US embassy cable - 03TEGUCIGALPA2467

C O N F I D E N T I A L SECTION 01 OF 09 TEGUCIGALPA 002467 
 
SIPDIS 
 
STATE FOR S, D, P, WHA, EB, CA, INL, DRL, PM, AND WHA/CEN 
NSC FOR SHANNON 
STATE PASS AID FOR LAC/CEN 
 
E.O. 12958: DECL: 10/21/2013 
TAGS: OVIP, PREL, PGOV, ETRD, PTER, SNAR, PHUM, ELAB, HO 
SUBJECT: SCENESETTER FOR SECREATRY POWELL'S VISIT 
 
 
Classified By: Political Councelor Francisco Palmieri; 
Reasons 1.5 (B) and (D). 
 
1. (C) Summary:  Honduran President Ricardo Maduro, nearly 
half way through his constitutionally mandated single 
four-year term, faces an uphill battle in one of the poorest 
and most corrupt countries in the Western Hemisphere.  His 
administration, having never been quite able to muster the 
political support necessary to move forward on an ambitious 
domestic agenda, has stalled and is making little progress on 
the myriad challenges facing the nation.  Bilateral relations 
between the U.S. and Honduras are excellent; Honduras was the 
first country in the Western Hemisphere to sign and ratify an 
ICC Article 98 Agreement with the United States.  Honduras' 
support for the international counterterrorism effort is 
steadfast and the Government of Honduras (GOH) has sent 
troops to Iraq in support of Operation Iraqi Freedom.  End 
Summary. 
 
------------------------------------ 
Key Issues in Bilateral Relationship 
------------------------------------ 
 
2. (C) The central themes in our bilateral diplomatic efforts 
in Honduras are combating international crime by 
strengthening governance and attacking corruption, assisting 
American citizens, fostering economic development, promoting 
regional stability, promoting trade and investment, and 
combating terrorism.  However, the underlying difficulty to 
realizing USG objectives is improving the administration of 
justice and rule of law.  President Ricardo Maduro's 
government is rhetorically committed on all of these issues, 
but has made very little substantive headway in addressing 
the many problems Honduras faces.  While Maduro has also 
spoken out strongly on tackling corruption, he faces 
formidable challenges from entrenched economic and political 
interests in moving his reform agenda forward. 
 
------------------------------- 
Status of the Maduro Government 
------------------------------- 
 
3. (SBU) President Maduro faces relentless criticism from the 
political opposition over his government's policies and 
continued dissatisfaction from his own party's Members of 
Congress because of his administration's technocratic and 
insular style.  Despite an excellent relationship with the 
current President of Congress and his leadership team, the 
Congress' rank-and-file membership is a focal point of 
political opposition to his policies.  Overall, the 
unicameral body is a corrupt institution riddled with 
avaricious politicians, and Maduro's National Party does not 
control a majority.  In July, Maduro's coalition partner, the 
Christian Democrats, defected thereby denying Maduro a 
majority in Congress.  Ongoing political problems within his 
own party are serious and are undermining his broader 
political agenda.  Maduro's technocratic cabinet is 
politically tone-deaf and continues to eschew the necessary 
political negotiations that are required to advance 
legislation.  Maduro's personal life has likewise intruded 
into the political sphere.  His October 2002 wedding to a 
Spaniard was criticized by many Hondurans who viewed the 
President as distracted by his personal life.  A recent 
public squabble between the First Lady and the very popular 
Minister of Culture (Maduro's ex-fiancee) was an excruciating 
embarrassment for the President. 
 
4. (SBU) The President's popularity remains low.  Faced with 
negligible progress in his efforts to promote economic growth 
or reach an IMF agreement, Maduro's team is hoping that a 
U.S.-Central American Free Trade Agreement (CAFTA) can serve 
as a catalyst to spur regional economic cooperation and 
integration.  Public security is one area that the public has 
awarded grudging credit to Maduro's team.  He has fulfilled 
his promise to launch a "zero tolerance" law and order 
campaign.  Notwithstanding his crackdown on street crime, 
criminal investigations are usually inadequate and case 
closure rates, in particular for homicides, remain extremely 
low. 
 
