US embassy cable - 03TEGUCIGALPA2871

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 002871 
 
SIPDIS 
 
STATE FOR EB/TPP/ABT, EB/TPP/MTA AND IO 
STATE FOR WHA/CEN AND WHA/EPSC 
STATE PASS AID FOR LAC/CEN 
GUATEMALA FOR AGATT 
 
E.O. 12958: N/A 
TAGS: AORC, ETRD, EAID, EAGR, PGOV, HO 
SUBJECT: International Coffee Organization Director Visits 
Honduras 
 
1.  SUMMARY: Nestor Osorio, Executive Director of the 
International Coffee Organization (ICO), visited Honduras 
and spoke publicly about the goals of the ICO.  While he 
defended the interventionist role that the ICO has played in 
the past, he stressed the organization's current focus is on 
promotion of new markets, greater demand, and improved 
coffee quality.  He also spoke of his hope that the U.S. 
would rejoin the ICO, to promote greater political co- 
operation and dialogue concerning the ongoing coffee crisis. 
President Maduro's willingness to raise this issue in public 
fora and with the highest levels of the USG is winning him 
strong praise among members of the Honduran coffee sector. 
END SUMMARY. 
 
2.  Nestor Osorio, a Colombian national who is Executive 
Director of the International Coffee Organization (ICO), 
visited Honduras on December 2 and 3.  After meetings with 
President Ricardo Maduro and the Minister of Agriculture, he 
hosted a three-hour open meeting with members of the 
Honduran coffee sector, which EconOff attended.  After 
several leading figures in the Honduran coffee industry gave 
opening remarks, Osorio spoke for about thirty minutes, then 
took questions from the audience, which also included coffee 
farmers and leaders of coffee co-operatives. 
 
------------------------------------- 
Osorio: Promotion, not Price Controls 
------------------------------------- 
 
3.  Osorio began with an overview of the history of the ICO, 
and gave a strong defense of the quota system that was in 
place until 1989.  However, he clearly stated on several 
occasions that the ICO will not return to such a system, and 
that instead, coffee-producing countries must find other 
means to address the current crisis.  In particular, he 
spoke of promotion of new markets (especially Russia and 
China), and of campaigns to increase coffee consumption in 
countries which already consume coffee, including Honduras. 
Said Osorio, "We're not trying to interfere in the market, 
but we are trying to influence the behavior of consumers." 
 
4.  Osorio also spoke of training and technical assistance 
to coffee producers to improve the quality of their product, 
and briefly touched on diversification.  However, for 
Osorio, the purpose of diversification is not to have coffee 
farmers stop producing coffee, but rather to complement 
coffee farmers' income.  Conspicuous by its absence was any 
suggestion that the world is producing too much coffee. 
Nowhere in his remarks did Osorio address the issue of 
global oversupply, except implicitly by his focus on the 
need for greater global demand. 
 
5.  Several of the Hondurans at the meeting appealed to the 
ICO to take a more activist role.  During the question and 
answer period, one Honduran coffee producer asked Osorio's 
opinion of the proposal that a portion of the world's coffee 
stocks be destroyed in order to boost the world price. 
Osorio declared flatly that it would never happen, as it 
would be completely impractical politically, and there would 
be no way to force the destruction of coffee stocks. 
Instead of such ideas, said Osorio, the ICO countries need 
to "think creatively" about ways to promote coffee in new 
markets. 
 
------------------- 
The U.S. in the ICO 
------------------- 
 
6.  Osorio also spoke of the possibility of the U.S. 
rejoining the ICO, saying that a major diplomatic effort has 
been underway since September on behalf of ICO members to 
encourage U.S. membership.  Several times he stated that 
"the coffee crisis is not purely a commercial issue, but 
also a political issue," and that it would therefore be 
beneficial to have the U.S. "sitting at the table" to 
discuss ICO initiatives with the other member countries. 
 
7.  This theme was echoed by some of the Hondurans present. 
Eduardo Kafati, owner of Honduras' largest coffee company, 
Liberal Party member of Congress and member of the National 
Coffee Council, spoke optimistically of the U.S. return to 
the ICO in his introductory remarks.  Privately, he 
acknowledged that of course U.S. membership would not 
magically solve any problems or have any immediate effect on 
world coffee prices.  However, he maintained that the U.S. 
would add considerable clout to the ICO, and would send a 
valuable signal that, as a major coffee consumer and the 
world's most powerful country, the U.S. takes the coffee 
crisis seriously and is willing to engage multilaterally in 
efforts to address the crisis. 
 
8.  Comment: Osorio was clear that the ICO's days as a price- 
fixing organization are over, even though it was apparent 
that many in the audience (and perhaps even Osorio himself) 
were sympathetic to the old methods of managed supply and 
price control. 
 
9.  Several Honduran speakers also mentioned the fact that 
President Maduro raised the issue of U.S. ICO membership 
with President Bush in May.  It was clear that many 
Hondurans regard Maduro as an international champion of this 
issue, and if the USG does indeed rejoin the ICO, there will 
be much congratulatory praise among Maduro's supporters here 
in Honduras.  End Comment. 
 
Pierce