TFHO1: IMF REPRESENTATIVE OUTLINES PLAN FOR

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 000908

SIPDIS

STATE FOR EXIM/MICHELE WILKINS

E.O. 12958: DECL: 09/09/2019
TAGS: EFIN ECON PGOV PREL PHUM KDEM IMF HO
SUBJECT: TFHO1: IMF REPRESENTATIVE OUTLINES PLAN FOR
HONDURAS RECOGNITION VOTE

REF: TEGUCIGALPA 883

Classified By: Ambassador Hugo Llorens, E.O. 12958, 1.4(d).

THIS CABLE CONTAINS AN ACTION REQUEST. SEE PARAS 2 AND 8.


1. (C) Summary: In a September 9 meeting with EconCouns,
International Monetary Fund (IMF) representative Mario Garza
said that the IMF is conducting a vote of its members on what
government to recognize in Honduras. The vote count will
probably take place on September 18. If there is no quorum,
a decision will be delayed. Two immediate issues are at
stake: access to Honduras's allotment of Special Drawing
Rights (SDRs) and representation at the IMF/World Bank fall
meetings. If the Zelaya government prevails in the
recognition vote, it may still be blocked from accessing the
funds (but not from attending the meetings) by a requirement
that the government be in control of its country's territory.
Garza said that he believes there is unlikely to be a quorum
by September 18 "unless one member pushes the issue."


2. (C) Summary continued: If a quorum can be achieved, the
Zelaya government is likely to win, given existing support by
the U.S., the Organization of American States (OAS),and
others. A prompt endorsement of the Zelaya government would
have an importance beyond the specific IMF issues at stake,
since it would represent the first time that the
international community as a whole weighed in on the
recognition question. Embassy recommends that the Department
instruct embassies in IMF member countries to demarche host
governments pressing them to vote to recognize the Zelaya
government in time for the voting deadline. End summary.


3. (SBU) During a September 9 introductory call by EconCouns,
IMF representative Mario Garza explained the IMF's recently
instituted process for deciding what government to recognize
in Honduras. The issue gained increased urgency when the de
facto Honduran regime portrayed the country's new allocation
of Special Drawing Rights, part of a worldwide effort to
inject liquidity into the world economy, as a sign of
recognition by the organization (reftel). (Note: The SDR,
the IMF's accounting unit, is convertible into dollars or
other currencies. End note.) IMF headquarters in Washington
later clarified that Honduras would be blocked from accessing
the funds pending a decision on recognition.


4. (C) Garza said that the IMF has asked member countries to
vote on which government to recognize in Honduras (i.e. the
Zelaya government or the de facto regime). At the same time,
members are to vote on recognition for three other countries
with leadership disputes, Madagascar, Mauritania, and Fiji.
Voting is through the normal IMF weighted voting mechanism.
Garza said that it currently appears that the vote count will
take place on September 18, though this could change. In the
meantime, the IMF has implemented a no-contact policy with
both the de facto regime and officials of the Zelaya
government.


5. (C) In the unlikely event that the de facto regime
prevails in the recognition vote, the regime will gain access
to the SDRs. If the Zelaya government wins, it will face
another hurdle: an IMF requirement that, in order to access
funds, a government must be in control of its country's
territory and administration. The Zelaya government is
clearly unable to meet this requirement under current
circumstances. However, there is a precedent in the Zelaya
government's favor; the IMF entered into a financial
relationship with Haiti's deposed Aristide government in

1992. Garza said that, if the Zelaya government wins the
membership vote, the IMF will have to undertake a legal
review to determine whether it can access the funds.


6. (C) Also in question is the issue of who is entitled to
send representatives to the IMF/World Bank fall meetings,
scheduled for October 6-7. In this case, Garza said, control
of territory is not an issue; the Zelaya government will be
entitled to send representatives if it prevails in the
membership vote.

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7. (C) If not enough members vote by September 18 to achieve
a quorum, the announcement of the result will be postponed.
Garza said that, in his opinion, there is unlikely to be a
quorum by that time "unless one member pushes the issue." He
said that any member state has the right to call a meeting to
force a vote, but members retain the right not to vote at the
meeting, so there could still be a failure to achieve a
quorum.


8. (C) Garza said that the Zelaya government's finance
minister, Rebeca Santos, and the government's central bank
president, Edwin Araque, were briefed about the upcoming
recognition vote during a recent meeting at the IMF. They
initially met with the IMF executive director from Spain, who
serves as regional representative for Honduras. At the
executive director's suggestion, IMF staff members, including
members of the legal department, joined the meeting to
explain the recognition process. Garza said that he himself,
acting on instruction from IMF headquarters, had informed
representatives of the de facto regime of the upcoming vote
by telephone on September 6.


9. (C) Comment and action request: If a quorum in the
membership vote can be achieved, the Zelaya government is
highly likely to prevail, given existing support by the U.S.,
the OAS, and others. Since this will be the first time that
the international community as a whole weighs in on the issue
of recognition, a quick and decisive endorsement of the
Zelaya government would have symbolic importance beyond the
specific IMF issues at stake. A delay in obtaining a quorum
would, by contrast, be seen as a victory by the de facto
regime, particularly if it prevented Zelaya government
representatives from attending the IMF/World Bank meetings.
Embassy requests that the Department instruct embassies in
IMF member countries to demarche host countries urging them
to vote in favor of recognition of the Zelaya government in
time for the voting deadline.
LLORENS