---------------------------- 
Counterterrorism Cooperation 
---------------------------- 
 
5. (SBU) Maduro is a good and reliable friend of the U.S. on 
counterterrorism.  The GOH has responded quickly to all USG 
requests regarding terrorist threats and financing, and to 
date no terrorist assets have been found in Honduran 
financial institutions.  The GOH, however, still needs to 
take action to sign and/or ratify the two outstanding 
international conventions/protocols and two OAS conventions 
(1971 and 2002) against terrorism.  It is also of vital 
importance for Honduras to improve security at its maritime 
ports, particularly Puerto Cortes. 
 
---- 
Iraq 
---- 
 
6. (C) The GOH is very supportive of key USG foreign policy 
goals and is a member of the Coalition of the Willing.  In 
support of Operation Iraqi Freedom (OIF), the GOH deployed 
some 370 troops to the vicinity of An Najaf as part of the 
Spanish Brigade operating under the Polish Division.  The 
troops departed Honduras August 10-13 and are scheduled to be 
rotated with a second contingent in February 2004.  Central 
American units from El Salvador, Nicaragua, and the Dominican 
Republic are also serving under Spanish command.  In August, 
CJCS GEN Myers and Secretary Rumsfeld visited Honduras to 
thank the GOH for its support of OIF.  Their visits were well 
received and provided important political support for 
Maduro's Iraq policy. 
 
7. (C) While President Maduro has consistently supported 
overall USG foreign policy objectives, particularly U.S. 
efforts to create a stable and peaceful Iraq, the general 
population at large, however, is far less enthusiastic. 
Recent polls demonstrate that a majority of Hondurans do not 
support the troop deployment to Iraq.  If Honduran troops 
suffer casualties there, the Maduro government will be 
subjected to intense domestic criticism which could undercut 
its staying power in Iraq. 
 
----------------------------------- 
Bilateral Political/Military Issues 
----------------------------------- 
 
8. (U) Honduras was the first country in all the Western 
Hemisphere to sign and ratify an Article 98 Agreement with 
the United States.  In January of 1999, the constitution was 
amended to abolish the position of military commander in 
chief of the Honduran Armed Forces (HOAF), thus codifying 
civilian authority over the military.  Honduras now has a 
civilian Minister of Defense (MOD) and a Chief of the Joint 
Staff who heads the HOAF.  Civilian control over the HOAF is 
complete.  This transition has resulted in greater 
transparency and fiscal accountability. 
 
9. (SBU) The current MOD, Federico Breve, enjoys a good 
relationship with the HOAF military leadership, but the 
Office of the Minister of Defense continues to lack a staff 
that could provide institutional memory and continuity 
between the change in political administrations.  Despite 
some reticence from the HOAF, President Maduro (together with 
MOD Breve) have reoriented the armed forces away from a more 
traditional focus towards the new wide range of 
trans-national threats, including counterterrorism, 
narcotrafficking, and combating international criminal 
organizations.  The HOAF is also interested in establishing 
an ability to participate in international peacekeeping 
operations and is seeking USG assistance through the Enhanced 
International Peacekeeping Capabilities (EIPC) initiative. 
10. (C) While supportive of U.S. efforts, President Maduro 
and his military advisors are very aware that Nicaragua and 
El Salvador have received large amounts of FMF funds.  They 
are likely to question why Honduras, even though it has been 
a staunch political and military supporter in the region, has 
not received any funds for many years.  (Note:  Honduras is 
scheduled to receive USD 168,000 in fall-out FMF funds made 
available from countries who have not completed Article 98 
Agreements with the USG, although it remains unclear when 
this money will be dispersed.  End Note.) 
 
11. (SBU) In January 2002, Honduras formally requested 6 
UH-1H helicopters through the EDA program.  However, because 
of changes in U.S. law, the cost of the helos rose from about 
USD 700,000 to USD 4.2 million - an amount the GOH was unable 
to afford.  The original Letter of Agreement expired some six 
months ago.  In early August, however, MOD Breve renewed his 
request for UH-1H helicopters, and also asked if there was 
any way to get them either free (i.e. under section 516 as 
grant aid at no cost to the GOH), or at an extended payment 
plan, i.e. 15 years.  The AMB and country team strongly 
support any assistance in this area since the principal use 
for these helos would be to support GOH counternarcotics 
operations.  The current Honduran fleet of UH-1H helicopters 
is in poor condition with a limited life expectancy. 
 
