AMBASSADOR MEETING WITH TRADE MINISTER CERRATO

C O N F I D E N T I A L TEGUCIGALPA 001071

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E.O. 12958: DECL: 11/28/2018
TAGS: ECIN EFIN EINV ENRG ETRD HN
SUBJECT: AMBASSADOR MEETING WITH TRADE MINISTER CERRATO

Classified By: AMBASSADOR HUGO LLORENS, E.O. 12958 REASONS 1.4 (B) AND
(D)


1. (U) Summary: The Ambassador met with Fredis Cerrato,
Minister of Trade and Industry, October 30 to discuss
CAFTA-DR, fuel prices and renewable energy, and the financial
crisis, among other topics. The Ambassador raised the
expropriation claim of U.S. citizen Oscar Cerna. End
summary.

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Benefits of Trade Must be Broadly Shared
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2. (C) Cerrato started by saying that Central American
integration is proceeding well and that it is part of the
effort to make the region more competitive. Advanced
Technology Centers are to be opened in Choluteca, Valle, and
Olancho Departments. Cerrato lamented, as he has in previous
meetings, that average Hondurans do not know about the
successes of CAFTA-DR and that "we don't believe in
ourselves."


3. (C) Cerrato added that the government needed to make sure
benefits of trade liberalization are shared broadly and to
ameliorate inequality. He asserted that his ministry should
be seen as the administrator of all trade capacity building
projects.


4. (U) Cerrato agreed with the Ambassador that corporate
social responsibility, including providing good pay and
health benefits to employees, led to better competitiveness.

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Effects of the Financial Crisis
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5. (C) When Cerrato expressed concern about a possible
contraction of U.S. investment in the apparel processing
(maquila) sector due to the financial crisis, the Ambassador
responded that he also expected the maquila industry to face
some difficult times. However, he thought that the maquila
industry had the management acumen to weather the storm, but
needed to work closely with the government. The Ambassador
added he expected the financial crisis to seriously affect
the real economy due to a reduction in remittances, a decline
in the values of key commodity exports, as well as tighter
credit conditions. The Ambassador advised the Minister that
the best way to minimize the effects of the financial crisis
would be to send a message that Honduras is a good place to
invest and was macroeconomically stable. Staying on track
with its IMF standby agreement would be a good sign, he added.

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Possibilities for Renewable Energy
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6. (C) Cerrato was less open to the Ambassador's urging to
explore the possibility of renewable energy. The country is
"chaotic," Cerrato said, and argued that damage from the
recent floods was partly due to high levels of deforestation.
He noted the recent approval of a project whereby Costa
Rica-based Mesoamerica Energy will install 100 MW of GE wind
turbines in southern Honduras but said such projects were
inevitably very costly and slow to develop. Solar is also
too expensive, he said. He complained as well that the
Brazilians had delivered nothing since President Lula's trip
last year to explore biofuel opportunities. (Note: The
Ambassador delivered a joint demarche with the Brazilian
Ambassador to the Honduran Deputy Foreign Minister on the
Biofuels Initiative on November 13. The GOH responded the
same day, through the Honduran Ambassador in Washington,
confirming its interest in participating in the initiative.
End note.)

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Hard Line with Oil Companies
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7. (C) The Ambassador conveyed his concern for the failure of
the GOH to resolve oil pricing issue with U.S. firms Exxon
and Chevron. He noted tat under the current formula U.S.
firms were being forced to lose money. Cerrato responded
that talks continued but that he was still awaiting to put
their complaints in writing and follow the legal
administrative procedure. As President of Petroleum
Commission he would take any proposal to the board for
approval, but needed this in writing. (Note: We understand
that the firms are reluctant to send an joint industry
proposal, since it would violate anti-monopoly laws. The
firms possibly may send separate proposals to the Commission
for their consideration.)

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Cerna Expropriation Claim
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8. (C) Ambassador suggested to Cerrato that he consider
reviewing the claim of expropriation of U.S. citizen Oscar
Cerna concerning his cement industry investment. The
Ambassador noted that Cerna had strong support for his claim
in the U.S. congress. Cerrato insisted that he had never
received any information from Cerna and that Cerna needed to
present evidence directly to a Honduran court.

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Pathways Meeting
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9. (U) Cerrato said that he planned to attend the meeting in
Panama December 10 to discuss the Pathways toward Prosperity
in the Americas.
LLORENS