VZCZCXYZ0010
OO RUEHWEB

DE RUEHTG #1002/01 2751548
ZNR UUUUU ZZH
O 021548Z OCT 09
FM AMEMBASSY TEGUCIGALPA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0799
INFO RUEHSN/AMEMBASSY SAN SALVADOR IMMEDIATE 1917

UNCLAS TEGUCIGALPA 001002 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA AND H 
 
E.O. 12958: N/A 
TAGS: OREP PGOV PREL KDEM PHUM EAID ECON CASC ASEC
HO 
SUBJECT: CODEL ROS-LEHTINEN (OCTOBER 5-6) 
 
REF: STATE 99027 
 
¶1. (SBU) Summary.  Embassy welcomes the October 5-6 visit of 
Codel Ros-Lehtinen to Honduras.  Honduras, a close ally of 
the United States, is currently in the throes of a severe 
political crisis.  Honduran society is severely polarized and 
reconciliation of the Honduran people will be essential for 
the country to move forward.  End Summary. 
 
¶2. (U) There are approximately 15,000 Americans resident in 
Honduras who are registered with the Embassy.  The Embassy 
estimates that there are an additional 10,000 unregistered 
resident Americans.  About 50,000 Americans visit Honduras 
annually.  The Peace Corps has been active in Honduras since 
1963 and its program is currently one of the largest in the 
world.  In 2009, there are 180 Peace Corps Volunteers in 
Honduras working in six types of projects, including: 
municipal development, water and sanitation, protected areas 
management, youth development, and health.  Embassy staff 
includes 108 direct-hire Americans, 243 locally engaged staff 
(LES) and 94 American dependents.  The Management Section has 
a staff of 12 direct-hire Americans, 7 eligible family 
members, and 112 LES. 
 
 
Political Backdrop 
------------------ 
 
¶3. (U) Jose Manuel "Mel" Zelaya Rosales of the Liberal Party 
won the November 27, 2005 presidential election with less 
than a four percent margin of victory, the smallest in 
Honduran history.  The Liberal Party won 62 of the 128 
congressional seats, just short of an absolute majority. 
Zelaya's presidency was marked by a series of controversies 
as his policies and rhetoric moved closer in line with that 
of Venezuelan President Hugo Chavez.  Zelaya signed onto the 
Bolivarian Alternative for the Americas (ALBA) in August 2008 
and it was ratified by the Congress in October 2008, with the 
support of then congress President Roberto Micheletti.  In 
the final year of Zelaya's term, he began advocating that a 
referendum regarding reform of the Constitution be added to 
the elections scheduled for November 2009.  When the Supreme 
Electoral Tribunal ruled the referendum unconstitutional, 
Zelaya proposed that an informal poll be held on June 28 to 
gauge public support for his proposal.  On June 25, the 
Supreme Court ruled that the poll was also unconstitutional 
and issued a cease and desist order on any public support to 
carry out the poll. 
 
¶4. (U) When Zelaya ignored the Supreme Court ruling and 
continued with plans to carry out the June 28 poll, the 
Supreme Court issued a secret arrest warrant for Zelaya. 
Soldiers entered Zelaya's residence on June 28, placed him on 
a plane, and took him to Costa Rica.  The National Congress 
met in an emergency session on June 28, declared Zelaya was 
no longer president, and swore in President of Congress 
Roberto Micheletti as the new President of the Republic. 
 
¶5. (U) The forcible removal of President Zelaya was 
universally condemned by the international community as a 
coup d'etat.  Both the United Nations and the Organization of 
American States (OAS) called for President Zelaya's immediate 
and unconditional restoration to office.  The OAS Special 
Assembly on July 5 suspended Honduras.  Not a single nation 
has recognized the de facto regime led by Micheletti.  With 
support from the United States, the OAS designated Nobel 
Peace Prize Laureate and Costa Rican President Oscar Arias to 
serve as mediator to reach a peaceful, diplomatic resolution 
to the crisis.  The San Jose Accord, a twelve-point plan for 
restoration of constitutional order in Honduras, was drafted 
in the negotiations led by President Arias.  The proposed 
Accord calls for Zelaya's restoration, a consensus-based 
unity government, establishment of reconciliation and 
verification committees, and amnesty for political crimes for 
both parties. 
 