------------------------------------------- 
Soto Cano Air Base - Joint Task Force Bravo 
------------------------------------------- 
 
12. (SBU) Five hundred sixty-five U.S. service men and women 
and eleven civilian DOD employees are currently stationed at 
Honduras' Soto Cano Air Base under the auspices of SOUTHCOM 
as Joint Task Force Bravo.  In 1954, the USG and GOH signed a 
Bilateral Military Assistance Agreement that set forth their 
intention to work closely together to foster peace and 
security in the Western Hemisphere.  The ICC Article 98 
Agreement with Honduras is therefore a particularly important 
accomplishment and will enable our military forces to 
continue to work together in such areas as disaster relief, 
joint training exercises, and counternarcotics missions. 
 
------------------- 
Cerro La Mole Radar 
------------------- 
 
13. (C) In 1993, the U.S. entered into an agreement with the 
GOH regarding the maintenance of the radar located at Cerro 
La Mole, under which the U.S. military agreed to pay 75 
percent of maintenance costs up to USD 400,000 per year.  To 
date, the U.S. has paid nothing under the agreement, (OSD/CN 
cited U.S. law that does not allow the USG to fund radars 
operated by foreign nationals) and the issue continues to be 
a sore spot between the U.S. and Honduran militaries.  The 
Embassy has pressed DOD and State on how best to resolve the 
U.S. obligation, and recommended that the U.S. either replace 
the radar with a solid state version (TPS-78) or with another 
TPS-70 transferred from counterdrug programs.  When 
operational, the radar provides a view of the 
Honduras-Nicaragua-El Salvador border areas and the Gulf of 
Fonseca on the Pacific Ocean, a corridor that cocaine laden 
aircraft regularly exploit on their illegal flight paths to 
Guatemala, Belize, and beyond.  A functioning radar in this 
location could greatly enhance Honduran capability to 
intercept and track these illegal flights.  The MOD and CHOD 
have agreed to share all data from this radar with the U.S. 
and with its neighbors.  Additionally, this radar would be a 
much-needed first step in eliminating the 10 mile "no fly" 
(without advance notice) corridor between the Honduran and 
Nicaraguan border - currently a safe haven for illegal 
flights. The Country Team strongly supports current efforts 
to transfer a radar from Venezuela (currently being 
dismantled) through EDA to Honduras in December of this year. 
 
------------------ 
F-5's for MANPADS? 
------------------ 
 
14. (C) Honduras maintains a fleet of aging F-5 aircraft as 
part of its overall defense structure, providing Honduras 
with the most lethal air force in the region.  Honduras has 
been encouraged to reduce or eliminate its fleet of F-5's as 
a quid-pro-quo to Nicaragua, which is being pressured to 
significantly reduce its stock of Man Portable Air Defense 
Systems (MANPADS).  Honduras has strongly rejected these 
efforts, suggesting that its fleet of F-5's should not be 
linked in any way to steps on the Nicaraguan MANPADS, which 
are a potential terrorist weapon.  These issues were 
discussed, but not linked, at an August 11 regional 
disarmament conference hosted by Managua that focused on 
reducing small arms and MANDPADS.  Honduras is not opposed to 
discussing the future of its F-5 aircraft in the context of 
regional disarmament.  However, any bilateral discussions 
with Nicaragua on that topic have so far been unacceptable. 
 
