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

UNCLAS SECTION 01 OF 09 TEGUCIGALPA 002086 
 
SIPDIS 
 
SENSITIVE 
 
COMMERCE FOR SECRETARY GUTIERREZ 
COMMERCE FOR EXIM, OPIC, SBA, TDA, AND USED FOR IADB 
STATE FOR WHA/CEN, EB, INL, DRL, CA, AND PM 
STATE PASS USAID FOR LAC/CAM 
 
E.O. 12958: N/A 
TAGS: OVIP PREL ETRD ECON PGOV SNAR EAID KJUS HO
SUBJECT: Scenesetter for Secretary Gutierrez Visit to 
Honduras October 18-20 
 
 
¶1. (U) Summary: Post welcomes the visit of Secretary 
Gutierrez to San Pedro Sula, Honduras, on October 18-20. 
Honduran President Ricardo Maduro, with less than four 
months remaining in his constitutionally-mandated single 
four-year term, faces a difficult task leading one of the 
poorest countries in Latin America.  There will be national 
elections for a new President, the unicameral Congress, and 
all 298 municipalities on November 27.  The election season 
is already in full swing with the two major parties' 
candidates, Porfirio "Pepe" Lobo, the President of the 
current Congress, and Manuel "Mel" Zelaya, a former Economic 
Development Minister, having won primary elections in 
February. 
 
¶2. (U) Honduras faces many challenges, including corruption, 
unemployment, high levels of violent crime, a highly skewed 
distribution of income, and a weak judicial system.  Despite 
these challenges, there were several positive economic 
developments in 2004 and 2005, including: continued fiscal 
restraint under an agreement with the IMF; reaching the 
Heavily Indebted Poor Countries (HIPC) completion point in 
late March 2005; the negotiation of up to USD 2.8 billion of 
debt forgiveness from Paris Club and G-8 creditors; the 
signing and ratification of the U.S.-Central American Free 
Trade Agreement (CAFTA) with the United States; and 
Honduras' selection as a grantee for a USD 215 million 
program by the Millennium Challenge Corporation.  Despite 
historically high energy prices in 2005, Honduras also 
maintained single-digit inflation rates and an estimated 4.5 
percent growth in GDP in 2004 and early 2005. 
 
¶3. (SBU) Bilateral relations between the U.S. and Honduras 
are excellent.  Honduras' support for the Global War on 
Terrorism is steadfast, and the Government of Honduras (GOH) 
is among the group of nations that sent troops to Iraq in 
support of Operation Iraqi Freedom, although these troops 
have since returned.  Honduras was the first country in the 
Western Hemisphere to sign and ratify an ICC Article 98 
Agreement with the United States.  Honduras voted for the 
U.S.-drafted UN Commission on Human Rights (UNCHR) 
resolution on Cuba, which passed in April.  End Summary. 
 
----------------- 
Economic Overview 
----------------- 
 
¶4. (U) Honduras, with a per capita income of $950, is the 
third poorest country in the Western Hemisphere, ahead of 
only Nicaragua and Haiti.  The economy grew by 3.2 percent 
in 2003, and by an estimated 4.5 percent in 2004.  However, 
over the past decade, the rate of economic growth has been 
only slightly faster than the rate of population growth, 
which is 2.7 percent per year.  The currency (the Lempira) 
is loosely pegged to the U.S. dollar, devaluing against the 
dollar 4.4 percent in 2004 to a rate of 18.9:1.  Inflation 
remains relatively tame, though above target, at 9.6 
percent.  Government securities yield approximately 11.5 
percent, and interest rates on commercially available credit 
range from 19 to 22 percent for premier clients.  Social 
indicators in Honduras are gradually improving, but nearly 
two-thirds of all Hondurans still live in poverty, and 
average education levels are very low (estimated at five 
years education, based on semi-annual household surveys 
conducted by the National Statistics Institute). 
 
¶5. (U) Historically, the Honduran economy was long dependent 
on exports of coffee and bananas.  In the past fifteen 
years, however, the economy has diversified, with the 
development of non-traditional exports such as shrimp and 
melons, an increase in tourism, and the establishment of a 
strong "maquila" (light assembly) industry (primarily 
textiles and assembly of apparel for re-export).  Investment 
incentives aimed at attracting foreign capital in export 
industries have been introduced.  In recent years, the 
coffee industry has suffered from low world prices, and the 
banana industry was severely damaged by Hurricane Mitch in 
¶1998.  Banana production has yet to reach pre-Mitch levels, 
and coffee and bananas now account for less than 15 percent 
of Honduran export earnings. 
 