¶6. (SBU) President Zelaya unexpectedly returned to 
Tegucigalpa on September 21 and has been inside the Embassy 
of Brazil with his wife and son since his arrival in the 
capital.   His return was announced by pro-Zelaya media on 
September 21 and a medium sized crowd of his supporters 
(1,000 - 5,000) gathered outside the Brazilian Embassy and 
some made their way into the embassy and have remained inside 
the diplomatic mission since then. On September 22, security 
forces used tear gas to forcibly move the demonstrators who 
were camped outside the embassy.  The de facto regime cut 
water and electricity to the embassy for a time and imposed 
all day curfews on September 22 and 23 and evening curfews on 
September 24-29. De facto regime minister Carlos Lopez 
Contreras read a statement in English on television the 
evening of September 22.  The statement said de facto regime 
leader Roberto Micheletti was ready to engage in a discussion 
with President Zelaya to find a resolution to the country's 
political crisis.  He added, however, that the discussion 
must be within the framework of the Honduran Constitution and 
that Zelaya must pledge to respect the general elections 
scheduled for November 29. 
 
¶7. (U) The two major parties are the slightly left-of-center 
Liberal Party and the slightly-right-of center National 
Party.  The three much smaller registered parties, the 
Christian Democratic Party, the Social Democratic Innovation 
and Unity Party (PINU), and the Democratic Unification Party, 
hold a few seats each in Congress, but have never come close 
to winning the presidency.  General elections are scheduled 
to be held on November 29.  The United States and other 
governments have questioned whether they will be able to 
accept the results of the government given the undemocratic 
nature of the government in power.  The September 27 
suspension of civil liberties currently planned to last until 
two weeks before the election, further brought into doubt the 
viability of the elections.  Besides the position of 
president of the nation, 128 congressional seats and 298 
mayoralties will be filled. 
 
Economic Overview 
------------------ 
 
¶8. (U) Honduras, with a per capita GDP of USD 1,845 in 2008, 
is one of the poorest countries in the Western Hemisphere. 
An estimated 59 percent of Honduran households live in 
poverty and 36 percent of the labor force was unemployed or 
underemployed in 2008.  The average adult Honduran has only a 
sixth-grade education.  GDP grew more than 6 percent a year 
2004-2007 but slowed to about 4 percent in 2008.  GDP growth 
estimates for 2009 range from negative 2 percent to negative 
4.4 percent.  Inflation surpassed 10 percent in 2008, but 
began decelerating late in the year with the fall in oil 
prices and consumption.  Current year-over-year inflation 
stands at 3.1 percent. 
 
¶9. (U) Because of a strong commercial relationship with the 
U.S., Honduras has been feeling the effects of the recession, 
especially in the export-oriented maquila sector, where 
orders are estimated to be down about 40 percent and where 
about 30,000 have been laid off since August 2008 out of a 
pre-crisis workforce of about 145,000.  Commercial bank 
balance sheets remain healthy, but banks are being extremely 
conservative about lending, so businesses are 
credit-constrained.  As of the end of August, Honduras had 
USD 2,109.6 million of Net International Reserves (NIR), down 
14.2 percent from December 2008.  Data indicates that the de 
facto regime will likely have sufficient Foreign Exchange 
reserves to meet their Foreign Exchange requirements, 
including financing trade, until mid-January, despite 
maintaining a fixed exchange rate policy. 
 
¶10. (U) The Central American-Dominincan Republic Free Trade 
Agreement (CAFTA-DR) entered into force for Honduras on April 
1, 2006.  Two-way trade with Honduras in 2008 was USD 8.8 
billion, up 6 percent from 8.37 billion in 2007.  Exports of 
non-traditional goods such as apparel and automobile parts 
now surpass traditional exports like coffee and bananas. 
From 2005 to 2008, the inflow of Foreign Direct Investment to 
Honduras increased from USD 600 million to more than USD 1 
billion and trade between Honduras and the U.S. increased 
from 7 billion to 8.9 billion.  Honduran imports from the 
U.S. have grown much faster under CAFTA than Honduran exports 
to the U.S.   With the economic downturn, exports were down 
almost 14 percent in the first half of 2009, while imports 
showed even greater declines, as evidenced in press reports 
noting that customs collections were down 39.8 percent. 
Meanwhile, during the first quarter of 2009, Foreign Direct 
Investment (FDI) was down 17 percent relative to the same 
period in 2008. 
 