---------------- 
Border Relations 
------------------ 
 
15. (SBU) Honduras has border disputes with its three Central 
American land neighbors and its seven maritime neighbors. 
Maduro is personally engaged with his Presidential 
counterparts to address these issues.  Its land and maritime 
disputes with El Salvador and Nicaragua are the most heated. 
The Gulf of Fonseca on the Pacific coast is a particularly 
difficult point.  A 1992 International Court of Justice (ICJ) 
ruling laid out shared areas of control in the Gulf of 
Fonseca and established the land border between Honduras and 
El Salvador, although El Salvador has been slow to implement 
the ruling.  In September 2002, El Salvador requested a 
revision of the 1992 ICJ ruling.  Honduras has responded to 
this request and remains confident the Court will not revise 
its original ruling.  In the interim, the Organization of 
American States (as a neutral third party) is providing both 
nations technical assistance to help them implement the 
non-disputed elements of the ICJ's ruling. 
 
16. (SBU) On the Caribbean coast, Honduras and Nicaragua have 
a long-standing maritime border dispute over the 15th 
parallel.  In the past, the dispute has threatened to derail 
trilateral counternarcotics operations.  Honduras provoked 
Nicaraguan retaliation when it signed a maritime treaty with 
Colombia recognizing the 15th parallel as its maritime border 
in 1999.  Nicaragua filed an ICJ case over the maritime 
border and more importantly in 1999 slapped a punitive 35 per 
cent tariff on Honduran goods.  This tariff remained in place 
until April of this year despite a Central American Court of 
Justice ruling that it was illegal.  Only after Honduras 
responded with a retaliatory tariff, threatening Nicaraguan 
exports, did Managua rescind the tax.  Tensions still exist 
between the GOH and Nicaragua over this issue, hampering 
regional integration and couternarcotics efforts. 
 
----------------- 
Economic Overview 
----------------- 
 
17. (SBU)  Honduras, with a per capita income of USD 950, is 
the third poorest country in the Western Hemisphere ahead of 
only Nicaragua and Haiti.  The economy is still growing 
(about 2.5 percent per year) but slower than the population 
growth rate of 3.5 percent per year.  Social indicators are 
improving, but two-thirds of all Hondurans live in poverty 
and average education levels are very low.  Historically low 
world coffee prices have hit rural areas particularly hard 
(although up some this year, coffee prices are still below 
the cost of production, forcing major cutbacks in planting, 
fertilizing, harvesting and investment).  The economy 
continues to be dominated by agriculture, particularly the 
production of bananas, coffee, cultivated shrimp, melons and 
other fruits, vegetables and grains. 
 
18. (SBU) The apparel assembly (maquila) sector grew 
dramatically in the 1990s reaching peak employment in 2000 of 
about 120,000 people.  Activity slowed after 2001 because of 
the U.S. economic slowdown in 2001-2002 and increased 
competition from Asia, but the sector appears to be 
rebounding this year.  While there has been some economic 
diversification (melons, cultivated shrimp, palm oil), there 
continues to be a large subsistence farmer population with 
few opportunities other than illegal immigration to the U.S. 
The Honduran government's desire to attract new types of 
foreign investment has been hindered by the stagnant economy 
and a wide range of investment climate/competitiveness 
problems. 
19. (SBU) Remittances from Hondurans abroad, particularly the 
U.S., continue to grow rapidly and have become the most 
important source of foreign exchange.  The U.S. is Honduras, 
largest trading partner.  The roughly 150 U.S. companies that 
do business in Honduras constitute the largest block of 
foreign direct investors. 
 
--------------------------------------------- ------------ 
Stubborn Fiscal Deficits Endanger IMF Program/Debt Relief 
--------------------------------------------- ------------ 
 
20. (C) President Maduro inherited a stagnating economy and 
seriously deteriorated government finances from the previous 
administration.  The difficult negotiations with the IMF have 
dominated much of Maduro,s time and that of his economic 
cabinet since assuming office.  The GOH has passed two tax 
packages in two years in order to stabilize the government's 
finances and reach a badly-needed agreement with the IMF, but 
have so far balked at measures that will rein in spending 
(particularly halting the uncontrolled growth in teacher and 
doctor salaries) and create a professional civil service. 
The Maduro administration and Congress, however, are hesitant 
to push through these needed reforms because of political 
opposition from teachers and medical workers who currently 
benefit from special legislation that gives them annual 
salary increases well above inflation.  In recent months, it 
also has become apparent that the tax measures were not 
sufficient to significantly improve revenue collection and 
meet government targets.  In addition, the IMF has pointed to 
repeated debt forgiveness legislation for farmers as 
undermining the government's finances as well as the banking 
system.  USG assistance is being provided to the GOH for both 
improvement in tax administration and implementation of civil 
service reform. 
 
