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UNCLAS SECTION 01 OF 02 TEGUCIGALPA 000930 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EAID ETRD HO KDEM PGOV PREL
NU 
SUBJECT: TFHO1: RURAL REGION SUFFERING FROM MULTIPLE 
ECONOMIC BLOWS 
 
REF: A. TEGUCIGALPA 890 
     ¶B. TEGUCIGALPA 889 
     ¶C. TEGUCIGALPA 818 
     ¶D. TEGUCIGALPA 776 
 
¶1.  (U) Summary:  During a September 2 visit to two towns in 
the southeastern province of El Paraiso, embassy officers 
found that political tension, police actions, and consumer 
uncertainty following the June 28 coup have caused short-term 
damage to the local economy.  El Paraiso is a primarily 
agricultural region and the center of Honduras's cigar 
industry.  Politically, most of the population supports 
President Zelaya's Liberal Party.  President Zelaya's 
symbolic return to Honduras from the Nicaraguan border, which 
took place in this area, caused significant disruption.  In 
the longer term, El Paraiso's agricultural sector has been 
largely unaffected by the worldwide economic downturn, with 
the exception of the cigar industry, which has experienced a 
significant decline.  End summary. 
 
¶2.  (U) The department of El Paraiso is located to the south 
of Tegucigalpa and borders Nicaragua.  Agriculture, 
consisting primarily of cattle, tobacco, coffee, corn, and 
melons, is the mainstay of the economy in this region of 
rolling hills and mountain valleys.  The Honduran cigar 
industry is centered in Danli, with the U.S. as its primary 
export destination.  The region is also an important 
transportation corridor, with goods and passengers transiting 
the Nicaraguan border at Las Manos and through the towns of 
El Paraiso and Danli to and from the rest of Honduras and the 
Port of Cortes.  As with many rural regions of Honduras, the 
Liberal party is dominant in the province, with many backers 
of President Zelaya. 
 
¶3.  (U) On September 2, PolOff and EconOff traveled to the 
towns of Danli and El Paraiso to meet with local residents, 
including civic leaders and business owners.  In addition to 
discussing the political situation (refs A and B), they asked 
residents about the current state of the economy in the two 
small cities. 
 
¶4.  (U) Local residents noted that business was bad in the 
first half of the year because of the global recession.  The 
implementation of a steep hike in the minimum wage in January 
also hit businesses hard, causing some to lay off workers in 
order to pay the higher wage to those remaining.  The 
situation was made somewhat worse by the coup, with sporadic 
roadblocks and general uncertainty, but in the weeks after 
the coup things seemed to be getting back to normal slowly. 
Some parts of the economy even improved slightly, such as 
dairy sales, as residents bought more local product during 
closure of the border with Nicaragua. 
 
¶5.  (U) The situation took another turn for the worse when 
President Zelaya made a symbolic return to Honduras by going 
to the Nicaragua border crossing of Las Manos on July 24.  In 
anticipation of this crossing, thousands of his supporters 
attempted to go to the area from locations around Honduras. 
However, most were blocked by some 14 military and police 
roadblocks between Tegucigalpa and the border.  In addition, 
the government established curfews in the border region and 
up to the city of Danli that were much longer than curfews in 
the rest of the country, sometimes lasting nearly 24 hours. 
The curfews in this region were repeated more frequently than 
in the rest of the country.  The combination of roadblocks, 
curfews, and general chaos brought commerce to a near 
standstill.  Of special concern was that food and fuel were 
not able to get in or out of the region during the tense week 
after July 24.  During the curfews, consumers had only enough 
time to quickly buy the bare necessities, precluding other 
shopping.  Many workers were unable to travel to their jobs, 
and so went without pay and likely without food for those 
days.  Some perishable products went to waste. 
 
¶6.  (U) As in other parts of the country, the tourism sector 
has been hardest hit, down approximately 80% in the last few 
months.  Most of the usual foreign visitors are missionaries 
and NGO representatives, who stay in local hotels and often 
buy supplies locally for their projects.  Hardly any such 
visitors have come since the coup, residents say. 
 
¶7.  (SBU) Danli is especially famous for its cigars, with 
 
TEGUCIGALP 00000930  002 OF 002 
 
 
several prominent companies run by Cuban immigrants.  The 
global economic downturn and a new tax on cigars in the U.S. 
have created an uncertain climate for cigar exporters.  Since 
last year, five of the smaller companies have closed their 
doors.  Whereas local cigar and livestock producers indicated 
that their businesses were not greatly affected in the 
immediate aftermath of the June 28 coup, the demonstrations 
surrounding Zelaya's July 24 visit to the border were much 
more disruptive.  With the curfews and unrest, many employees 
were unable or unwilling to go to work, bringing production 
to a halt.  Several production associations got together and 
offered to provide bus transportation to the resistance 
groups so they would more quickly leave the region.  Leaders 
of local livestock production associations expressed the hope 
that the resistance groups would never use their region this 
way again. 
 
¶8.  (SBU) There was anecdotal evidence of economic backlash 
against those who supported Zelaya.  A local pro-Zelaya 
lawyer noted that he has lost clients because of his 
political stance.  He also pointed to how thin the liberal 
newspaper El Tiempo was getting as pro-coup businesses 
stopped advertising in it. 
 
¶9.  (SBU) Comment: Business owners, workers, and mayors alike 
recognize that the ongoing political conflict will continue 
to hurt the economy, as consumers and investors feel 
discouraged about the current situation and anxious about the 
future.  How to resolve the political situation and get the 
economy back on track -- bringing back Zelaya or just moving 
on to elections -- is the essence of the political division. 
LLORENS