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 02 TEGUCIGALPA 001991 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, DRL/IL, AND EB/ESC 
STATE FOR DS/IP/WHA - MFLYNN, DS/ITA - KHALL, DS/DSS/OSAC 
COMMERCE FOR MSEIGELMAN 
TREASURY FOR DDOUGLAS 
ENERGY FOR IA 
DOL FOR ILAB 
 
E.O. 12958: DECL: 09/25/2015 
TAGS: EPET ECON ELAB PGOV KSAC HO
SUBJECT: HONDURAS: SOME GOH AND IMF WORRIES OVER COST OF 
FUEL SUBSIDIES; REJECTION OF ENERGY-SAVING RESTRICTIONS 
 
REF: A. A) TEGUCIGALPA 1851 
 
     ¶B. B) TEGUCIGALPA 1873 
     ¶C. C) TEGUCIGALPA 1910 
     ¶D. D) TEGUCIGALPA 1970 
     ¶E. E) TEGUCIGALPA 1971 
 
Classified By: ECONCHIEF PDUNN FOR REASONS 1.5(B AND D) 
 
 ¶1. (C) Summary:  In an emergency session on September 22, 
the GOH Council of Ministers declared an energy state of 
emergency in Honduras and imposed a number of energy 
conservation measures, but did not directly address fuel 
prices, which apparently remain frozen without a formal 
Congressional decree.  Taxi drivers and gas station owners 
have rejected the new plan, and intend to defy it or go on 
strike.  Price rises in gasoline, widely expected for 
September 27, are unlikely to happen, according to senior GOH 
officials.  Oil companies remain deeply concerned that they 
will have to absorb the losses from selling gasoline at 
below-market prices, while the GOH is concerned that, if it 
were to cover those costs, it would break faith with the IMF. 
 The Fund, meanwhile, is intent on saving the GOH from 
itself, but does not yet see a reason to panic over fuel 
prices, and will be sending an advisory team later this week. 
 End Summary. 
 
¶2. (U) Taxi and Bus Drivers:  Transport workers have rejected 
the September 22 decision of the GOH Council of Ministers to 
redesign bus routes and limit taxi access to downtown areas 
in the name of reducing fuel consumption.  Taxi drivers have 
loudly complained that they offer a door-to-door service, and 
restricting their access to downtown would significantly hurt 
their ability to earn a living.  Capitalizing on their 
newfound status as popular heroes (for blockading the city 
until gasoline prices were reduced - refs A and B), taxi 
drivers have also refused to accept announced plans for 
subsidies only to registered taxi drivers (refs D and E). 
Representatives of the taxi drivers have announced that if 
gasoline prices are increased on September 27 they will again 
strike and again block city traffic throughout Tegucigalpa. 
(Security implications of this threat will be reported 
septel). 
 
¶3. (U) Gasoline Station Operators:  The Honduran Association 
of Gas Station Owners (ADHIPPE) has rejected the Council of 
Ministers prohibition on gasoline sales on Sundays and has 
vowed to defy the ban.  According to group spokespersons, the 
ban is illogical and will fail in its stated goal of reducing 
consumption, since drivers will merely fill up on Saturday or 
Monday instead.  Further, the group claims it is dangerous, 
since it will promote the operation of "backyard pumps" 
(bombas de patio) selling gasoline on Sundays. 
 
¶4. (C) Minister of the Presidency Ramon Medina Luna told 
Charge on September 26 that the Commission of Notables (a 
group established by the GOH to examine reforming the 
GOH-managed fuel pricing regime) would likely issue a 
statement but not recommend an increase in fuel prices on 
September 27.  While this might avert another taxi strike, it 
leaves U.S. oil companies in a dangerously undefined 
situation, as no source of funds has been formally identified 
to reimburse them for selling imported fuel at below-market 
rates.  (Despite the lack of a decree to this effect, 
gasoline prices remain frozen at August 26 levels, with 
importers currently absorbing the loss.)  Minister Medina 
Luna reported that the price freeze has cost the GOH 73 
million lempiras (approximately USD 3.9 million) in the first 
20 days, and he fears if this spending continues the GOH 
could break its spending limits agreed to with the 
International Monetary Fund (IMF). 
 
¶5. (C) EconChief spoke September 26 with IMF Resident 
Representative Hunter Monroe, who said the GOH spent 35 
million lempiras in the first 10-day period of the price 
freeze (the period that was to be reimbursed by the GOH, 
according to the Congressional decree.)  Since 0.1 percent of 
GDP is approximately 172 million lempiras, it would take six 
10-day periods "for it to even cause a blip on the radar 
screen."  The Fund is not overly worried at present with GOH 
spending in this regard, though they are somewhat concerned 
by the open-ended nature of the current price-freeze and its 
potential longer-term fiscal implications.  At GOH request, 
an IMF team will be visiting Honduras September 28-30 to 
examine the options on the table for closing the IMF review 
"in light of any recommendations from the Commission of 
Notables."  One way the GOH could limit their upside risk, 
Monroe noted, is to invest in futures or options on the 
petroleum markets.  "They are just not that expensive," he 
said.  The key thing to remember, he told Post, is that the 
Fund is "looking for a way to keep this (PRGF) program 
going."  The GOH has a history of losing fiscal discipline in 
the run-up to national elections.  This year, the GOH has 
managed to maintain that discipline thus far, and elections 
are only two months away.  If the GOH can keep their program 
on the straight and narrow, they will pass on to the new 
government a solid fiscal situation that no previous 
administration has had. 
 
¶6. (C) EconChief also contacted Vice Minster of Commerce Iris 
de Coello, who is responsible for the Commerce Ministry while 
Minister Irving Guerrero is out of the country.  (The 
Petroleum Technical Unit -- UTP, the GOH office responsible 
for setting fuel prices -- is housed within the Ministry of 
Commerce.)  Coello said she has no information on when or if 
gasoline prices will change.  The Commission of Notables will 
make a recommendation, she said, and only then will her 
Ministry take any action to adjust prices.  (Note:  The 
former head of the UTP, Perfecto Aguilera, is also out of the 
country, reportedly on leave but in actuality having been 
dismissed from the UTP after a falling out with the Minister. 
 Aguilera was a well-respected technician responsible for 
implementing the gasoline-pricing formula, but, in the view 
of the Minister, with too narrow a focus.  According to 
Minister Guerrero, with whom EconChief spoke on September 23, 
Aguilera will resume his price-setting duties, but from an 
office within the Ministry of the Presidency.  The UTP will 
be expanded, Guerrero said, to enable it to deal with broader 
energy policy issues including biodiesel, renewable energy, 
and ethanol. End Note.) 
 
Williard 
Williard