21. (SBU) Significant multilateral and bilateral donor 
disbursements (USD 140 million) will be held up until a new 
IMF program is in place.  There is also pressure on the GOH 
to make renewed Paris Club debt service payments (USD 100 
million per year) and the lack of an IMF agreement is 
delaying Honduras, attainment of the completion point for 
Heavily Indebted Poor Country (HIPC) debt relief (USD 900 
million in present value terms).  Starting in July 2003, 
Honduras has had to resume payments of debt service on old 
DOD loans to avoid a cut-off of USG assistance under the 
Brooke Amendment.  With the lack of an IMF agreement, old 
Eximbank loan payments also became past due, and the agency 
has now gone off-cover for official loans to Honduras. 
 
------------------------------------------- 
CAFTA, Trade Capacity Building, and the MCA 
------------------------------------------- 
 
22. (SBU) In the CAFTA negotiations, the Honduran government 
is seeking to (1) make permanent the market access provided 
under CBTPA; (2) improve its textile and apparel sector's 
ability to compete with Asia as worldwide quotas are lifted; 
(3) increase its market access in the U.S. in products such 
as sugar, poultry, beef, and dairy, and (4) protect its 
agricultural sector from massive disruptions as much as 
possible.  The most controversial chapter of the agreement 
for Honduras is agricultural market access.  The Honduran 
Trade Ministry has repeatedly asked the Embassy to urge USTR 
to "broaden its focus from commercial advantage to economic 
development."  The Honduran delegation has also been seeking, 
in the context of the CAFTA agreement, a temporary entry 
program for unskilled laborers; this would be unacceptable to 
the US delegation, because of its inherent change to 
immigration policy and strong U.S. Congressional opposition. 
 
23. (SBU) In discussing CAFTA, President Maduro may request 
large financial grants for the Central American countries to 
ease the adjustment to free trade with the U.S. (pointing to 
the example of the large financial transfers provided to 
Spain and Portugal as part of their accession to the European 
Community.)  Much of USG assistance to Honduras focuses 
heavily on assistance to the trade ministry, agricultural 
diversification, micro-enterprise development, and other 
trade capacity projects.  This bilateral assistance is 
supplemented by large and active programs by the World Bank, 
Inter-American Development Bank and other bilateral and 
regional donors.  However, the Honduran government has been 
arguing for far greater sums and may prepare a Millennium 
Challenge Account proposal for trade adjustment (Honduras 
appears to have a good chance at qualifying in the first year 
for the MCA, its fiscal  problems notwithstanding.)  Finally, 
Honduran interlocutors may repeat a request made earlier in 
the year that the USG fold into CAFTA some incentives for US 
companies to invest in Central America, such as tax 
incentives provided to companies in the 1960s to invest in 
Puerto Rico. 
 
24. (SBU) CAFTA ratification problems in Honduras are not 
expected, as long as the final agreement provides strong new 
opportunities in textiles and apparel, and some market access 
openings for non-traditional Honduran agricultural exports to 
the U.S.  In the U.S. Congress, concerns about labor rights 
enforcement are expected to be centered on countries other 
than Honduras, but we have been urging the GOH to do what it 
can to improve enforcement of core labor rights and 
environmental protection in Honduras.  At the beginning of 
2003, the USG banned exports of harvested shrimp from 
Honduras because of lack of adherence to laws on the 
protection of sea turtles. 
 
----------------------- 
Counternarcotics Issues 
----------------------- 
 
25. (C) Honduras' geography places it squarely in the middle 
of a major illegal drug trans-shipment zone.  Current U.S. 
estimates are that between 80-100 tons of cocaine transit the 
country annually on the way to the U.S. market.  Honduras' 
airspace is regularly violated by drug traffickers, who also 
use go-fast boats to transit their cocaine through the 
Western Caribbean region.  Heroin and marijuana are likewise 
trafficked through Honduras on a lesser scale, although 
heroin trafficking appears to be increasing.  Recently, the 
Embassy has noted an increase in drugs-for-guns bartering 
between Colombian terrorist organizations and local Honduran 
smugglers. 
 