¶6. (SBU) Despite the recent economic diversification, there 
continues to be a large subsistence farmer population with 
few economic opportunities (other than illegal immigration 
to the U.S.).  Furthermore, the Honduran government's desire 
to attract new types of foreign investment has been hindered 
by a wide range of investment climate and competitiveness 
problems, including public insecurity, weak judicial 
protections of investor rights, and corruption. 
 
¶7. (U) Family remittances from Hondurans living abroad, 
particularly the U.S., grew by 19 percent to USD 1,135 
million in 2004, and, is estimated to be 1.4 billion in 
2005, will soon pass the maquila sector as the country's 
largest 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. 
 
----------------------- 
The Importance of CAFTA 
----------------------- 
 
¶8. (SBU) On March 3, 2005, the Honduran Congress approved 
the U.S.-Central American Free Trade Agreement (CAFTA) by an 
overwhelming margin.  The agreement was negotiated in 2003 
and 2004 among the United States, Honduras, Guatemala, El 
Salvador, Nicaragua, Costa Rica, and the Dominican Republic, 
and has also been approved by El Salvador, Guatemala, and 
the Dominican Republic.  The agreement was ratified by the 
United States on July 27, 2005, but will not enter into 
force until a U.S. Presidential proclamation is issued 
certifying that all ratifiers are in compliance with the 
relevant terms and conditions. 
 
¶9. (SBU) In Honduras, CAFTA is strongly supported by most of 
the private sector, especially the textile and apparel 
industry.  While the agreement was approved by voice-vote 
only and an exact count is therefore not available, 
witnesses reported that, of the 128-member Congress, there 
were more than a hundred votes in favor, and only four 
against.  CAFTA therefore was supported by not only the 
ruling National Party, but also by the opposition Liberal 
Party and two of the smaller parties in Congress as well. 
Only one small leftist political party voted against the 
agreement.  The agreement has also been opposed by some 
NGOs, labor unions, and campesino groups, who are concerned 
that small-scale Honduran farmers will be unable to compete 
with subsidized U.S. agricultural products. 
 
¶10. (SBU) President Maduro's team hopes that CAFTA, once in 
effect, will lead to faster economic growth and serve as a 
catalyst for regional economic cooperation and integration. 
The agreement is considered to be absolutely vital to the 
survival of the textile and apparel sector in Honduras now 
that worldwide quotas have been eliminated.  It is estimated 
that in 2004 Honduras received at least $200 million in new 
foreign investment, most of it from the United States, as a 
result of the anticipated benefits of CAFTA.  The 
agreement's agricultural chapter will liberalize 
agricultural trade gradually while protecting Honduran 
farmers from sudden disruptions caused by subsidized 
imports.  The agreement also will spur modernization in 
government procurement and services and will help lock in 
the GOH's structural reforms in areas such as 
telecommunications. 
 
------------------------------------- 
Millennium Challenge Account Proposal 
------------------------------------- 
 
¶11. (SBU) In 2004, Honduras was chosen as one of sixteen 
countries eligible (out of 75 considered) to apply for 
assistance under the $2.2 billion Millennium Challenge 
Account (MCA).  Countries were selected based upon past and 
current policy performance in the areas of governing justly, 
investing in their own people, and promoting economic 
freedom.  In June 2005, the Millennium Challenge Corporation 
(MCC) approved $215 million in funding over five years for a 
Honduran-drafted proposal focusing on highway infrastructure 
and integrated rural development.  Honduras was one of the 
first countries in the world to sign an MCC Compact, and 
continues to demonstrate the requisite political will to 
implement the program as soon as possible.  Legislation 
establishing MCA-Honduras (the local body that will oversee 
and implement the project) was approved by Congress and the 
first official meeting of MCA-Honduras was held September 
¶29.  Legal and technical discussions continue, as do 
selection processes for senior MCA-Honduras officials and 
publication of bid documents for oversight and procurement 
services.  First disbursement is expected in early CY 2006. 
 
