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C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 000142 
 
SIPDIS 
 
STATE FOR WHA 
 
E.O. 12958: DECL: 02/16/2020 
TAGS: ECON EINV ENRG EPET ETRD HO
SUBJECT: AMBASSADOR MEETS WITH OIL COMPANY REPRESENTATIVES 
 
REF: A. 09 TEGUCIGALPA 1336 
     ¶B. 09 TEGUCIGALPA 1285 
 
Classified By: Ambassador Hugo Llorens for reasons 1.4 b and d. 
 
 
This message contains an action request.  See paras 1 and 4. 
 
¶1. (C) The Ambassador met with representatives from the oil 
industry on February 11 to discuss continuing concerns 
regarding the government's fuel pricing formula.  Although 
the de facto regime addressed oil importers' most important 
concern when it allowed companies to charge a higher price 
for premium than for regular gasoline (ref A), the new 
government is reviewing this decision.  Consumer advocates 
are making a high-profile push for a return to the previous 
formula.  The oil industry representatives told the 
Ambassador that they had raised their concerns in meetings 
with government officials, including Minister of Trade and 
Industry Oscar Escalante.  The Ambassador said that he had 
also raised the issue with Escalante and promised to mention 
it to President Lobo as well.  (Note:  The Ambassador 
mentioned the issue to President Lobo in a meeting on 
February 14, and with Minister to the Presidency Maria 
Antonieta Bogran on February 16.  End Note)  The Embassy is 
making the case that the existing price formula imposed on 
the oil industry ensures continued operating losses for U.S. 
firms, and we are pressing the GOH to take action soonest to 
provide relief.  In a separate discussion, Minister of 
Finance William Chong Wong asked the Economic Counselor for 
any objective information that the USG can provide on this 
issue, including on the potential economic impacts of a move 
to free-market pricing.  Embassy Tegucigalpa would appreciate 
any information the Department can provide.  End summary. 
 
¶2. (SBU) The Ambassador met with representatives from the oil 
industry on February 11.  Participants included Carlos 
Ernesto Reyes of Chevron Caribbean, Roberto Alvarado and 
Mario Sierra of DIPPSA, Daniel Mencia of Exxon Mobil, 
Fernando Ceballos of Hondupetrol/Shell, and Mario Cid of 
COHPETROL, the oil industry association.  The Economic 
Counselor and EconOff also attended the meeting.  The oil 
industry representatives expressed concern about the 
possibility that the government would reverse a decision of 
the de facto regime to abolish a Zelaya administration policy 
requiring oil importers to sell premium gasoline at the price 
set for regular.  Representatives of Texaco/Chevron and Exxon 
had told Embassy representatives at previous meetings that 
they were losing money in Honduras due to the Zelaya 
administration policy.  The oil industry representatives said 
that they had met with Minister of Industry and Commerce 
Oscar Escalante on the issue and were scheduled to meet with 
President Lobo's first designate, Maria Antonieta Bogran, who 
oversees the office of the Presidency, as well.  (They said 
that it is their understanding that Bogran will be the point 
person within the government on the issue.  Note:  In a 
meeting with the Ambassador on February 16, Bogran briefed us 
on her session with the oil companies and said she was 
looking for a way to find an equitable solution that was 
accountable to both the oil companies and the Honduran 
consumer.  The Ambassador noted that the existing price 
formula was forcing U.S. oil companies to lose money and was 
not a sustainable policy.  The Ambassador insisted that a 
solution be found soonest.  End Note) 
 
¶3. (SBU)  The Ambassador told the oil industry 
representatives that he had discussed the issue with Minister 
of Trade and Industry Oscar Escalante, emphasizing to 
Escalante that the oil companies had invested in Honduras and 
deserved a fair return.  He pledged to raise the issue with 
President Lobo as well. (Note:  The Ambassador raised the 
issue during a meeting with Lobo on February 14.  Lobo 
confirmed that he had tasked Bogran to conduct a policy 
review of the issue and seek a solution that worked for all 
sides.  End Note) The Ambassador emphasized that a decision 
to allow gasoline to be sold at a fair market price would 
send a clear signal to potential investors that investment in 
Honduras is a profitable endeavor.  Carlos Reyes of Chevron 
told the Ambassador that the first stage of repairs to 
 
TEGUCIGALP 00000142  002 OF 002 
 
 
Chevron's Honduras terminal, which was damaged in an 
earthquake in May, was underway, but that, due to lingering 
uncertainties about the fuel formula issue, the more 
extensive second phase of repairs had not been authorized. 
 
¶4. (C)  Comment:  The Lobo government is undertaking this 
review as part of a broader review of de facto regime policy 
decisions.  Consumer advocate Juliette Handal has been 
engaged in a high-profile effort to have the de facto 
regime's decision reversed.  A motion to reverse the decision 
was introduced in Congress but was defeated. 
¶5. (C) Comment and Action Request:  In a separate discussion 
on February 12, Minister of Finance William 
Chong Wong told the Economic Counselor that President Lobo is 
trying to obtain as much objective information on fuel 
pricing as possible, including information on the economic 
effects of a potential move to allow free-market pricing.  We 
would like to take advantage of this opportunity to encourage 
the Lobo government not merely to continue to allow a higher 
price for premium than for regular but to move to a 
free-market pricing system.  Embassy Tegucigalpa would 
appreciate any information that the Department can provide 
that would demonstrate the benefits of free-market pricing. 
We understand that other countries in the region have 
deregulated fuel prices in recent years and may be a source 
of useful information.  We would need to provide this 
information quickly, since a decision on the issue is likely 
to take place soon.  Point of contact is Economic Counselor 
Mary Grace McGeehan. 
LLORENS