HONDURAN BUSINESS COMMUNITY VIEWS ON COUP

UNCLAS TEGUCIGALPA 000586 SENSITIVE E.O. 12958: N/A TAGS: PGOV KDEM ECON EINV EAID ETRD HO SUBJECT: HONDURAN BUSINESS COMMUNITY VIEWS ON COUP REF: A. TEGUCIGALPA 579 ¶B. TEGUCIGALPA 577 AND PREVIOUS ¶C. TEGUCIGALPA 576 ¶D. TEGUCIGALPA 568 ¶E. TEGUCIGALPA 566 ¶F. TEGUCIGALPA 565 ¶1. (SBU) SUMMARY: The vast majority of the Honduran business community both publicly and privately supports the removal of President Manuel "Mel" Zelaya from office June 28. Major business organizations have published full-page ads over the past week supporting the coup and recognizing the legitimacy of the Micheletti regime. In private, some business leaders concede that the way Zelaya was removed was illegal, but they are universally adamant that he should not be brought back. Post has consistently and faithfully relayed the USG position to all these contacts. END SUMMARY. ¶2. (U) Embassy has conducted outreach to the business community, both Honduran and American (ref F),since the June 28 coup to explain the USG position -- condemning the coup and seeking a restoration of the constitutional order as soon as possible. We have also made clear how the cutting off of economic assistance will impact on the economy and the investment climate. We have also solicited their views on the recent events. The views expressed in public and to us by the leading business organizations are summarized below. We in turn have stressed that we do not accept the legitimacy of the June 28 coup or of the regime that was installed as a result. -------------- What They're Saying in Public -------------- ¶3. (U) The overwhelming opinion of the Honduran business community is that the actions taken against Zelaya were legal and justified and the Micheletti regime is legitimate. The major business organizations regret the postion taken by the international community with respect to the events of June 28 and believe the international condemnation was based on a lack of information about and understanding of the events that preceded Zelaya's removal. ¶4. (U) The Honduran Private Enterprise Council (COHEP) published a full-page ad giving its full support to the de facto government and the institutions it says acted in defense of the law. COHEP argues the imposition of international sanctions would worsen the crisis. ¶5. (U) The Honduran Banking Association (AHIBA) supports COHEP's position and hopes that respecting the rule of law will contribute to the restoration of a positive business climate. AHIBA encourages the de facto government to promptly commence managing public finances prudently, transparently, and efficiently. ¶6. (U) The Honduran Association of Private Universities supports the removal of Zelaya, which it says followed constitutional procedures, and believes that the international community prematurely condemned the action. They encourage the Honduran Armed Forces to continue upholding the constitution. ¶7. (U) The Cortes Chamber of Commerce (CCIC) has pledged its full support to the civil and military authorities and invites the Honduran people to join it in standing firm in defense of democracy. It reassured the public that Honduras's public and private institutions, most notably the national financial system, are solidly established and operating normally. ¶8. (U) The Honduran Petroleum Industry Council (COHPETROL) assured the public in a statement of the continued supply of fuel and confirmed that affiliated importers and corresponding service stations were operating without interruption. -------------- What They're Saying in Private -------------- ¶9. (SBU) Econoff spoke with executives of several Honduran business associations July 6-7. The leaders reiterated points made in the press releases but provided a bit more detail about their views of the political crisis. They all seemed to agree that Zelaya needed to be removed from office, that his removal was legal and in accordance with the Honduran constitution, and that the political crisis has not led to any significant disruptions of business. Some of these same representatives, in previous conversations with EconCouns reported in sitreps (ref B),acknowledged the coup may have been illegal and inappropriate. But they were nonetheless pleased with Zelaya's removal and thought restoring him to power would be disastrous. ¶10. (SBU) The Executive Secretary of the CCIC said the general sentiment among members was that Hugo Chavez, not Zelaya, was the enemy. Chavez is considered to be manipulating the situation and the international press. Business and labor are divided over which side they support. But despite this division, businesses are operating as usual. Some radical labor leaders are promoting strikes to show support for Zelaya, but few rank and file members are heeding the call. According to the CCIC representative, the San Pedro Sula business community is more concerned with potential economic sanctions than with the direct effects of the politcal crisis. Specifically, they worry that the USG, IMF, and IDB will cut off funding for programs in Honduras. ¶11. (SBU) A representative of the National Association of Industries (ANDI) said what occurred was not a coup but rather the culmination of a legal process to remove Zelaya from office for committing illegal acts. He said taking Zelaya out of the country rather than placing him in jail was best for the security of Hondurans and prevented Hugo Chavez from ruling Honduras by proxy. He said the current situation might have been averted if the international press had reported more about the state of affairs in Honduras for the three months leading up to the coup. He thought the social polarization caused by Zelaya contributed to the crisis. The ANDI representative said Zelaya alienated the business community and the population at large by neglecting to address the impact of the global financial crisis. Specifically, Zelaya did not enact an anti-crisis plan and failed to present a budget to congress. ANDI estimates Zelaya's policies caused 180,000 job losses over the past six months. ¶12. (SBU) The president of the National Federation of Farmers and Ranchers (FENAGH) said politics and economics should be kept separate. He said Zelaya's actions were detrimental to the government as an institution and were in violation of the law, and therefore he needed to be removed. However, he thought it was a mistake to send Zelaya out of the country instead of putting him on trial. FENAGH wants peace and stability and does not expect the current political situation to have any impact on agriculture. -------------- Economic Impact -------------- ¶13. (SBU) The CCIC reported that investors in export-processing ("maquila") operations, which are the core of the regional economy, are more confident now that Zelaya is not in power. They previously feared his tendency to issue erratic, populist decrees that damaged the industry, such as the sharp increase in wages he mandated last December. Some investors are actually increasing investment and implementing projects that had been on the backburner while Zelaya was in control. ¶14. (SBU) FENAGH said the agricultural sector continued to move forward with no changes in investment or export levels. The representative said the global economic crisis had had more of an impact than the current political crisis. ¶15. (SBU) The ANDI official did not think the current situation would have long-lasting economic consequences as long as the borders remain open for international trade. He said the recent temporary border closure by SICA countries served only to foster hate. However, he said the nightly curfews imposed by the de facto regime(lifted July 12) were hurting restaurants and nightclubs. -------------- Views about November Elections -------------- ¶16. (SBU) CCIC supports advancing the date of the November general elections but is concerned about the feasibility of doing that and worries that losers might contest the results on the grounds of lack of time to prepare and campaign. ¶17. (SBU) ANDI hopes the upcoming elections will spur action to address the country's social and economic problems. ANDI encourages people to respect the electoral process and to vote on the issues. -------------- Comment -------------- ¶18. (SBU) The business associations are firmly within the White Camp (ref D) -- those who rationalize the June 28 coup and oppose Zelaya's return. They made that case strongly to the U.S. Congress in Washington last week. Privately, many acknowledge the coup may have been rash and illegal. But they are pleased with the results and do not want to see Zelaya return, at least not in a capacity to pursue the polices and political brinksmanship he displayed over the past six months. However, our sense is that the postition of the business community is essentially a pragmatic one. They see Zelaya's removal as having removed what they saw as the number one threat to the country's business climate. They are less concerned with the legal sophistry being deployed by other coup-backers from the political and legal realms. Once they realize what the long-term economic consequences could be of failing to restore constitutional legitimacy (several contacts were surprised to learn from us that expulsion from the OAS meant ineligibility for IDB loans),there is a good chance that at least some of them can be brought around to supporting a negotiated solution to the crisis that restores Zelaya in some form. End Comment. LLORENS