----------------------------- 
IMF Agreement and Debt Relief 
----------------------------- 
 
¶12. (U) In February 2004, after almost two years of 
negotiations, the Maduro Administration signed a Letter of 
Intent with the International Monetary Fund, which was later 
approved by the IMF's Executive Board, for a new three-year 
arrangement for Honduras under the Poverty Reduction and 
Growth Facility (PRGF).  In April 2004, Honduras reached 
agreement with Paris Club creditors on the immediate 
cancellation of $147 million in debt payments and the 
restructuring of over $200 million more.  Honduras has 
committed to devote resources freed by this treatment to 
priority areas outlined in the country's poverty reduction 
strategy.  The first review of the PRGF program was 
conducted in September 2004, and the IMF found that 
Honduras' performance was strong.  The IMF and the World 
Bank announced in April 2005 that the GOH had reached its 
Heavily Indebted Poor Countries (HIPC) completion point due 
to good PRGF implementation. 
 
¶13. (SBU) Having obtained Completion Point, Honduras 
approached the Paris Club (international group of bilateral 
and multilateral creditors) and the Group of Eight 
industrialized countries, seeking forgiveness or 
restructuring of an estimated USD 1.2 billion in external 
debt.  In July 2005, Honduras announced it had received a 
combined total of $2.8 billion in debt relief from bilateral 
and multi-lateral donors.  The GOH estimates this will 
eliminate debt service payments of $212 million per year. 
The GOH has committed to applying these funds to poverty 
alleviation, as laid out in the existing Poverty Reduction 
Strategy.  The USG and other donors remain vigilant that 
these funds not be stolen or diverted to off-budget items, 
non-poverty-reducing activities, or recurrent budget 
expenses.  In particular, Post is watchful for any signs 
that these funds could be used to fund the 2005 Presidential 
campaigns, or to pay for unsustainable growth in teachers 
and medical salaries (which the GOH has committed to reining 
in by 2007). 
 
------------------------- 
Political/Military Issues 
------------------------- 
 
¶14. (SBU) President Maduro is a solid supporter of the U.S. 
on the Global War on Terrorism.  The GOH has responded 
quickly to all USG requests regarding terrorist threats and 
financing, although to date, no terrorist assets have been 
found in Honduran financial institutions.  Honduras is a 
party to all UN and OAS counter-terrorism conventions and 
protocols and has also been aggressive in upgrading port 
security.  Honduras was also the first country in the 
Western Hemisphere to sign and ratify an International 
Criminal Court (ICC) Article 98 Agreement with the United 
States. 
 
¶15. (U) Honduras has a civilian Minister of Defense and a 
Chief of the Joint Staff who heads the Honduran Armed Forces 
(HOAF).  In January 1999, the constitution was amended to 
abolish the position of military commander-in-chief of HOAF, 
thus codifying civilian authority over the military. 
Civilian control over the HOAF is complete, and 
civil/military relations are good.  This transition has 
resulted in greater transparency and fiscal accountability. 
The HOAF has a new focus on trans-national threats, 
including counter-terrorism, drug trafficking, and combating 
international criminal organizations.  The HOAF is 
interested in establishing an ability to further increase 
its participation in international peacekeeping operations. 
Honduras also stands ready to participate in a regional arms 
"rationalization" process but has announced that it will not 
negotiate on a bilateral basis. 
 
¶16. (SBU) Honduras has taken the lead in a number of 
regional initiatives to enhance cooperative security against 
emerging transnational threats.  Within the past year, 
Honduras has hosted a "round-up" of maritime forces to 
conduct combined training and operations; the Honduran Air 
Force hosted a Central American air security conference that 
resulted in agreements for improving cross-border/regional 
communications and coordination in addressing illegal 
flights; during a recent Central American summit, the 
presidents unanimously agreed to the Honduran call for the 
establishment of a regional rapid reaction force to deal 
with the rise of narco-terrorism in Central America. 
Additionally, Honduras has hosted and participated in two 
combined U.S. Joint Chiefs of Staff (JCS) level special 
operation exercises in 2005: Gallant Journey and Bold 
Warrior. 
 
