Protocol. The Convention and Protocol
provide a legal mechanism for providing mutual legal
assistance between states parties in investigations,
prosecutions, and proceedings that pertain to crimes over
which the requesting state has jurisdiction. The Convention
provides, among other things, an obligation on the states
parties to establish Central Authorities to facilitate the
speedy execution of requests, and establishes procedures for
the handling of witnesses and evidence. The Protocol is an
important adjunct to the Convention that enables the Parties
to obtain cooperation for tax crimes, not just tax crimes
involving proceeds from other crimes covered under the
Convention. Post has proposed to several GOH
representatives, including high levels of the Foreign
Ministry, Honduran Ambassador to the U.S. Flores Bermudez,
and the Attorney General, that Honduras become a Party to
the Convention. All have expressed interest. Post
recommends the USG officials raise this matter with
President Zelaya.


28. (U) House Democracy Assistance Commission (HDAC): Post
has strongly recommended that Honduras be selected for
receiving the House Democracy Assistance Commission's (HDAC)
assistance in 2007. USAID proposed Honduras as a Western
Hemisphere candidate country since the newly elected
Honduran Congress would benefit substantially from
legislative assistance, particularly with the provision of
technical expertise improving its efficiency and
transparency. Honduras has a new Congress that was elected
in November 2005. Given more than an 80 percent turnover in
the Congress as a result of landmark electoral reforms, the
timing would be optimum for strengthening this critical
branch of government. This new, more independent Congress
presents an opportunity for transforming it into a more
responsive body to the people. The assistance also would
support the implementation of CAFTA by strengthening the
capacity of the new Congress to support the new economic
framework and opportunities.


29. (SBU) Soto Cano Air Force Base: This joint Honduran Air
Force/U.S. Air Force installation about an hour and 15
minutes from Tegucigalpa is the home to about 10 U.S.
helicopters and over 500 U.S. servicemen that serve U.S.
policy goals in the region and help Honduras during times of
natural disasters and various medical/humanitarian programs.
The U.S. may want to expand the base in the future,
including transferring Coronet Oak, a hub for four C-130 air

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cargo transport planes, to Soto Cano from Puerto Rico. The
Maduro Administration agreed to Coronet Oak. Zelaya
supports the base, has not yet been asked to formally commit
to Coronet Oak, and wants to establish joint military and
commercial use for export/import of goods under CAFTA.
SOUTHCOM and the Embassy stand ready to discuss this
proposal with the GOH, but there are significant costs and
security considerations that must be met before joint use
can happen.

Ford