26. (C) Honduras, under heightened Embassy pressure to 
increase its effectiveness on narcotics interdiction after 
disappointing results in 2001 and 2002, has risen to the 
occasion.  The GOH has seized approximately 4,962 kilos of 
cocaine this year, more than the previous five years 
combined.  While seizure rates have expanded significantly 
this year, endemic corruption in the judiciary, Public 
Ministry (Attorney General's office), and the police continue 
to hamper long-term efforts to increase the rule of law and 
effectively prosecute, sentence, and incarcerate drug 
traffickers.  Despite the increased seizures, there does not 
appear to be any drop-off in the amount of drugs transiting 
the country. 
 
27. (C) Under pressure from the USG to interdict more drugs, 
the Honduran Air Force shot-down an intruding Colombian 
aircraft carrying approximately 942 kilos of cocaine in 
April, killing the plane's two Colombian crewmembers. 
SOUTHCOM temporarily suspended sharing of air-track 
information pending reconfirmation from the GOH that Honduras 
has a "no shoot-down" policy.  The Embassy obtained such 
assurances and the GOH has stated unequivocally that the 
incident was an aberration.  Honduras is fully aware that 
under U.S. law, the USG is not allowed to share tactical 
air-track information with countries that employ a shoot-down 
policy.  SOUTHCOM has since restored sharing air-track 
information with the GOH. 
-------------- 
Anticorruption 
-------------- 
 
28. (C) Honduras was recently ranked 106 out of 133 counties 
surveyed by Transparency International, an NGO that tracks 
international corruption issues.  Only Ecuador, Haiti, and 
Paraguay scored lower in the Western Hemisphere.  U.S. policy 
to combat endemic corruption has struck a nerve in Honduras, 
especially any mention of our visa revocation authorities. 
Politicians in Congress and certain business elements feel 
the U.S. is attacking them.  Maduro has stated he is willing 
to address corruption, even if it will cost him political 
support within his party, but real achievements to date have 
been lacking.  Of particular concern are individual judges 
and prosecutors who remain susceptible to offers of bribes. 
Also, the current Attorney General, whose term expires in 
March 2004, is simply unwilling to prosecute high-profile 
cases.  Given the scope of the problem, any public discussion 
about the country's pervasive corruption is a positive 
development. 
 
---------------------------------- 
Money Laundering and Bank Failures 
---------------------------------- 
 
29. (C) Strengthened money laundering legislation, with an 
anti-terrorist financing clause, was passed in early 2002 and 
the GOH followed up rapidly with creation of a Financial 
Information Unit (FIU) for investigation of financial crimes. 
  Currently, over 150 potential cases of money laundering are 
under investigation.  However, without greater participation 
from the slow and corrupt Public Ministry responsible for 
prosecuting such cases, results will be minimal. 
 
30. (C) Weakness of the financial system remains a key 
concern  The GOH took over the two most troubled banks in May 
2002 (one has since been closed), arranged for the absorption 
of a third undercapitalized bank, and is actively promoting 
mergers among the remaining 20 private banks. 
 
--------------------------------- 
Supreme Court and Judicial Reform 
--------------------------------- 
 
31. (SBU) The current Supreme Court is developing into an 
independent branch of power, unlike any of its predecessor 
courts since democracy was restored in 1982.  It is 
pro-reform in orientation and fighting for its prerogatives. 
A key emerging issue is whether it can become a fully 
independent and co-equal branch of political power, 
consistent with the separation of powers provision in the 
Honduran Constitution.  The established political order is 
fighting that prospect with vigor.  In fact, the Congress 
seized the political opportunity to introduce legislation 
that would amend the constitution to give itself the power to 
interpret the constitutionality of the laws it passes.  The 
Supreme Court ruled in May that the proposed amendment was 
unconstitutional, which sparked a tense confrontation between 
the Supreme Court and Congress.  Congress, however, refrained 
from any precipitous action and the issue has since receded. 
 
