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S E C R E T SECTION 01 OF 05 TEGUCIGALPA 001179 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
STATE FOR D, P, AND E 
STATE FOR WHA, WHA/PPC, WHA/EPSC, WHA/AND, AND WHA/CEN 
STATE FOR EB, INL/LP, AND INR/B 
STATE PASS AID FOR LAC/CAM 
NSC FOR DAN FISK 
TREASURY FOR JHOEL 
 
E.O. 12958: DECL: 06/30/2036 
TAGS: PREL PGOV ECON ETRD KCRM SMIG SNAR PINR VZ HO
SUBJECT: HONDURAN POPULIST PRESIDENT ZELAYA: MELISTAS PUSH 
PETROCARIBE AND MISSTEP; ANGST GROWING AMONG ELITE 
 
REF: A. TEGUCIGALPA 1124 
     ¶B. TEGUCIGALPA 1131 
     ¶C. TEGUCIGALPA 1102 AND PREVIOUS 
     ¶D. TEGUCIGALPA 872 
     ¶E. TEGUCIGALPA 853 
     ¶F. TEGUCIGALPA 526 
 
TEGUCIGALP 00001179  001.2 OF 005 
 
 
Classified By: Ambassador Charles A. Ford; 
Reasons 1.4 (b) and (d). 
 
¶1. (C) Summary: Honduran President Jose Manuel "Mel" Zelaya 
and his Administration have now been in office approximately 
five months.  Zelaya is acting more and more like a populist, 
and has stumbled through a series of missteps ever since his 
meeting with POTUS June 5.  His willful mis-characterizations 
of the USG position on a possible PetroCaribe deal, his 
overreaction to the Embassy's one-week suspension of 
scheduling new visa appointments, and other gaffes have all 
served to take the shine off bilateral relations, which is 
something the "Melistas" have milked.  The Minister of 
Finance's surprise resignation announcement fed a growing 
sense of disarray within the Zelaya Administration, which, 
combined with palpable stiffness in the bilateral 
relationship, led many outside Zelaya's inner circle to 
express concern to the Embassy.  Post sees a distinct 
possibility that Zelaya may be seeking to supplant the fiscal 
disciplines of an IMF program with the relatively easy money 
that the financing conditions of PetroCaribe would provide. 
U.S. public and private statements questioning the wisdom of 
such a deal and noting the lack of transparency appear to be 
the major factor in slowing down a rush to PetroCaribe. 
While no irreversible decisions have been made, some could be 
made in July/August, and so Post will continue to reach out 
to the Zelaya Administration and encourage a responsible 
response by non-Melistas, in and out of the Liberal Party. 
End Summary. 
 
Zelaya and the "Melistas" 
------------------------- 
 
¶2. (C) Honduran President Jose Manuel "Mel" Zelaya Rosales is 
acting more like a populist as his Administration reaches 
five months of age, despite his protestations to the contrary 
to EmbOffs.  The Embassy has tried repeatedly to establish a 
closer relationship with Zelaya, but whether due to his 
outdated Latin American "caudillo" style, his instinctive 
negative reaction to what he perceives as dependency on the 
U.S. (which on its own would probably be a good reaction), 
the influence of key left-leaning Melistas (particularly 
Liberal Party President Patricia Rodas, Foreign Minister 
Milton Jimenez, and Zelaya legal advisor Enrique Flores 
Lanza), or a combination of all three, Zelaya has not truly 
reciprocated.  While professing his willingness to have an 
honest, open dialogue with the Embassy, and numerous 
meetings, Zelaya and his Melista advisors repeatedly fail to 
level with EmbOffs, ignoring former President Carlos Flores' 
(Liberal Party) advice to Zelaya not to try to fool the U.S. 
Embassy.  This failure to be frank with the Embassy causes 
unnecessary friction that benefits no one (except perhaps key 
Melistas, who, according to some observers, may be seeking to 
have Zelaya "stand up" to the U.S.). 
 
