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RUEHME/AMEMBASSY MEXICO PRIORITY 6017
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UNCLAS TEGUCIGALPA 000139 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DOJ FOR ATTORNEY GENERAL GONZALES 
USARSO FOR BG KEEN 
SOUTHCOM FOR GENERAL CRADDOCK 
STATE FOR WHA, WHA/CEN, WHA/PPC, PM, INL, AND EB 
 
E.O. 12958: N/A 
TAGS: OVIP PREL PGOV ECON MOPS SNAR PTER KJUS HO
SUBJECT: HONDURAS SCENESETTER FOR ATTORNEY GENQL 
GONZALES, DELEGATION HEAD TO PRESIDENT ZELAYA'S INAUGURATION 
 
 
¶1. (U) Summary:  New Honduran President, Jose Manuel "Mel" 
Zelaya Rosales, will face a difficult task leading one of the 
poorest countries in Latin America.  There were national 
elections for a new President, the unicameral Congress, and 
all 298 municipalities on November 27, 2005; Congress will be 
inaugurated on January 25 and the Presidential inauguration 
will occur January 27.  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 and volunteered to be the 
first country to host a U.S. Coast Guard port security 
evaluation visit to inspect its ports.  Honduras' support for 
the Global War on Terrorism is steadfast and the Government 
of Honduras (GOH) was among the group of nations that sent 
troops to Iraq in support of Operation Iraqi Freedom (OIF), 
although these troops have since returned.  Honduras also 
voted for the U.S.-drafted UN Commission on Human Rights 
(UNCHR) resolution on Cuba, which passed in April 2005. 
 
¶2. (SBU) 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, and the signing and ratification of the 
U.S.-Central American Free Trade Agreement (CAFTA) with the 
United States.  In June 2005, the Millennium Challenge 
Corporation (MCC) approved USD 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 first disbursement is expected in early 
CY 2006.  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. 
End Summary. 
 
--------------------------------------------- - 
Key Strategic Themes in Bilateral Relationship 
--------------------------------------------- - 
 
¶3. (SBU) The key strategic themes in our bilateral diplomatic 
efforts in Honduras are: the rule of law (including 
democratic institutions), regional security (including 
transnational crime), economic development to reduce poverty 
(through trade and investment, and investment in human 
resources), and assistance to American citizens and 
businesses.  Overarching these goals is an emphasis on good 
governance and attacking corruption, a focus that Zelaya says 
he shares, as fraud/waste/abuse and the ineffective 
administration of justice hampers progress in all these 
areas.  The USG goals coincide with Zelaya's emphasis on 
public security/rule of law, economic development, and 
natural resources/environment (including the prevention of 
natural disasters). 
 
--------------------------------------------- ------ 
What will a Zelaya Administration Mean for the USG? 
--------------------------------------------- ------ 
 
¶4. (SBU) While Zelaya is a friend of the USG, his 
personality, administration, and likely government plans 
could make working with him an interesting challenge.  The 
future Zelaya administration provides many opportunities for 
forward progress and will not likely result in any changes 
that would have a significant negative impact on U.S. 
interests.  One thing is certain: his victory means a 
 
complete upheaval of the GOH with Liberal Party political 
appointees coming in to replace National Party political 
appointees at senior, mid-level, and even lower level 
positions.  Zelaya is specifically interested in "Citizen 
Power" and achieving a smaller central government with more 
power at the local level.  He is also in favor of government 
transparency, and plans to sign into law at his inauguration 
a transparency bill he hopes the new congress will pass soon 
after being inaugurated January 25. 
 
¶5. (SBU) Zelaya's long term international strategy is based 
on the theme of economic and political integration with the 
surrounding countries.  Zelaya sees the integration of 
Central America as the only viable means Honduras has to meet 
the increasing demands of globalization.  The unification of 
Central America is not a new idea, dating back to Honduras' 
independence from Spain.  However, it has recently resurfaced 
as an issue of increasing importance with CAFTA.  Zelaya has 
made clear that integration is an issue of prominence to him, 
suggesting not only economic, but also political cooperation 
in other areas.  Short of integration and increased 
cooperation with the countries directly surrounding Honduras, 
Zelaya has specific intentions to develop and strengthen 
relationships with countries both in the Western Hemisphere 
and overseas seen by Zelaya as important to Honduras' 
national interests. 
 