------------------------ 
Election Season Underway 
------------------------ 
 
¶17. (U) Honduras' open primary election for national and 
local races took place February 20, with general elections 
set for November 27.  Under a new Electoral law reform 
passed early in 2004, Honduran voters select candidates for 
the National Congress based not only on their names but also 
on their photographs, a process without precedent in 
Honduras.  This new method for the direct election of 
congressional members contrasts with the old system whereby 
candidates were elected on party rank-ordered congressional 
lists.  Only the National and Liberal Parties participated 
in the primary election - the other three small parties will 
join the two larger parties in the general election.  USAID 
and other international donors provided approximately $5.5 
million to support the primary elections, and presently, 
about $3.4 million is available from international donors to 
support the general elections in November.  A Supreme 
Electoral Tribunal, managed by political party appointees, 
has national authority to run the elections. 
 
¶18. (SBU) In the race for presidential nomination on the 
Nationalist's side, President of Congress Porfirio "Pepe" 
Lobo defeated Tegucigalpa Mayor Miguel Pastor.  On the 
Liberal side, politician Mel Zelaya won a majority over a 
crowded eight-candidate pack.  Lobo, for all intents and 
purposes, was the current administration's candidate 
(although the GOH did not say so publicly or in private), 
and had the support of the traditional National Party 
machine.  Both Lobo and Zelaya support CAFTA and have made 
it clear that the U.S. is the key partner for Honduras.  The 
race is a toss-up at this point, with polls showing the two 
fighting for the lead. 
 
--------------------------------------------- -- 
Iraq, Haiti, and Other Key Foreign Policy Goals 
--------------------------------------------- -- 
 
¶19. (SBU) The GOH is very supportive of U.S. foreign policy 
goals, including the reconstruction of Iraq.  In support of 
Operation Iraqi Freedom (OIF), the GOH deployed two 370-men 
task forces to the vicinity of An Najaf as part of the 
Spanish Brigade operating under the Polish Division. 
However, following Spain's decision to withdraw its troops 
in April 2004, Honduras did likewise, although Honduras' 
withdrawal was not linked to the Spanish decision. 
Previously, Secretary Powell, Chairman of the JCS GEN Myers, 
and Secretary Rumsfeld all visited Honduras in 2003 to thank 
the GOH for its support of OIF.  Their visits were well 
received and provided important political support for 
Maduro's Iraq policy.  As in most of the region, the general 
public overwhelmingly opposed the Honduran deployment. 
While Honduras has left Iraq, the GOH is considering 
deploying troops to Haiti in support of UN peacekeeping 
operations there.  Honduras is also very supportive at the 
UN, sharing our views on resolutions covering such key 
issues as human rights, human cloning, and the Middle East. 
Honduras introduced a UN Commission on Human Rights (UNCHR) 
resolution on Cuba, which passed in April 2004, and voted 
for the U.S.-drafted UNCHR resolution on Cuba, which passed 
in April 2005. 
 
------------------------------------------- 
Soto Cano Air Base - Joint Task Force Bravo 
------------------------------------------- 
 
¶20. (SBU) Approximately 570 U.S. service men and women, 14 
civilian DOD employees, and 63 Locally Employed Staff 
(Hondurans) are currently stationed at Honduras' Soto Cano 
Air Base under the command of the Combatant Commander, U.S. 
Southern Command (SOUTHCOM), as Joint Task Force Bravo, with 
the responsibility for disaster relief, joint and combined 
training exercises, and counternarcotics missions in the 
assigned geographical area.  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 enables our military forces to 
continue to work with the Honduran military and government. 
 
---------------- 
Counternarcotics 
---------------- 
 
¶21. (U) Honduras' geography places it squarely in the middle 
of a major illegal drug trans-shipment zone, and the trans- 
shipment of cocaine through Honduras by air, land, and 
maritime routes continues.  However, this trade has now 
begun to face significant disruptions.  In 2003, overall 
seizures in Honduras of approximately 6,000 kilos were 
higher than the past five years combined, and in 2004, 
Honduras seized approximately 3,869 kilos of cocaine.  Thus 
far in 2005, the GOH has seized 208 kilos of cocaine and 
$374,440 in drug money.  These seizure figures do not count 
thousands of kilos of cocaine seized by the U.S. Coast Guard 
off Honduran-flagged vessels operating in international 
waters.  Close USG-GOH cooperation, thanks to a Maritime 
Agreement, has allowed these narcotraffickers and the drugs 
to be brought to the U.S. for prosecution. 
 
