This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 07 TEGUCIGALPA 001868 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/PPC, AND WHA/EPSC 
STATE FOR PM, INL, EB, AND CA 
 
E.O. 12958: DECL: 08/07/2013 
TAGS: OVIP MARR MASS MOPS PREL PGOV SNAR ECON HO
SUBJECT: SCENESETTER FOR CJCS GENERAL MYERS' VISIT TO 
HONDURAS AUGUST 13 
 
Classified By: Charge d'Affaires Roger D. Pierce; 
Reasons 1.5 (B) and (D). 
 
¶1. (C) Summary.  Honduran President Ricardo Maduro, nearing 
the half-way point of his constitutionally mandated single 
four-year term, faces numerous challenges in one of the 
poorest and most corrupt countries in the Western Hemisphere. 
 His Administration has been stalled on its domestic agenda 
since June of last year and has mustered little progress as 
it tries to reconcile its ambitious goals to its 
straitjacketed financial situation.  Bilateral relations 
between the U.S. and Honduras are excellent; Honduras was the 
first country in the Western Hemisphere to sign and ratify an 
ICC Article 98 Agreement with the United States.  Honduras' 
support for the international counterterrorism effort is 
steadfast and the Government of Honduras (GOH) is sending 
troops to Iraq in support of Operation Iraqi Freedom.  The 
United States and Honduras have maintained a long-standing 
close relationship framed by such events as the establishment 
of the banana plantations in the late 1800s, the Contra wars 
of the 1980s, and reconstruction efforts in the wake of the 
October 1998 fury of Hurricane Mitch.  End Summary. 
 
------------------------------------ 
Key Issues in Bilateral Relationship 
------------------------------------ 
 
¶2. (C) The central themes in our bilateral diplomatic efforts 
in Honduras are combating international crime by 
strengthening governance and attacking corruption, assisting 
American citizens, fostering economic development, promoting 
regional stability, promoting trade and investment, and 
combating terrorism.  However, the underlying difficulty to 
realizing USG objectives is improving the administration of 
justice and rule of law.  President Ricardo Maduro's 
government is rhetorically committed on all of these issues, 
but has made very little substantive headway in addressing 
the myriad problems Honduras faces.  While Maduro has also 
spoken out strongly on tackling corruption, he faces 
formidable challenges from entrenched economic and political 
interests in moving his agenda forward. 
 
------------------------------- 
Status of the Maduro Government 
------------------------------- 
 
¶3. (SBU) President Maduro is facing increasing criticism from 
the political opposition over his government's policies and 
continued dissatisfaction from his own party's Members of 
Congress because of his Administration's technocratic style. 
The Honduran Congress is a focal point of political 
opposition to his policies.  It is a corrupt institution 
riddled with avaricious politicians, and Maduro's National 
Party does not control a majority of the unicameral body. 
Maduro recently lost his coalition partner, the Christian 
Democrats, who had given Maduro a majority in Congress.  The 
ongoing problems within his own party are serious and 
threaten his broader political agenda, which will require 
legislation to advance.  Continuing political negotiations 
will be needed to manage this situation.  Maduro's personal 
life also intruded into the political sphere.  His October 
2002 wedding to a Spaniard was criticized by many Hondurans 
who viewed the President as distracted by his personal life. 
A recent public squabble has not helped the situation. 
 
¶4. (SBU) The President's standing has remained stalled at a 
low point since June 2002.  Faced with slow progress in his 
efforts to promote regional economic integration, Maduro's 
team is pinning its hopes that a U.S.-Central American Free 
Trade Agreement (CAFTA) can serve as a catalyst to regional 
economic cooperation.  Maduro is also beginning to hear wider 
disillusionment among the Honduran public as violent crime 
levels are increasing once again despite his initial "zero 
tolerance" law and order campaign.  Notwithstanding his 
crackdown on street crime, criminal investigations are 
usually inadequate and case closure rates, in particular for 
homicides, remain very low. 
 
