TFHO1: COMPANIES COMPLAIN CURFEWS CRUSH COMMERCE

UNCLAS TEGUCIGALPA 000996

SENSITIVE
SIPDIS

STATE FOR WHA/CEN

E.O. 12958: N/A
TAGS: ECON BBSR EIND EINV ELTN ETRD EWWT PGOV PINS
KDEM, HO
SUBJECT: TFHO1: COMPANIES COMPLAIN CURFEWS CRUSH COMMERCE

REF: A. TEGUCIGALPA 924

B. TEGUCIGALPA 745

C. TEGUCIGALPA 649

D. TEGUCIGALPA 586


1. (SBU) SUMMARY: The business community has urged de facto
regime leader Roberto Micheletti to consider the negative
impacts of curfews to business and provide exemptions for
maquillas and commerce, according to Honduran Private
Enterprise Council (COHEP) representatives. A recent decree
limiting civil liberties specifically exempts cargo
transportation from curfew restrictions. Curfews are not
applicable in the Department of Cortes, where the majority of
maquillas are located, or the Port of Cortes, Honduras' main
port. Businesses report that during curfews cargo containers
and ships are moving through the port and that customs
officials remain on the job. COHEP said that uncertainty
about the political future hinders investment and it feared
international buyers will refrain from placing orders as
political unrest might prevent delivery. COHEP said that
these economic losses were not limited to Honduras but will
spillover to neighboring countries, from whom they purchase
inputs. COHEP believed that the best way for Honduras to
protect its economic interests was for both sides to return
to discussions with Arias. Our discussion indicated that
some business leaders are now beginning to realize the
long-term economic consequences of failing to restore
constitutional legitimacy and may be ready to support a
negotiated solution to the crisis. END SUMMARY.


2. (SBU) On September 28, EconCouns and EconOff met with
representatives of the Honduran Private Enterprise Council
(COHEP). Present were Amilcar Bulnes (President),Armando
Urtecho Lopez (Director of Legal Affairs),and Norman Garcia
(Advisor to the President).

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COHEP speaks with Micheletti...
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3. (U) COHEP leaders reported that de facto regime head
Micheletti hosted an event for the Honduran private sector
during the week of September 21. It was meant to be an
informal social event, but the leaders said that the business
community availed themselves of the opportunity to urge the
de facto regime to consider the negative impacts to business
of some recently enacted measures.


4. (U) Those present were particularly concerned with the
recent imposition of a two-day long nationwide daytime curfew
as it prevented people from going to work and created a state
of panic. Additionally they complained that the evening
curfews were especially harmful to the maquilla industry
since many factories have graveyard shifts that have been
prevented from working. They requested that the de facto
regime issue passes for busses to transport maquilla workers
between their homes during curfew.


5. (U) COHEP representatives said that they felt Micheletti
had listened to the business community's concerns, but that
he had no immediate reaction and did not specially address
their requests.

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...and he may have heard.
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6. (U) COHEP representatives said that the latest measures
taken by the de facto regime addressed some of the business
community's requests. The decree limiting personal liberties
passed by the de facto regime on September 22 and published
in the official registry on September 26 exempts the
transport of goods to market and the port from the freedom of
movement restrictions. Recent curfew notices were not
applicable in the Department of Cortes, where the majority of
maquillas are located, or to the Port of Cortes. Businesses
report that cargo containers and ships have been able to move
through the port in spite of the curfews and that customs
officials have remained on the job to clear containers.

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COHEP links bad business with political crisis
-------------- --


7. (SBU) The representatives that we spoke with agreed that
the current political crisis acerbated the effects of the
global economic crisis. They said that trade and businesses
were paralyzed the week after June 28 and were finally
starting to recover only to be dealt another blow with the
unexpected return of Zelaya on September 21. Garcia said
that they felt they were "back to square one."


8. (U) The representatives lamented that it is expensive for
a country to create a positive international investment
climate, but its reputation can lost quickly. They said that
although many have confidence in the policies of the de facto
regime, there remained uncertainty about the political future
of Honduras, which was hindering both international and
domestic investment. Previously, plants were relocating to
Honduras from as far away as Asia, but the political
instability had dammed the flow of new jobs and investment.
They also fear that Honduras will lose its reputation as a
country that can deliver goods on time, expressing concern
that international buyers would question whether to place an
order with a Honduran factory since political unrest might
prevent delivery.


9. (U) COHEP representatives said that these economic losses
were not limited to Honduras but would spillover to
neighboring countries since Honduras imports inputs and was
the second largest market for Guatemalan and El Salvadoran
goods after the U.S. In 2008, Honduras exported USD 800
million to neighboring countries and imported USD 1.7 billion
from them.


10. (U) Business losses are not limited to the manufacturing
industry. As previously reported, tourism has been hit hard
(ref B). COHEP representatives pointed out that tourists
would not want to spend their vacation in a locale where
there was political upheaval, demonstrations, and curfews.
Other businesses also suffered when they had to close their
doors because demonstrators are in the vicinity. Meanwhile,
workers whose income was based on commission do not get paid
for days that they were unable to work due to political
unrest or curfews.

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COHEP supports Arias process
--------------


11. (SBU) COHEP leaders said that the best way for Honduras
to protect its economic interests was for both sides to
return to discussions with Arias. They said that if the
current version of the San Jose Accord was not acceptable to
both sides, the parties should remember that it is not
written in stone and could offer a counterproposal to keep
the dialogue flowing. COHEP leaders said that they believed
a resolution would ensure that the elections would be
transparent and fair. However, they were concerned about
measures to limit Zelaya if he were returned to office, with
one of them stating, "the cage is not the problem, the monkey
is the problem."

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Comment
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12. (SBU) COHEP was initially supportive of the coup and
did not want to see Zelaya return. They published a
full-page newspaper ad after June 28 giving their full
support to the de facto regime (ref D). This was a
reflection of the business community,s belief that Zelaya
was the number one threat to the country's business and
investment climate. Our discussion with COHEP indicates that
some are now beginning to realize the long-term economic
consequences of failing to restore constitutional legitimacy
and have been brought around to supporting a negotiated
solution to the crisis.
LLORENS