AMBASSADOR MEETING WITH TRADE MINISTER CERRATO

C O N F I D E N T I A L TEGUCIGALPA 001071 SIPDIS PLEASE PASS TO USTR 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. -------------- Benefits of Trade Must be Broadly Shared -------------- ¶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. -------------- Effects of the Financial Crisis -------------- ¶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. -------------- Possibilities for Renewable Energy -------------- ¶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.) -------------- Hard Line with Oil Companies -------------- ¶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.) -------------- Cerna Expropriation Claim -------------- ¶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. -------------- Pathways Meeting -------------- ¶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