¶6. (SBU) While Zelaya has not declared what specific public 
security measures he will set in place, he has made clear 
that he holds an entirely different approach to the gang 
problem than did the Maduro Administration before him. 
Instead of focusing on increasing punishments and penalties 
for crimes, the Liberal Party's Government Plan provides 
three areas where the administration will focus their 
efforts: prevention, enforcement, and rehabilitation. 
 
-------- 
Election 
-------- 
 
¶7. (U) Honduras' general elections were held November 27, 
2005, and were judged to be generally democratic, peaceful, 
and fair.  USAID and other international donors provided 
approximately $5.5 million to support the primary elections, 
and about $3.4 million for the general elections. 
 
¶8. (U) Honduras has two main parties, the Liberal Party and 
the National Party, and three minority parties, the Christian 
Democrat (CD), Innovation and National Unity (PINU), and 
Democratic Unification (UD).  President of the Congress 
Porfirio "Pepe" Lobo was the National Party presidential 
candidate, and agro-businessman and former Congressman Zelaya 
ran on the Liberal Party ticket.  Zelaya won the election 
with 49.9 percent of the vote.  Lobo received 46.17 percent, 
UD received 1.51 percent, CD received 1.04 percent, and PINU 
received 1.02 percent of the votes.  While exit polls, a 
Supreme Electoral Tribunal quick count, and an OAS Quick 
Count immediately projected that Zelaya had won, Lobo did not 
officially concede the election until December 7, 2005, 
choosing to wait until the official vote count had been 
tabulated. 
 
¶9. (U) In the next Congress, the Liberals will have 62 of the 
128 seats, the Nationals 55 seats, UD 5 seats, CD 4 seats, 
and PINU 2 seats.  The next President of Congress will be 
Liberal Party Congressmen Roberto Micheletti. 
 
¶10. (U) Of the 298 municipalities in Honduras, 165 mayoral 
seats went to the Liberal Party, 130 to the National Party, 
two to DC, and one to PINU.  Within these municipalities, at 
least 20 major cities were won by the Liberal Party. 
 
 
--------------------------------------------- -- 
Iraq, Haiti, and Other Key Foreign Policy Goals 
--------------------------------------------- -- 
 
¶11. (SBU) In recent years, the GOH has been very supportive 
of U.S. foreign policy goals, including the reconstruction of 
Iraq.  In support of OIF, the GOH deployed 370 troops to the 
vicinity of An Najaf as part of the Spanish Brigade operating 
under the Polish Division.  Secretary Powell, CJCS GEN Myers, 
and Secretary Rumsfeld all visited Honduras in 2003 to thank 
the GOH for its support of OIF.  As in most of the region, 
however, the general public overwhelmingly opposed the 
Honduran deployment and in late April 2004, Honduras withdrew 
its troops.  The GOH stated this decision was based on a U.S. 
request that Honduras consider expanding its troops' mandate 
in Iraq to participate in offensive combat operations.  The 
GOH believed that the National Congress would not have 
authorized such a change in the rules of engagement.  The GOH 
committed itself to deploying some troops to Haiti in support 
of the UN peacekeeping operations there, possibly via the 
Conference on Central American Armed Forces (CFAC), but has 
yet to do so.  Honduras is very supportive of the United 
States 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. 
 
----------------------------------- 
Bilateral Political/Military Issues 
----------------------------------- 
 
¶12. (SBU) Honduras was the first country in the Western 
Hemisphere to sign and ratify an ICC Article 98 Agreement 
with the United States.  Honduras has a civilian Minister of 
Defense and a Chief of the Joint Staff who heads the Honduran 
Armed Forces (HOAF). In January of 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 transnational threats, including 
counterterrorism, arms and drug trafficking, and combating 
international criminal organizations.  The HOAF is interested 
in establishing an ability to increase further its 
participation in international peacekeeping operations and 
the HOAF has been participating in numerous joint exercises 
with U.S. forces.  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 regional 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.  Honduras 
hosted and participated in two combined U.S. Joint Chiefs of 
Staff level special operation exercises in 2005: Gallant 
Journey and Bold Warrior.  Honduras also stands ready to 
participate in a regional arms "rationalization" process, but 
has said it will not negotiate on a bilateral basis. 
 
---------------------------- 
Counterterrorism Cooperation 
---------------------------- 
 
 
¶13. (SBU) 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 
counterterrorism conventions and protocols and has also been 
aggressive in upgrading port security. 
 
