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C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 000160

SENSITIVE
SIPDIS

STATE FOR WHA

E.O. 12958: DECL: 02/19/2020
TAGS: EAID ECIN EINV ENRG KJUS PGOV HO
SUBJECT: ALLEGATIONS OF CORRUPTION SURROUND DAM MANAGEMENT
CONCESSION

Classified By: Ambassador Hugo Llorens for reasons 1.4 (b & d)

¶1. (SBU) Summary: A last minute concession granted to a
Honduran-Italian consortium by the Micheletti regime has
erupted into a scandal. Critics allege that the deal was
approved by outgoing Congressional leadership without a vote
and hastily signed into law by the outgoing administration.
The deal was published in a rump volume of the government's
official register, leading to a belief that the Micheletti
administration was attempting to cover it up. While the
alleged cover-up has dominated headlines, the concession
itself is a more serious issue. President Lobo's Council of
Ministers decided in its first meeting (before the issue of
the rump register surfaced) to appoint a commission to look
into the issuance of the concession, along with other
decisions made by the Micheletti regime. The Supreme
Accounting Tribunal is also investigating. While de facto
regime leader Roberto Micheletti and his colleagues portrayed
themselves as practitioners of efficient and honest
government, they appear to have cut a significant number of
back-room deals, which were egregious even by local
standards. The dam concession is the prime example.

¶2. (C) Summary continued: Credible Embassy sources have
directly implicated Micheletti and some of his closest
business partners in this deal. End summary.

¶3. (U) On February 11, Honduran newspapers reported that two
versions of the official publication "La Gaceta", the
equivalent of the U.S. Federal Register, had been published
on the same date and with the same serial number on January
¶22. The difference was that the first version contained a
decree granting a concession contract for the improvement,
operation, and exploitation of the Jose Cecilio del Valle dam
and hydroelectric plant near Nacaome to a Honduran-Italian
consortium. About 20 copies of this version were printed.
In the remaining copies, with the same date and serial
number, this entire 24-page section was missing. (The dam
section was also dropped from the table of contents.)

¶4. (U) Suspicions abound that this is part of a cover-up
involving the concession, although it is not exactly clear
what aspect of the double Gaceta publication purportedly
constitutes a cover-up. Since a law in Honduras cannot go
into effect until it is published in the "Gaceta", several
sources quoted in the newspapers said this was an attempt by
the Italian consortium to get the final seal of approval on
the deal, even though there may be outstanding doubts or
questions. Whether through covert schemes or procedural
error, government leaders have promised an investigation. In
the meantime, the new manager of the government printing
office, Martha Alicia Garcia, who started her job on February
1, announced on February 12 that both editions of the
"Gaceta" in question were nullified. Far from solving the
situation, this announcement further obfuscated it, with
several parties questioning her authority to nullify a
publication of the law.

¶5. (U) Even before the issue of the "Gacetas" arose, the
government had decided to review the dam concession as well
as a number of other decisions taken by the de facto regime.
While the question of the "cloned" Gaceta is dominating the
headlines, the dam concession itself is a more important
issue. On January 13, near the end of its term, the congress
approved the concession to a consortium which included the
Italian companies Italian Industrial Agency S.R.L. and B&P
Altolumie SNS, and the Honduran firms Hidrocontrol S.A. and
Desarrollo y Construcciones y Equipos S.A. The consortium,
known as Electrica de Nacaome S.A. (ENASA), was granted the
concession to manage the dam, which was built in the 1990's,
in exchange for promises to make improvements and to pay the
Honduran government 1 million Lempiras (approximately USD
53,000) per year. The de facto regime leader, Roberto
Micheletti, signed the law on January 20. Congresswoman Ana
Julia Garcia, along with others, raised objections afterwards
that the law was rushed through the system, without enough
time to give thorough consideration to all the implications

TEGUCIGALP 00000160 002 OF 002


of the decree such as costs to the GOH and loss of other
benefits. For example, a plan by the Italian government to
grant 25 million Euros (USD 34 million) for expansion of
power generation capabilities would not proceed if the
management of the facility were in private hands. Also,
recent reports indicate a concession to manage part of the
dam operations had already been granted to a Spanish firm.
The press reports also indicated that the concession was
granted without the normal bidding process.

¶6. (U) Jose Alfredo Saavedra, who assumed the presidency of
congress when Roberto Micheletti took power as head of the de
facto regime, was presiding over congress at the time the
bill was passed and has downplayed suggestions of
impropriety. However, citizen and congressional concern,
especially from the region of the country where the dam is
located, has stopped the implementation of the concession and
brought about investigations in Congress, the Attorney
General's office, and other agencies charged with combating
corruption.

¶7. (C) According to Embassy sources, Micheletti was one of
the Honduran partners in the consortium granted the
concession. The chief actors included Saavedra, Micheletti
Minister of Public Works Saro Bonanno, and Micheletti
intimates Johnny Kafati and Roberto Turcios. It is
inconceivable that this deal could have been put together
without Micheletti's knowledge.

¶8. (SBU) Comment: While Micheletti and his colleagues
portrayed themselves as practitioners of efficient and
honest government in contrast to President Manuel Zelaya's
chaotic administration, they appear to have cut a significant
number of back-room deals, which were egregious even by local
standards. The approval of a huge hydroelectric deal, with
such little benefit to the state, just a week before the
regime left office is the prime example. Members of congress
and others who in normal times would have exercised scrutiny
were distracted by the political crisis and the elections.
The Lobo administration's decision to review these deals is
wise given the president's assurance that he will take on
corruption. End comment.
LLORENS