¶22. (SBU) Corruption within the police, Public Ministry 
(prosecutors), and the judiciary remains a primary 
impediment to successful law enforcement cooperation. 
Previously, the National Council for the Fight Against Drug 
Trafficking (CNCN) was active in leading the country's 
counternarcotics efforts.  Available funds to implement a 
government approved master counternarcotics plan, though, 
remain severely limited. 
 
---------------- 
Border Relations 
---------------- 
 
¶23. (SBU) Honduras has land border disputes with El Salvador 
and Nicaragua and some of its seven maritime neighbors. 
Maduro has been personally engaged with his Presidential 
counterparts in addressing these issues.  The Gulf of 
Fonseca on the Pacific coast has been a particularly 
difficult area.  A 1992 International Court of Justice (ICJ) 
ruling laid out a shared area 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.  In December 2003, the ICJ 
ruled against the Salvadoran appeal, bringing an end to the 
case.  The Organization of American States (as a neutral 
third party) is providing both nations with technical 
assistance to help them implement the non-disputed elements 
of the ICJ's ruling. 
 
¶24. (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.  In 1999, Honduras 
provoked Nicaraguan retaliation when it signed a maritime 
treaty with Colombia recognizing the 15th parallel as its 
maritime border.  Nicaragua subsequently filed an ICJ case 
over the maritime border and, more importantly, in 1999 
slapped a punitive 35 percent tariff on Honduran goods. 
This tariff remained in place until April 2003, despite a 
Central American Court of Justice ruling that it was 
illegal.  Only after Honduras responded with a retaliatory 
tariff, threatening Nicaraguan exports, did Managua rescind 
the tax.  Nicaraguan naval forces recently seized eight 
Honduran fishing boats in disputed waters.  Tensions flared 
recently over possible oil exploration in the disputed area. 
Cuba suspended negotiations with Honduras over a maritime 
boundary agreement near completion due to the GOH's 
introduction of the UNCHR resolution on Cuba in 2004.  The 
agreement has yet to be finalized. 
 
------------- 
Port Security 
------------- 
 
¶25. (U) Puerto Cortes is the 37 largest trading port with 
the U.S. by volume, according to U.S. Customs and Border 
Patrol (CBP).  Approximately 41 percent of all Honduran 
exports are destined for the U.S. (75 percent of which 
transits Puerto Cortes), and significant import-for-re- 
export containerized traffic also occurs, largely to feed 
the booming Honduran maquila sector.  The GOH has taken a 
very pro-active stance in addressing port security issues, 
and met the International Maritime Organization's (IMO) July 
1, 2004, deadline to certify its ports as meeting the new, 
more stringent port security standards under the 
International Ship and Port Facility Security Code (ISPS) 
and Maritime Transportation Security Act of 2002.  Puerto 
Cortes is the largest port on the Caribbean side of the 
Central American isthmus and currently provides container 
service to the U.S. market, not just for Honduran exports, 
but also for goods from Guatemala, El Salvador, and 
Nicaragua. 
 
¶26. (U) The GOH hosted a successful visit (the first in the 
Western Hemisphere) of a U.S. Coast Guard (USCG) port 
security program team in June 2004.  The team came to assess 
Honduras' implementation of the ISPS.  It reviewed security 
practices at five national ports, met with the national 
commission on port security, and discussed Honduran port 
security regulations with the newly created (per the ISPS) 
national port security authority.  The USCG team reported 
that it had identified several very innovative and efficient 
security practices that it would carry back to the port 
facilities in the U.S. as "best security practices". 
 
¶27. (U) Puerto Cortes' volume of trade with the U.S. earned 
it a place on the Container Security Initiative (CSI) short- 
list.  However, it was GOH unilateral efforts to improve the 
port - notably including completing a successful U.S. Coast 
Guard review in June 2004 and the December 2004 GOH decision 
to install gamma-ray scanning devices at the port - that 
convinced CBP to move forward with CSI at Cortes. 
Negotiations are ongoing between the GOH and CBP over the 
functioning, composition, vetting, and duties of the bi- 
national customs team that would enforce CSI.  Construction 
on CBP office space at Cortes has already commenced and 
should finish in Fall 2005.  The office will be staffed by 
three to five officers of the CBP, pending the negotiation 
and signing of a Declaration of Principles.  Throughout this 
process the GOH team has been very responsive and results- 
oriented.  GOH political will to see CSI implemented is 
unquestioned. 
 