¶3. (C) As reported extensively, Zelaya and the Melistas seem 
dead-set on a PetroCaribe deal or something similar, though 
perhaps cloaked in the respectability of a "commercial" deal 
with PDVSA or its U.S. affiliate CITGO (ref C and previous). 
Despite statements to the contrary, Zelaya appears to be 
willing not to have an IMF agreement as a 
PetroCaribe-inspired deal appears to give Zelaya an alternate 
source of funding for populist spending measures (which will 
not actually lower the price of gas at the pump). 
Nationalists have recently renewed their claim that Zelaya 
 
TEGUCIGALP 00001179  002.2 OF 005 
 
 
received campaign funding from Venezuelan President Hugo 
Chavez, and claim that a PetroCaribe deal flows from Chavez's 
surreptitious electoral support.  (Note: Others claim Zelaya 
(perhaps unwittingly) received campaign financing from 
narco-money, and claim that Zelaya is under intense pressure 
from narcos.  If this allegation is true, Zelaya to his 
credit has not given narcos an inch.  End Note.)  Post 
attempted to run down various campaign financing rumors in 
fall 2005 but could neither prove, nor disprove, any of the 
allegations. 
 
False Statements and Overreaction 
--------------------------------- 
 
¶4. (C) Zelaya has repeatedly misstated U.S. positions since 
his June 5 meeting with POTUS at the White House: 
- Zelaya falsely claimed that POTUS had said the USG had no 
problem with a GOH PetroCaribe deal with Venezuela, a false 
perception that the Ambassador quickly corrected. 
- Zelaya falsely claimed that POTUS had said the GOH's 
request to commercialize Soto Cano Air Base was "rational." 
- After Zelaya met with U.S. oil companies in Washington, DC 
June 5, the Honduran Embassy announced that U.S. oil 
companies had decided to participate in the fuel bid; 
likewise, Flores Lanza made a similar announcement after the 
GOH met in Tegucigalpa with oil companies, including U.S. oil 
companies.  Both statements were false. 
- FM Jimenez announced that the USG had granted a one-month 
extension of the registration deadline for Temporary 
Protected Status (TPS), when in fact the GOH had only 
requested such an extension from DHS/CIS but no extension was 
granted. 
 
¶5. (C) Zelaya sharply overreacted to the Embassy's one-week 
suspension of scheduling new visa appointments (ref A).  The 
reaction came after effectively putting on the back burner 
repeated Embassy requests for high-level action by the GOH to 
reform Honduran Immigration.  While Zelaya did finally 
appoint German Espinal, a respected former Executive Director 
of the National Anti-Corruption Council, as Immigration 
Director, he had done nothing to make good on his repeated 
promise to move Immigration out of the Ministry of Government 
and Justice (led by Minister Jorge Arturo Reina, who had his 
U.S. visa revoked for ties to terrorist activities years 
ago).  After the GOH quickly responded to the Embassy's 
action by briefing the Embassy on actions it had taken or 
would soon take to reform Immigration (and the National 
Registry of Persons), the Embassy reinstated scheduling visa 
appointments.  Since then, Zelaya's rhetoric has cooled 
considerably, and the growing sense of trouble in bilateral 
relations has leveled off. 
 
MinFinance Resigns - More Cabinet Changes? 
------------------------------------------ 
 
¶6. (C) Minister of Finance Hugo Noe Pino announced June 16 he 
was stepping down effective in July (ref B).  While he moves 
to Washington to be the Central American Representative to 
the Inter-American Development Bank, he was widely seen to be 
fleeing the disorderly Zelaya Administration, and the 
possible impending fiscal crisis if the GOH cannot pass the 
IMF review.  Rumors are swirling of other possible cabinet 
changes, including predictably Minister of Health Orison 
Velasquez (who is mired in allegations of corruption and 
incompetence), but also disappointingly Minister of Public 
Security Alvaro Romero, who after a slow start and press 
criticism appears to be making real headway in his plan to 
reform the notoriously corrupt and ineffective police force, 
now that President Zelaya at long last agreed to his request 
and appointed Jorge Rodas Gamero as Vice Minister.  Another 
rumor has Minister of the Presidency Yani Rosenthal being 
sacked.  Rosenthal, a stand-in for his powerful 
 
TEGUCIGALP 00001179  003.2 OF 005 
 
 
businessman/politician father Jaime Rosenthal, is seen by 
many observers as compromised by his family business 
interests.  He appears alternatively close to and estranged 
from the Melistas. 
 