---------------------------- 
Counterterrorism Cooperation 
---------------------------- 
¶5. (SBU) Maduro is a good and reliable friend of the U.S. on 
counterterrorism.  His government hosted a major U.S. 
military counterterrorism exercise in March 2002 and has 
quickly responded with freeze orders to all U.S. requests 
regarding suspect terrorist bank accounts.  No terrorist 
assets have been found in Honduran financial institutions, to 
date.  The GOH still needs to take the following concrete 
steps: designate a national coordinator for counterterrorism, 
file its national report in accordance with United Nations 
Security Council (UNSC) Resolution 1373, and most of all, 
sign and/or ratify the five outstanding international 
conventions/protocols and two OAS conventions (1971 and 2002) 
against terrorism.  It is also of vital importance for 
Honduras to improve security at its maritime ports, 
particularly Puerto Cortes. 
 
---- 
Iraq 
---- 
 
¶6. (C) The GOH is in general supportive of key USG foreign 
policy goals and is a member of the Coalition of the Willing. 
 In support of Operation Iraqi Freedom, the GOH will deploy 
some 370 troops to the vicinity of An Najaf as part of the 
Spanish Brigade operating under the Polish Division.  The 
troops are currently scheduled to depart Honduras for Spain 
on August 10-13.  After approximately a week in Spain, they 
will deploy in conjunction with the other Central American 
units from El Salvador, Nicaragua, and the Dominican Republic 
through Kuwait to Iraq.  Status of Forces Agreement (SOFA) 
negotiations are still ongoing between the GOH and the 
Government of Kuwait (GOK).  In the interim, The GOK has 
given the GOH authority to transit Kuwait under the blanket 
USG SOFA, however this is not an ideal solution. 
 
----------------------------------- 
Bilateral Political/Military Issues 
----------------------------------- 
 
¶7. (C) In January of 1999, the constitution was amended to 
abolish the position of military commander in chief of the 
Honduran Armed Forces (HOAF), thus codifying civilian 
authority over the military.  Honduras now has a civilian 
Minister of Defense (MOD) and a Chief of the Joint Staff who 
heads the HOAF.  Civilian control is well accepted by the 
HOAF, and the transition to civilian control has resulted in 
greater transparency and fiscal accountability.  The current 
MOD, Fred Breve, enjoys a good relationship with the HOAF 
military leadership, but the Office of the Minister of 
Defense still lacks a staff that could provide institutional 
memory and continuity between the change in political 
administrations. 
 
¶8. (C) Honduras was the first country in all the Western 
Hemisphere to sign and ratify an Article 98 Agreement with 
the USG.  President Maduro, despite domestic political and 
some regional opposition, has also consistently supported 
overall USG foreign policy objectives, particularly U.S. 
efforts to create a stable and peaceful Iraq.  President 
Maduro and his military advisors are very aware that 
Nicaragua and El Salvador have received FMF funds and 
question why Honduras, even though it has been a staunch 
political and military supporter in the region, has not 
received any funds for many years. 
 
¶9. (SBU) In January of 02, Honduras formally requested 6 
UH-1H helicopters through the EDA program.  However, due to 
changes in US law, the cost of 6 EDA helos rose from about 
USD 700,000 to USD 4.2 million - an amount the GOH was unable 
to afford.  The original LOA expired some three months ago. 
This week, however, MOD Breve renewed his request for UH-1H 
helicopters, and also asked if there was way to get them 
either free (ie under section 516 as grant aid at no cost to 
the GOH), or at an extended payment plan, i.e. 15 years.  The 
AMB and country team strongly support any assistance in this 
area as a principal use for these helos is to support 
counternarcotics operations.  The current Honduran fleet of 
UH-1H helicopters is in poor condition with a limited life 
expectancy. 
 
------------------------------------------- 
Soto Cano Air Base - Joint Task Force Bravo 
------------------------------------------- 
 
¶10. (SBU) Five hundred fifty-eight U.S. service men and women 
and eight civilian DOD employees are stationed at Honduras' 
Soto Cano Air Base under the auspices of SOUTHCOM as Joint 
Task Force Bravo.  In 1954, the USG and GOH signed a 
Bilateral Military Assistance Agreement that set forth their 
intention to work closely together to foster peace and 
security in the Western Hemisphere.  The ICC Article 98 
Agreement with Honduras is therefore a particularly important 
accomplishment and will enable our military forces to 
continue to work together in such areas as disaster relief, 
joint training exercises, and counternarcotics missions. 
 