----------------------- 
Counternarcotics Issues 
----------------------- 
 
¶14. (SBU) GOH has cooperated with USG counternarcotics 
efforts by facilitating USG use of La Ceiba by U.S. Customs 
CHET aircraft to stage regional counternarcotics detection 
and monitoring aircraft.  However, the CHET aircraft does not 
address maritime transit zone trafficking that most threatens 
our interests.  Expanding the site to include staging 
maritime detection and monitoring aircraft should be our goal. 
 
¶15. (SBU) Honduras' geography places it squarely in the 
middle of a major illegal drug transshipment zone.  Cocaine, 
heroin, and marijuana transit Honduras, its airspace, and its 
maritime waters.  Due to increased efforts by Honduran, U.S., 
and regional counternarcotics forces, this trade has 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.  The total slipped in 
2005 to 261 kilos of cocaine.  Additionally, there were five 
Honduran-flagged vessels seized by the U.S. Coast Guard in 
international waters carrying approximately 11,250 kilos of 
cocaine and 53 kilos of heroin, as well as one 
Honduran-flagged vessel seized by the Nicaraguan Navy 
carrying 871 kilos of cocaine.  Close USG-GOH cooperation, 
thanks to a Bilateral Maritime Agreement, has allowed these 
narcotraffickers and the drugs to be brought to the U.S. for 
prosecution. 
 
--------------- 
Anti-corruption 
--------------- 
 
¶16. (SBU) Honduras remains one of the most corrupt countries 
in the Western Hemisphere and was recently ranked 107 (tied 
with Nicaragua) out of 158 countries surveyed by Transparency 
International (an NGO that tracks international corruption 
issues,) with 158 being the most corrupt.  Only Bolivia, 
Ecuador, Guatemala, Guayana, Haiti, Paraguay, and Venezuela 
scored lower in the Western Hemisphere.  U.S. policy against 
corruption has struck a nerve here, especially any mention of 
our 212f visa revocation authority.  The Director of 
Immigration, Ramon Romero, was arrested on May 1, 2005, 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, 
2005, 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.  Procedural problems at the Public 
Ministry (Attorney General and all prosecutors) and lack of 
resources contribute to the GOH's limited ability to take 
significant action against high-level corrupt individuals. 
Given the scope of the problem, any public discussion about 
the country's pervasive corruption is a positive development. 
 
------------- 
 
Port Security 
------------- 
 
¶17.  (U) Puerto Cortes is the 37th 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 
transit 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  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. 
 
¶18.  (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". 
 
¶19.  (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 DHS/CBP to move forward with CSI at 
Cortes.  A Declaration of Principles for the CSI program has 
been signed and construction on CBP office space at Cortes 
has already been completed. 
 
---------------------------- 
Public Security/Human Rights 
---------------------------- 
 
¶20. (SBU) Violent crime, particularly homicides and various 
gang-related crimes, continues at a high rate.  Public 
support for forceful government actions remains strong, 
although the military's enthusiasm for joint police/military 
patrols has begun to erode, claiming the joint operations 
have negatively affected military readiness.   The U.S. is 
helping to establish an anti-kidnapping unit, increase 
intake/training of police recruits, 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. 
 
¶21. (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.  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.  There have been multiple large scale deaths in 
the national penitentiaries in the last several years.  While 
 
many have been due to fires or other inmates, the GOH has 
prosecuted some of its prison personnel and has been found 
negligent in its responses and preventative measures. 
 
¶22. (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/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, as Honduras has the highest rate of 
HIV/AIDS in Central America. 
 
------------------------------------------- 
Soto Cano Air Base - Joint Task Force Bravo 
------------------------------------------- 
 
¶23. (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, as Joint Task Force Bravo (JTF-B).  JTF-B 
has responsibility for interagency operations and supporting 
contingency operations such as disaster relief, search and 
rescue operations, 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 planned relocation of the Coronet Oak C-130 
program from Puerto Rico to Soto Cano would increase the U.S. 
footprint. 
 
---------------- 
Border Relations 
---------------- 
 
¶24. (SBU) Honduras has land border disputes with El Salvador, 
Nicaragua, and some of its seven maritime neighbors.  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 technical assistance 
to help them implement the non-disputed elements of the ICJ's 
ruling. 
 
¶25. (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.  An ICJ 
decision on the case is expected in 2006.  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. 
 