---------------------------- 
Public Security/Human Rights 
---------------------------- 
 
32. (SBU) Upon taking office on January 27, 2002, President 
Maduro's first act was to fulfill his main campaign promise 
-- a zero tolerance campaign against the country's 
out-of-control crime situation.  He deployed more than 5,000 
soldiers to the streets to support the police.  The public 
responded enthusiastically.  However, despite the initial 
success of establishing a visible police presence, violent 
crime, particularly homicides, continues at a high rate. 
Public support is fading and the campaign needs some visible 
victories to restore confidence in the government's program. 
The USG is helping the Maduro government establish an 
anti-kidnapping unit, increase intake/training of police 
recruits, create a model tourist police force, boost its 
counternarcotics efforts, and expand the frontier police. 
The country's geographic position makes it an obvious 
strategic transit point for narcotics trafficking, alien 
smuggling operations and other organized crime activities. 
 
33. (SBU) Extrajudicial killings, especially of 
children/young adults since 1998, have been a source of 
serious concern and only recently has the GOH begun to take 
steps to investigate the hundreds of unsolved cases.  Human 
rights groups regularly accuse former security force 
officials and the business community of colluding to organize 
"death squads" to commit these summary, and arbitrary 
executions.  There are also serious problems with child labor 
in several industries, particularly melon, coffee, and sugar 
cane (but not the maquila) sectors, and trafficking in 
persons of women/children for prostitution in the U.S. and 
children for commercial sexual exploitation in Central 
America.  USAID and Peace Corps have both been involved in 
HIV/AIDS prevention. 
 
------------- 
Consular Issues 
--------------- 
 
34. (SBU) At least 600,000 Hondurans, both legal and illegal, 
live in the U.S., a fact that places immigration issues high 
on the bilateral agenda.  (The population of Honduras is 6.5 
million.)  There is deep appreciation for the USG's extension 
of Temporary Protected Status (TPS) in the U.S. and interest 
in possible congressional action on the proposed Nicaraguan 
Adjustment and Central American Relief Act (NACARA), which 
would give immigration parity for Hondurans.  With 
approximately 18,000 American citizens residing in Honduras 
and many thousands visiting Honduras annually for tourism and 
business, American Citizen Services are a key part of the 
Embassy's work.  Since 1995, 37 American Citizens have been 
murdered in Honduras.  There has been little progress on 
these cases and to date, only two convictions have been made. 
 However, in the last year the GOH has increased cooperation 
with the Embassy on the remaining cases, including 
establishing two prosecutors to further the GOH's effort. 
Also, little progress has been made on extradition cases 
involving American Citizens residing in Honduras who are 
wanted for felonies in the United States. 
 
------------------------------ 
U.S. Investment Faces Problems 
------------------------------ 
 
35. (SBU) Maduro,s administration understands the need to 
increase foreign (and domestic) investment to spur economic 
growth, but so far has placed its emphasis on the more 
immediate problems of political and judicial reforms, the 
fiscal deficit, and needed improvements in security, 
education and health.  The government identified tourism, 
agribusiness, and forestry as important sectors that could 
create much-needed jobs. 
 
36. (SBU) Much still needs to be done to declare Honduras 
"open for business" for new sectors.  Although the Maduro 
Administration has begun significant changes, Honduras still 
suffers from poor and expensive infrastructure such as 
telecommunications, electric power and transportation, a weak 
legal system, threats to personal security, weak education 
and health delivery systems, land tenure problems, and 
opposition to large foreign investments by well-connected 
vested interests. 
 
------------------- 
Embassy Tegucigalpa 
------------------- 
 
37. (SBU) Embassy Tegucigalpa is a medium-sized post, 
employing 140 U.S. citizens and 300 Hondurans among 20 USG 
agencies.  Our Peace Corps program, with more than 245 
volunteers, is one of the world's largest, and the USAID 
mission had a FY03 budget of USD 45 million.  The Mission 
maintains a Consular Agent in Honduras' second city and 
industrial center, San Pedro Sula. 
 
 
Palmer