------------------- 
Cerro La Mole Radar 
------------------- 
 
¶11. (C) In 1993, the U.S. entered into an agreement with the 
GOH regarding the maintenance of the radar located at Cerro 
La Mole, under which the U.S. military agreed to pay 75 
percent of maintenance costs up to USD 400,000 per year.  The 
U.S. has paid nothing under the agreement, (OSD/CN has stated 
that the USG cannot fund radars operated by foreign 
nationals) and the issue affects relations between the U.S. 
and Honduran militaries.  The Embassy has sought guidance 
from DOD and State on how to resolve U.S. obligations, and 
recommended that the U.S. either replace the radar with a 
solid state version (TPS-78) or with another TPS-70 
transferred from counterdrug programs.  When operational, the 
radar  provides a view of the Honduras-Nicaragua-El Salvador 
border areas and the Gulf of Fonseca on the Pacific Ocean.  A 
functioning radar in this location could greatly enhance 
Honduran capability to intercept and track illegal flights. 
The MOD and CHOD have agreed to share all data from this 
radar with the US and with its neighbors.  Additionally, this 
radar would be the first step in eliminating the 10 mile "no 
fly" (without advance notice) corridor between the Honduran 
and Nicaraguan border - currently a safe haven for illegal 
flights. The AMB and country team strongly support current 
efforts to have the radar in Venezuela (currently being 
dismantled) be made available for EDA for Honduras in 
December of this year. 
 
------------------ 
F-5's for MANPADS? 
------------------ 
 
¶12. (C) Honduras maintains a fleet of aging F-5's as part of 
its overall defense structure, providing Honduras with the 
most lethal air force in the region.  Honduras has been under 
some regional pressure to give up or reduce its fleet of 
F-5's as a consolation to Nicaragua who is also being 
encouraged to give up, or significantly reduce, its stock of 
Man Portable Air Defense Systems (MANPADS).  Honduras has 
resisted these efforts, suggesting that its fleet of F-5's 
should be de-coupled from any discussion of MANPADS, which 
are a potential terrorist weapon. 
 
--------------------------------------------- --- 
Brooke Amendment - GOH Facing Possible Sanctions 
--------------------------------------------- --- 
 
¶13. (C) Honduras faces the possibility of mandated Brooke 
Sanctions in September if three DOD loans totaling USD 1.73 
million are not paid in full.  This debt is over a year old 
and once Brooke Sanctions are invoked, no new or pending USG 
assistance is permitted to proceed, including programs 
administered by USAID, DOD, and State.  These sanctions do 
not affect existing assistance efforts already obligated by 
these agencies.  The GOH is fully aware of the consequences 
of falling under Brooke Sanctions but is not clear at all 
how, or if, the GOH will be able to repay the loans before 
the September 3 deadline.  The situation is further 
complicated because under the Paris Club rules, the GOH is 
not allowed to pay only one official creditor. 
 
----------------------- 
Counternarcotics Issues 
----------------------- 
 
¶14. (C) Honduras' geography places it squarely in the middle 
of a major illegal drug transshipment zone and the Embassy 
estimates that between 80-100 tons of cocaine transit the 
country annually on its way to the U.S. market.  Honduras' 
airspace is regularly violated by drug traffickers, who also 
use go-fast boats to transit their cocaine through the 
region.  Heroin and marijuana are likewise transited through 
Honduras on a lesser scale.  Recently, the Embassy has 
noticed a significant increase in drugs-for-guns bartering 
between Colombian traffickers and local Honduran smugglers. 
 
¶15. (C) Honduras has been under heightened USG pressure to 
increase its effectiveness on counternarcotics issues after 
disappointing results in 2001 and 2002.  This effort appears 
to have born fruit.  The GOH has seized approximately 3,750 
kilos of cocaine this year (more than the previous four years 
combined).  While seizure rates have expanded significantly 
this year, endemic corruption in the Public Ministry and the 
police continue to hamper long-term efforts to increase the 
rule of law and reduce the amount of drugs transiting the 
country. 
 