----------------- 
Economic Overview 
----------------- 
 
¶26. (SBU) Honduras, with a per capita income of USD 950, is 
the third poorest country in the Western Hemisphere, ahead of 
only Nicaragua and Haiti.  The economy grew at a rate of 4.5 
percent in 2004, but over the past several decades has grown 
at an average rate only slightly higher than population 
growth.  Social indicators are improving, but two-thirds of 
all Hondurans live in poverty, and average education levels 
are very low.  In the past few years, low world coffee prices 
have hit rural areas particularly hard (although they are now 
rising somewhat), forcing major cutbacks in planting, 
fertilizing, harvesting, and investment.  While there has 
been some agricultural diversification (melons, cultivated 
shrimp, palm oil) there continues to be a large subsistence 
farmer population with few economic opportunities (other than 
illegal immigration to the U.S.).  Remittances from Hondurans 
living abroad, mostly in the United States, grew by 19 
percent to USD 1.14 billion in 2004, and, at an estimated USD 
1.4 billion in 2005, which is the equivalent of nearly 15 
percent of Honduras' foreign exchange, will soon pass the 
maquila sector as the country's largest source of foreign 
exchange. 
 
¶27. (SBU) The U.S. is Honduras' largest trading partner, with 
two-way trade in goods of $6.6 billion dollars in 2004.  The 
roughly 150 U.S. companies that do business in Honduras 
constitute the largest block of foreign direct investors. 
One of the major magnets for foreign investment is the 
apparel assembly (maquila) sector, which grew dramatically in 
the 1990s, reaching then-peak employment in 2000 of about 
120,000 people.  Activity slowed due to increased competition 
from Asia and also in response to the 2001-2002 U.S. economic 
slowdown.  The sector has been rebounding since 2003 and has 
now exceeded pre-downturn levels, with employment now at 
130,000 jobs. 
 
----------------------- 
The Importance of CAFTA 
----------------------- 
 
¶28. (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. 
All countries except for Costa Rica have now ratified the 
agreement.  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 at least 
one other ratifier is in compliance with the relevant terms 
and conditions.  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 outgoing then-ruling National Party, but also by the 
incoming then-opposition Liberal Party and two of the smaller 
parties in Congress (PINU and CD) as well.  Only one small 
 
leftist political party (UD) voted against the agreement. 
The agreement has also been opposed by some NGOs, labor 
unions, and peasant (campesino) groups, who are concerned 
that small-scale Honduran farmers will be unable to compete 
with subsidized U.S. agricultural products. 
 
¶29. (SBU) Zelaya'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 USD 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 
------------------------------------- 
 
¶30. (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, 
¶2005.  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 
----------------------------- 
 
¶31. (U) In February 2004, after almost two years of 
negotiations, the Maduro Administration signed a Letter of 
Intent with the International Monetary Fund for a new 
three-year arrangement for Honduras under the Poverty 
Reduction and Growth Facility.  The first review of the 
program was conducted in September 2004, and the IMF found 
that Honduras' performance was strong.  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 pledged debt 
relief from bilateral and multi-lateral donors, most of which 
had been completed by December 2005.  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.  Post is watchful for any signs that 
these funds could be used to pay for unsustainable growth in 
 
public sector teacher and doctor salaries (which the GOH has 
committed to reining in by 2007). 
 
-------------- 
USAID Programs 
-------------- 
 
¶32. (SBU) USAID's FY06 budget for Honduras is USD 44.9 
million.  The USAID Central America and Mexico 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 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 
Presidential Initiative.  USAID is also assisting GOH efforts 
to develop quality education standards, testing, and 
evaluation. 
 
¶33. (U) USAID's Integrated Food Security program addresses 
the multiple causes and effects of food shortages and 
nutritional deficiencies in some of the poorest communities 
in Honduras.  It provides community-based maternal and child 
health care, improved agricultural productivity and 
marketing, construction of rural roads and water systems, 
improved natural resource management, and increased 
transparency and efficiency of municipal governments. 
 
--------------- 
Consular Issues 
--------------- 
 
¶34. (U) The GOH estimates close to a one million 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 approximately seven million.) 
Combating alien smuggling and TIP are top priorities. 
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, particularly 
temporary work permit proposals.  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. (U) With approximately 15,000 American citizens residing 
in Honduras (including American citizens that also hold 
Honduran citizenship) and many thousands visiting Honduras 
annually for tourism, missionary work, and business, American 
Citizen Services are a key part of the Embassy's work.  Since 
1995, there have been 50 American Citizen victims of 
homicide; 15 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.  (The Honduran constitution bars the extradition of 
Honduran nationals.) 
 
------------------- 
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 $44.9 million.  The Mission maintains a Consular 
Agent in Honduras' second largest city and industrial center, 
San Pedro Sula. 
Ford