¶11. (U) Roughly 200 U.S. companies operate in Honduras, and 
the U.S. is the largest principal investor, contributing 
almost 60 percent of total FDI.  However, increased foreign 
direct investment is hindered by public insecurity, weak 
judicial protections of investor rights, corruption and, most 
recently, the political crisis.  There are approximately 
15,000 U.S. citizens living in Honduras, many of whom work at 
U.S. owned companies or own businesses themselves. 
Remittance inflows from Honduras living abroad, particularly 
in the U.S., are the largest source of foreign exchange, 
reaching USD 2.71 billion in 2008.  The total flow is 
equivalent to about one-fifth of GDP and is 13.1 percent 
lower in 2009 over 2008, primarily because of the economic 
recession. 
 
¶12. (U) The global recession, which hit exports and 
remittances especially hard, placed downward pressure on the 
Honduran economy.  The June 28 coup and the ensuing political 
crisis, with its aftermath of rolling curfews and political 
unrest, exacerbated the effects of the global economic 
crisis.  Business associations report that uncertainty about 
the political future of Honduras is hindering both 
international and domestic investment.  Tourism and 
hospitality, the third largest revenue source in Honduras, is 
significantly down since June 28. 
 
Bilateral Assistance 
-------------------- 
 
¶13. (U) The United States has historically been the largest 
bilateral donor to Honduras.  Over the years, U.S. foreign 
assistance has helped advance such objectives as fostering 
democratic institutions, increasing private sector employment 
and income, helping Honduras manage its arrears with 
international financial institutions, providing humanitarian 
aid, increasing agricultural production, and providing loans 
to microbusiness.  The Department of State on September 3 
announced the termination of a broad range of assistance to 
the government of Honduras as a result of the coup d'etat 
that took place on June 28. 
 
Military to Military Relations 
------------------------------ 
 
¶14. (U) The U.S. and Honduran militaries worked together for 
many years until the June 28 coup when assistance was 
suspended and subsequently terminated on September 3.  Joint 
Task Force-Bravo, located at Enrique Soto Cano Air Base in 
Comayagua is comprised of approximately 1,200 assigned 
personnel, of whom about 575 are military while the remainder 
includes both locally engaged staff (LES) and civilian 
contractors who provide base support, communications services 
and helicopter maintenance.  JTF-Bravo forces maintain and 
operate an all-weather C-5 capable airfield and provide the 
U.S. with an agile response capability in Central America. 
Recent humanitarian assistance/disaster relief operations 
include flooding relief in Honduras, Costa Rica and Panama in 
November 2008, earthquake relief in Costa Rica in January 
2009, and search and rescue operations for American citizens 
missing off the coast of Honduras.  Military cooperation with 
Honduras has been suspended since the June 28 coup d'etat. 
Since the coup, JTF-Bravo operations have been suspended. 
 
Crime and Security 
------------------ 
 
¶15. (SBU) Honduras is a critical threat post for crime, the 
highest level possible within the Department of State. 
Widespread poverty and unemployment, along with significant 
gang and narco-trafficking activities have all contributed to 
the incredibly high crime rate.  An undermanned, poorly 
trained and poorly equipped police force, easily susceptible 
to corruption, can do little to deter criminal activity.  The 
weak judicial system and lack of will to enforce existing 
laws for fear of reprisal allows criminals to act with near 
impunity.  Kidnappings have been on the rise in recent years 
with large ransom demands being paid out and only a fraction 
of the kidnappers being caught by the Honduran police.  The 
recent political crisis has only added to the already poor 
security situation.  While the majority of pro-Zelaya 
demonstrations have been peaceful, a number of them have 
turned violent and clashes have occurred between security 
forces and demonstrators resulting in several dead and 
wounded. 
 
 
 
 
 
LLORENS