¶16. (C) Under pressure from the USG to interdict more drugs, 
in April the Honduran Air Force shot-down an intruding 
Colombian aircraft carrying approximately 942 kilos of 
cocaine, killing the plane's two Colombian crewmembers. 
SOUTHCOM temporarily suspended sharing of air-track 
information pending reconfirmation from the GOH that Honduras 
has a "no shoot-down" policy.  The Embassy has since received 
such assurances and the GOH has stated that the incident was 
an aberration.  Honduras is fully aware that under U.S. law, 
the USG is not allowed to share tactical air-track 
information with countries that employ a shoot-down policy. 
SOUTHCOM has since restored sharing air-track information 
with the GOH. 
 
-------------- 
Anticorruption 
-------------- 
 
¶17. (C) U.S. policy against corruption struck a nerve in 
Honduras, especially any mention of our visa revocation 
authorities.  Politicians in Congress and certain business 
elements feel the U.S. is attacking them.  Maduro appears 
committed to addressing corruption, even if it will cost him 
political support within his party.  The Supreme Court 
President is also on board.  However, individual judges 
remain susceptible to offers of bribes and the Attorney 
General is unwilling to prosecute high-profile cases.  Given 
the scope of the problem, any public discussion about the 
country's pervasive corruption is a positive development. 
 
--------------------------------- 
Supreme Court and Judicial Reform 
--------------------------------- 
 
¶18. (SBU) The Supreme Court is developing into an independent 
branch of power, unlike all of its predecessor courts since 
democracy was restored in 1982.  It is pro-reform in 
orientation and fighting for its prerogatives.  A key 
emerging issue is whether it can become a fully independent 
and co-equal branch of political power, consistent with the 
separation of powers provision in the Honduran Constitution. 
The established political order is fighting that prospect 
with all its might.  In fact, the Congress seized the 
political opportunity to introduce legislation that would 
amend the constitution to give itself the power to interpret 
the constitutionality of the laws it passes.  The Supreme 
Court ruled in May that the proposed amendment was 
unconstitutional, which sparked a tense confrontation between 
the Supreme Court and Congress.  Congress, however, refrained 
from any precipitous action and the issue has since receded. 
 
---------------------------- 
Public Security/Human Rights 
---------------------------- 
 
¶19. (SBU) Upon taking office on January 27, 2002, President 
Maduro's first act was to fulfill his main campaign promise 
-- a zero tolerance campaign against the country's 
out-of-control crime situation.  He deployed more than 5,000 
soldiers to the streets to support the police.  The public 
responded enthusiastically.  However, despite the initial 
success of establishing a visible police presence, violent 
crime, particularly homicides, continues at a high rate. 
Public support is fading and the campaign needs some visible 
victories to restore confidence in the government's program. 
The USG is helping the Maduro government establish an 
anti-kidnapping unit, increase intake/training of police 
recruits, create a model tourist police force, boost its 
counternarcotics efforts, and expand the frontier police. 
The country's geographic position makes it an obvious 
strategic transit point for narcotics trafficking, alien 
smuggling operations and other organized crime activities. 
 
¶20. (SBU) Extrajudicial killings, especially of 
children/young adults since 1998, have been a source of 
serious concern and only recently has the GOH begun to take 
steps to investigate the hundreds of unsolved cases.  There 
are serious problems with child labor in several industries, 
particularly melon, coffee, and sugar cane (but not the 
maquila) sectors, and trafficking in persons of 
women/children for prostitution in the U.S. and children for 
commercial sexual exploitation in Central America.  USAID and 
Peace Corps have both been involved in HIV/AIDS prevention. 
 