-------------------------------- 
Public Security and Human Rights 
-------------------------------- 
 
¶28. (SBU) Upon taking office in January 2002, President 
Maduro's first act was to fulfill his main campaign promise 
-- a zero tolerance campaign against the country's 
intolerably high crime situation.  He deployed more than 
5,000 soldiers to the streets to support the police.  The 
public responded enthusiastically.  However, after initial 
success of establishing a visible police presence, violent 
crime, particularly homicides, continued at a high rate.  On 
December 23, 2004, gunmen killed 28 people and wounded an 
equal number on a bus in Chamelecon (near San Pedro Sula in 
northern Honduras).  Police believe that the Mara 
Salvatrucha (MS-13) gang was responsible for the massacre. 
The U.S. 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, expand the Frontier Police, and 
improve prosecutorial and forensic capacities.  The 
country's geographic position makes it an obvious strategic 
transit point for narcotics trafficking, alien smuggling 
operations, trafficking in persons, and other organized 
crime activities. 
 
¶29. (SBU) Extrajudicial killings, especially of children and 
young adults since 1998, have been a source of serious 
concern, and only since 2002 has the GOH begun to take steps 
to investigate the hundreds of unsolved cases.  Human rights 
groups regularly accuse former security force officials and 
the business community of colluding to organize "death 
squads" to commit these summary and arbitrary executions. 
In April 2003, 68 persons, 61 of them Mara 18 gang members, 
were killed in a violent incident at El Porvenir prison near 
La Ceiba.  Reports produced by the Public Ministry, a 
Special Commission of the Honduran National Council for 
Internal Security (CONASIN), and the Human Rights 
Commissioner put the blame for the vast majority of deaths 
on government security forces (police and military under 
police command) and non-gang member inmate trusties.  In May 
2004, the Public Ministry filed criminal charges against 51 
people for alleged involvement in the deaths.  The Deputy 
Warden, who was in charge at the time of the incident, was 
convicted in December 2004 of murder and attempted murder 
and sentenced in February 2005 to 19 years in prison.  In a 
separate incident in May 2004, a fire at the Granja Penal 
prison in San Pedro Sula claimed the lives of 107 MS-13 gang 
members.  Although it appears GOH authorities were not 
complicit in this event, timely assistance to inmates that 
could have prevented many deaths was withheld due to 
security concerns. 
 
¶30. (SBU) While Honduran labor law is deficient in some 
areas with respect to International Labor Organization core 
conventions, the main issue for the protection of labor 
rights, including freedom of association and collective 
bargaining, is the effective enforcement of existing laws. 
There are serious problems with child labor in several 
industries, particularly melon, coffee, and sugar cane (but 
not in the maquila sector), as well as in the informal 
economy, and trafficking in persons of women and children 
for commercial sexual exploitation in the U.S., Central 
America, and Mexico.  USAID and Peace Corps have both been 
involved in HIV/AIDS prevention. 
 
-------------------------- 
Corruption and Rule of Law 
-------------------------- 
 
¶31. (SBU) Honduras remains one of the most corrupt countries 
in the Western Hemisphere and was recently ranked 114 out of 
146 countries surveyed by Transparency International, an NGO 
that tracks international corruption issues.  Only Bolivia, 
Guatemala, Haiti, and Paraguay scored lower in the Western 
Hemisphere.  U.S. policy to combat endemic corruption has 
struck a nerve in Honduras, especially any mention of our 
visa revocation authorities.  The Director of Immigration, 
Ramon Romero, was arrested on May 1 for his alleged role in 
a corruption/fraud scandal involving the illegal sale of 
valid Honduran passports, visas, and residency documents to 
third country nationals.  On May 2, the Minister of 
Government and Justice fired 71 Immigration employees and 
transferred another 37.  However, the problem within 
immigration and the control over Honduran identity documents 
is still a major concern, and the GOH has not taken proper 
action to address the pervasive corruption.  This is most 
evident in the ongoing judicial proceeding regarding ex- 
director Romero, which continues to proceed at an 
agonizingly slow pace. 
 