Non-Melista Establishment Reacts 
-------------------------------- 
 
¶7. (C) The Embassy has received private messages from key 
National Party figures, including Zelaya's 2005 opponent 
Porfirio "Pepe" Lobo, former President Ricardo Maduro, former 
Tegucigalpa Mayor Miguel Pastor (who is keeping a low 
profile) and his political strategist brother Sebastian, and 
current Tegucigalpa Mayor Ricardo Alvarez, expressing concern 
over the damage Zelaya and his team have done in what they 
see as a bungled managing of Honduras' most important 
bilateral relationship.  Some ascribe this to the 
inexperience of FM Jimenez (who was not Zelaya's original 
choice as FM, but chosen without Embassy input after the 
Embassy objected to Reina's infamous past).  Others see it is 
a conscious policy to cause friction that will burnish Mel's 
image as a nationalist/populist.  Key media owners Rafael 
Ferrari, Jorge Canahuati, and Carlos Flores warned the 
Ambassador that the recent negative exchange in the press 
between the Embassy and Zelaya could make the U.S. look like 
the bad guy.  Taking a different view, Lobo told the 
Ambassador that the average Honduran will side with the USG 
over the GOH in any rhetorical squabble when a Honduran 
politician such as Zelaya potentially puts at risk good 
relations that allow record levels of remittances from 
relatives in the U.S. 
 
¶8. (C) Non-Melistas in the Liberal Party have also expressed 
concern, including Vice President Elvin Santos and the Flores 
camp, which includes President of Congress Roberto 
Micheletti.  Ambassador met with Flores and Micheletti 
together recently and Flores voiced his frustration with the 
way Zelaya had handled the White House visit.  Using a 
baseball metaphor, Flores said the U.S. had teed up a 
softball and instead of hitting it out of the park, Zelaya 
had thrown his bat down and yelled "Chavez!"  Flores has not 
talked with Zelaya since his POTUS meeting, and fears that 
the Melistas may be seeking an economic crisis, which will 
then lead to a political crisis, which suits the Melistas 
view of a failed system that warrants new solutions, such as 
the controversial "citizen power" initiative. 
 
¶9. (C) VP Santos has been extremely candid with the 
Ambassador in expressing his frustration with Zelaya and the 
Melistas, while at the same time urging the Embassy to 
continue to help prod Zelaya to take decisions that are in 
the best interests of Honduras, not those that the Melistas 
want him to take to promote their agenda.  Santos is close to 
Alvarez (the two are godparents to at least one of each 
other's children), and appears to reflect the centrist 
establishment's hope that continued engagement with Zelaya 
will ward off irreversible policy mistakes.  Likewise, 
Catholic Church Cardinal Oscar Rodriguez told the Ambassador 
that he is concerned about potential political ramifications 
of a PetroCaribe deal, and wants to help lead the fervently 
Catholic Zelaya to more responsible policy decisions and a 
focus on poverty reduction. 
 
Think Tanks and National Development Plans 
------------------------------------------ 
 
¶10. (C) The Embassy has sought to encourage a positive 
response to the frustration voiced by various members of the 
elite about Zelaya and his Administration.  The Embassy has 
met with: 
- Irma de Fortin, President of University Jose Cecilio del 
Valle, who is seeking to set up a group of respected 
 
TEGUCIGALP 00001179  004.2 OF 005 
 
 
individuals (mostly Nationals), to perhaps develop a think 
tank to speak out on and study key issues for the future of 
Honduras; and 
- FUNDEMOS, a new NGO akin to the GOH development 
organization FIDE, led by Nationalist luminaries from the 
Maduro Administration (among them former Minister of Defense 
Fred Breve, former Minister of the Presidency Ramon Medina 
Luna, and former President of the Central Bank Maria Elena 
Mondragon), is focused on economic development. 
 