------------- 
Consular Issues 
--------------- 
 
¶21. (SBU) At least 600,000 Hondurans, both legal and illegal, 
live in the U.S., a fact that places immigration issues high 
on the bilateral agenda.  (The population of Honduras is 6.5 
million.)  There is deep appreciation for the USG's extension 
of Temporary Protected Status (TPS) in the U.S. and interest 
in possible congressional action on the proposed Nicaraguan 
Adjustment and Central American Relief Act (NACARA), which 
would give immigration parity for Hondurans.  With 
approximately 18,000 American citizens residing in Honduras 
and many thousands visiting Honduras annually for tourism and 
business, American Citizen Services are a key part of the 
Embassy's work.  Since 1995, 34 American Citizens have been 
murdered in Honduras.  There has been little progress on 
these cases and to date, only two convictions have been made. 
 However, in the last year the GOH has increased cooperation 
with the Embassy on the remaining cases, including 
establishing two prosecutors to further the GOH's effort. 
Also, little progress has been made on extradition cases 
involving American Citizens residing in Honduras who are 
wanted for felonies in the United States. 
 
-------------- 
Border Relations 
---------------- 
 
¶22. (SBU) Honduras has border disputes with its three Central 
American land neighbors and its seven maritime neighbors. 
Maduro is personally engaged with his Presidential 
counterparts to address these issues.  Its land and maritime 
disputes with El Salvador and Nicaragua are the most heated. 
The Gulf of Fonseca on the Pacific coast is a particularly 
difficult point.  A 1992 International Court of Justice (ICJ) 
ruling laid out shared areas of control in the Gulf of 
Fonseca and established the land border between Honduras and 
El Salvador, although El Salvador has been slow to implement 
the ruling.  In September 2002, El Salvador requested a 
revision of the 1992 ICJ ruling.  Honduras has responded to 
this request and opposes any revisions to the original 
ruling.  In the interim, the Organization of American States 
(as a neutral third party) is providing both nations 
technical assistance to help them implement the ICJ's ruling. 
 
¶23. (SBU) On the Caribbean coast, Honduras and Nicaragua have 
a long-standing maritime border dispute over the 15th 
parallel.  In the past, the dispute has threatened to derail 
trilateral counternarcotics operations.  Honduras provoked 
Nicaraguan retaliation when it signed a maritime treaty with 
Colombia recognizing the 15th parallel as its maritime border 
in 1999.  Nicaragua filed an ICJ case over the maritime 
border and more importantly in 1999 slapped a punitive 35 per 
cent tariff on Honduran goods.  This tariff remained in place 
until April of this year despite a Central American Court of 
Justice ruling that it is illegal.  Only after Honduras 
responded with a retaliatory tariff, threatening Nicaraguan 
exports, did Managua back down.  Tensions still exist between 
the GOH and Nicaragua, hampering regional integration and 
couternarcotics efforts. 
 
----------------- 
Economic Overview 
----------------- 
 
¶24. (SBU) Honduras, with a per-capita income of only USD 950, 
is the third poorest country in the Western Hemisphere ahead 
of only Nicaragua and Haiti.  The Honduran economy is growing 
slowly, with real GDP growth of only two-and-a-half percent 
in 2002 and 2003.  Low world coffee prices also continue to 
inhibit growth in rural areas.  Inflation, at double-digit 
levels in the late 1990s, has decreased and is now relatively 
stable at about 8 percent per year, while the currency is 
depreciating at a rate of about 6 percent per year.  The 
economy continues to be dominated primarily by agriculture, 
particularly the production of coffee, bananas and cultivated 
shrimp.   However, the in-bond apparel assembly industry 
(maquilas) has grown dramatically over the past decade and 
now employs over 100,000 people.  Remittances from Hondurans 
living overseas, primarily in the United States, continue to 
grow rapidly (up 15 percent in the first six months of 2003) 
and have become the most important source of foreign 
exchange.  The U.S. is Honduras' largest trading partner and 
the roughly 150 U.S. companies that do business in Honduras 
constitute the largest block of foreign direct investors. 
While many social indicators are improving, two-thirds of all 
Hondurans live in poverty and average educational levels are 
very low. 
 