¶32. (SBU) Maduro has stated he is willing to address 
corruption, even if it will cost him political support 
within his party, but real achievements to date have been 
few.  Of particular concern are individual judges and 
prosecutors who solicit and/or remain open to offers of 
bribes.  The Attorney General's office has been unwilling, 
or unable, to prosecute high-profile cases, with the notable 
exception of several sitting congressmen recently accused of 
drug trafficking and other offenses.  Until recently, 
immunity from prosecution for government officials precluded 
action against senior officials.  Given the scope of the 
problem, any public discussion about the country's pervasive 
corruption is a positive development. 
 
-------------- 
USAID Programs 
-------------- 
 
¶33. (SBU) The USAID Central America and Mexico (CAM) 
Regional Strategy focuses bilateral and regional USAID 
investment on the three performance arenas of Ruling Justly, 
Economic Freedom, and Investing in People and is closely 
aligned with the goals of the Millennium Challenge 
Corporation (MCC).  USAID supports the Ruling Justly 
objective by increasing the responsiveness and 
accountability of public institutions, while also building 
on successful municipal development programs to create 
better models for governance, justice reforms, and 
transparency and participation.  In the arena of Economic 
Freedom, there is a concerted focus on trade policy and 
preparations to ready Honduras' participation in the CAFTA 
and FTAA.  USAID strives to bridge agricultural production 
in rural areas with relatively higher value processing and 
marketing enterprises in urban centers.  The integrated 
natural resource management program emphasizes sustainable 
land and water-use, biodiversity, and reduced disaster 
vulnerability.  Also, to support the Investing in People 
objective, the health program aims toward improving 
reproductive health, family planning, child survival, 
prevention of HIV/AIDS and other infectious diseases, and 
household food security.  Seeking a better-educated Honduran 
work force through expanded access at the pre-school, middle 
school, and upper secondary levels (grades 10-11) is done 
using alternative delivery systems and implementing the 
Centers for Excellence in Teacher Training (CETT) 
Presidential Initiative.  USAID is also assisting GOH 
efforts to develop quality education standards, testing, and 
evaluation. 
 
--------------------------- 
Consular/Immigration Issues 
--------------------------- 
 
¶34. (SBU) An estimated 800,000 Hondurans live in the U.S., 
both legally and illegally, a fact that places immigration 
issues high on the bilateral agenda.  (The population of 
Honduras is approximately 7 million.)  Approximately 82,000 
of these Hondurans currently enjoy Temporary Protected 
Status (TPS), which was granted to certain Hondurans who 
were in the United States illegally at the time of Hurricane 
Mitch in 1998.  In October 2004, the Department of Homeland 
Security extended TPS for these Hondurans until July 2006, a 
move that the GOH deeply appreciated.  The GOH is also very 
interested in any possible U.S. Congressional action on 
immigration reform.  The GOH is currently working closely 
with the USG to expedite the issuance of travel documents to 
facilitate the deportations of Hondurans who have illegally 
entered the U.S.  As part of this cooperation the GOH is 
planning to expand permission for Justice Prisoner and Alien 
Transport System (JPATS) deportation flights to land in San 
Pedro Sula in addition to Tegucigalpa. 
 
¶35. (SBU) With approximately 11,000 American citizens 
residing in Honduras (this includes American citizens that 
also hold Honduran citizenship) and many thousands visiting 
Honduras annually for tourism and business, American Citizen 
Services are a key part of the Embassy's work.  Since 1995, 
46 American citizens have been murdered in Honduras; ten of 
these have occurred in the past year.  There was not much 
progress on most of these cases until 2003, but there have 
now been 27 convictions in 14 cases, and six cases have been 
closed.  Better coordination among the investigative police, 
prosecutors, and the Embassy has revived investigations into 
several previously cold cases.  Some progress has been made 
on extradition cases involving American citizens residing in 
Honduras who are wanted for felonies in the United States. 
In September 2005, the USG extradited a Honduran wanted for 
major financial fraud in Honduras. 
 
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Embassy Tegucigalpa 
------------------- 
¶36. (SBU) Embassy Tegucigalpa is a medium-sized post, 
employing approximately 119 U.S. citizens and 344 Locally 
Employed Staff (mostly Hondurans) among 14 USG agencies. 
The Peace Corps program, with approximately 192 volunteers, 
is one of the world's largest, and the USAID mission has a 
FY06 budget of $45 million.  The Mission maintains a 
Consular Agent in Honduras' second largest city and 
industrial center, San Pedro Sula. 
 
Williard