¶11. (C) The National Party's 2005 Presidential ticket of Pepe 
Lobo and VP candidate Mario Canahuati also professes to want 
to help shape non-partisan consensus plans for the economic 
and political development of Honduras.  The two are 
increasingly seen as rivals within the party, but hopefully 
their rivalry and positioning for platforms for the 2009 
presidential primary can help fuel real strategic thought 
about Honduras' economic development, which failed when last 
tried by UNDP in 2005 due to political rivalries between the 
two major parties.  Interestingly in hindsight, a key issue 
cited by the Liberal Party in refusing to sign on to the UNDP 
plan was the lack of focus on the high cost of energy. 
- Canahuati, President of the private sector umbrella 
organization COHEP, is conducting strategic planning on a 
COHEP vision for the development of Honduras.  Canahuati and 
a group of leading businessmen, including wealthy mogul (and 
Liberal Party supporter) Miguel "Uncle Mike" Facusse, met 
with EmbOffs, and said that they sought to help the Zelaya 
Administration set a more productive course.  Members of the 
group were clear that the private sector is "basically on 
(the USG) side" and that they see no good coming of picking a 
fight with the USG.  They also recognized and (mildly) 
objected to the leftward drift of the current administration. 
 However, they pointed out, any significant breech between 
the USG and the GOH "only plays into Chavez's hands." 
- Lobo, President of the National Party, said he is seeking 
to bring together four out of the five political parties 
(leaving the anti-globalist UD party on the sidelines), the 
Catholic Church, COHEP (not clear if Canahuati supports this 
plan), and the labor confederations to develop a national 
development plan.  Lobo is seeking to work with former 
President Flores and Micheletti as his Liberal Party 
counterparts; whether or not the Melistas and Zelaya will 
embrace this idea is debatable.  Lobo said that he plans to 
have an impartial facilitator (although the name he 
mentioned, Juan Ferrera, is linked in many people's eyes to 
the National Party), and would have the G-16, led by the U.S. 
beginning July 1, as key observers and supporters of this 
effort.  Cardinal Rodriguez told the Ambassador that he 
supports Lobo's idea, and that he has talked to Micheletti 
about it (an apparent warming of what had been a chilled 
relationship between the two). 
 
Zelaya and Rodas vs. Flores 
--------------------------- 
 
¶12. (C) Comment: Zelaya is alleged to have grown further 
apart from his wife, and reportedly the two are not currently 
living together.  Rumors persist that Zelaya is having an 
affair with his longtime advisor Rodas, said to be the last 
one to meet with him late at night.  Whether or not the 
rumors are true, what is clear is that Rodas is Zelaya's 
closest advisor, and is seen by many as Zelaya's choice for 
Liberal Party presidential candidate in 2009.  Flores' 
antipathy to the Melistas, who he calls the "Halloween 
people," is widely known, and his newspaper's June house 
editorials have criticized Zelaya's recent missteps.  Flores 
is the key counterweight to Zelaya within the party, and the 
person he decides to back for the 2009 presidential race 
might have Rodas as an opponent, if she can survive the 
internal party struggle that has led to calls for her ouster 
at a party conference this fall.  (Besides Rodas, rumored 
 
TEGUCIGALP 00001179  005.2 OF 005 
 
 
Liberal Party candidates include Minister of Social 
Investment Marlon Lara, Central Bank President Gabriela 
Nunez, both candidates in 2005, Micheletti, and Flores' 
daughter Mary Flores, second to Micheletti in Congress). 
 
¶13. (C) Comment continued: U.S. public and private statements 
questioning the wisdom of a PetroCaribe deal and noting the 
lack of transparency in the fuel bid process appear to be the 
major factor slowing down a rush to PetroCaribe.  Zelaya's 
emissaries have repeatedly asked the Embassy to back off on 
the fuel issue, with Minister of Defense Aristedes Mejia 
going so far as to say that Zelaya would forget about 
commercialization of Soto Cano Air Base if the U.S. stopped 
talking about PetroCaribe.  While no irreversible decisions 
have been made, some could be made in July/August (Congress 
goes back in session July 4).  Post will continue to reach 
out to the Zelaya Administration in the hope they might see 
the light, encourage a responsible response by non-Melistas, 
in and out of the Liberal Party, and despite Zelaya's 
requests, continue to speak publicly when necessary on 
PetroCaribe, focusing on issues of transparency and policy 
rather than Chavez.  End Comment. 
FORD