--------------------------------------------- ------------ 
Stubborn Fiscal Deficits Endanger IMF Program/Debt Relief 
--------------------------------------------- ------------ 
 
¶25. (C) President Maduro inherited a stagnating economy and 
seriously deteriorated government finances from the previous 
administration.  During its first 18 months in power the 
Maduro administration has passed two fiscal packages (in May 
2002 and April 2003) designed to broaden the tax base, help 
reduce chronic budget deficits, and move the government on 
the road to an IMF agreement.  However the IMF is still 
concerned about persistent fiscal deficits, and an IMF 
agreement is highly unlikely until the Congress passes major 
civil service reform legislation.  The Maduro Administration, 
however, is hesitant to push these needed reforms because 
they will fundamentally alter the salary structure of 
teachers and medical workers who currently benefit from 
special legislation which gives them annual salary increases 
well above inflation.  Teachers particularly are a powerful 
special interest group that if agitated could destabilize the 
government.  Moreover, Maduro's lack of congressional support 
for civil service reform has also hamstrung his efforts. 
 
¶26. (SBU) Multilateral and bilateral donor disbursements (USD 
140 million) will be held up until a new IMF program is in 
place.  There is also pressure on GOH Paris Club debt service 
payments (USD 100 million per year), and the completion point 
for debt reduction under the Highly Indebted Poor Countries 
initiative (HIPC - worth USD 900 million) continues to slip 
back further.  If unaddressed, this fiscal situation could 
also impact Honduras' eligibility for Millennium Challenge 
Account grants. 
 
--------------------------------------------- ---- 
U.S.-Central America Free Trade Agreement (CAFTA) 
--------------------------------------------- ---- 
 
¶27. (SBU) President Maduro, who has identified CAFTA as his 
government's principal trade objective, is a strong supporter 
of regional economic integration.  The historically weak 
Ministry of Trade and Industry got a late start in preparing 
for this year's CAFTA negotiations, but has added staff and 
been an active participant in the negotiations so far. 
Latent protectionism exists in the private sector, especially 
agriculture, but the general attitude toward a free trade 
agreement in Honduras is guardedly positive.  The textile and 
apparel industry in particular believes that some type of 
free trade agreement is the only way that the Honduran 
apparel sector can survive the elimination of quotas in 2005 
and compete with Asian manufacturers.  As such, it is the 
strongest supporter of CAFTA. 
 
------------------------------ 
U.S. Investment Faces Problems 
------------------------------ 
 
¶28. (SBU) Maduro's Administration understands the need to 
increase foreign (and domestic) investment to spur economic 
growth, but so far has placed its emphasis on the more 
immediate problems of political and judicial reforms, the 
fiscal deficit, and needed improvements in security, 
education and health.  The government identified tourism, 
agribusiness, and forestry as important sectors that could 
create much-needed jobs.  While some efforts to promote 
tourism have paid off, little headway has been made in the 
other sectors. 
 
¶29. (SBU) Much needs to be done to declare Honduras "open for 
business."  Maduro needs to find a way to get his cabinet 
(and the prickly legislative and judicial branches) to make 
meaningful changes that will resolve key problems such as: 
poor and expensive infrastructure; a weak legal system; 
threats to personal security; weak education and health 
conditions; land tenure problems; and opposition to large 
foreign investments by well-connected vested interests. 
 
---------------------------------- 
Money Laundering and Bank Failures 
---------------------------------- 
 
¶30. (C) Strengthened money laundering legislation, with an 
anti-terrorist financing clause, was passed in early 2002, 
and the GOH followed up rapidly with creation of a Financial 
Information Unit (FIU) for investigation of financial crimes. 
 Currently, over 150 potential cases of money laundering are 
under investigation.  However, without greater participation 
from the slow and corrupt Public Ministry, responsible for 
prosecuting such cases, results will be minimal. 
 
¶31. (SBU) Weakness of the financial system remains a key 
concern.  The GOH took over the two most troubled banks in 
May 2002 (one has since been closed), arranged for the 
absorption of a third undercapitalized bank, and is actively 
promoting mergers among the remaining 20 private banks. 
 
------------------- 
Embassy Tegucigalpa 
------------------- 
 
¶32. (SBU) Embassy Tegucigalpa is a medium-sized post, 
employing 140 U.S. citizens and 300 Hondurans among 20 USG 
agencies.  Our Peace Corps program, with more than 220 
volunteers, is one of the world's largest, and the USAID 
mission had a FY03 budget of USD 45 million.  The Mission 
maintains a Consular Agent in Honduras' second city and 
industrial center, San Pedro Sula. 
Pierce