US embassy cable - 04TEGUCIGALPA1508

UNCLAS SECTION 01 OF 05 TEGUCIGALPA 001508 
 
SIPDIS 
 
STATE FOR WHA/CEN and WHA/EPSC 
TREASURY FOR EIlzetzki 
STATE PASS USTR 
STATE PASS AID (LAC/SA) 
STATE PASS OPIC, EXIM 
 
E.O.  12958: N/A 
TAGS: EAID, ECON, EINV, SOCI, PREL, PGOV, HO, MCC, NSC 
SUBJECT: Review of the Consultative Group meeting in 
Honduras, June 10-11, 2004 
 
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SUMMARY 
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1.  Summary: The Honduran Consultative Group (CG) meeting 
was held on June 10-11 with more than 300 participants from 
the GOH, civil society, and the international donor 
community.  President Maduro made a key-note presentation on 
the importance of this meeting to report on the progress 
made on achieving the Poverty Reduction Strategy (PRS) goals 
and the actions left to be taken.  His presentation was 
followed by a number of presentations by Cabinet Ministers, 
the President of Congress, the President of the Supreme 
Court, and representatives of the Honduran civil society and 
members of the international donor community.  Primary 
themes in these presentations included the importance of 
achieving the goals of the PRS, strengthening transparency 
and anti-corruption programs, decentralizing PRS 
implementation to include municipalities and civil society, 
and insuring equal rights for women and minority ethnic 
groups. 
 
2.  The principal results of this meeting were the 
announcement by the IDB President of the CG Meeting, Miguel 
Martinez, that the donors pledged $1.8 billion over the next 
three years in support of the Honduran PRS, and that the 
Government of Honduras (GOH), civil society, and the 
international donors would continue to work together to 
achieve the PRS goals as expressed in the Declaration of 
Tegucigalpa and the Follow-up Actions to be taken during the 
coming year. 
 
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Overview of the Consultative Group Meeting 
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3.  The Honduran Consultative Group (CG) meeting was 
held on June 10-11 with more than 300 participants from the 
GOH, civil society, and the international donor community. 
The U.S. Government delegation was co-chaired by Ambassador 
Palmer and USAID Country Director Paul Tuebner, and also 
included EconCouns Robin Matthewman, U.S. Treasury/W Officer 
Ethan Ilzetzki, USAID Chief Economist Duty Greene, USAID/W 
Desk Officer for Honduras Laura Libanati, and visiting 
Millennium Challenge Corporation (MCC) representatives John 
Hewko, John Wingle, and Katharine Uhre. 
 
4.  The meeting was opened with a welcoming presentation by 
Miguel Pastor, mayor of Tegucigalpa and a leading 
presidential candidate for the 2005 elections.  This 
presentation was followed by those of Miguel Martinez (IDB 
Manager of the Regional Operations Department for Mexico, 
Central American Isthmus, Haiti, and the Dominican Republic) 
and President Ricardo Maduro.  President Maduro spoke on the 
importance of this CG meeting to report on the progress 
being made by his government to achieve the goals of the 
national Poverty Reduction Strategy (PRS) and the work that 
lies ahead.  After the President's presentation, GOH 
Ministers Luis Cosenza (Presidency), Arturo Alvarado 
(Finance), Vicente Williams (First Vice-President and 
Coordinator of the National Competitiveness Program and the 
Plan Puebla Panama), and Thierry Pierrefeu (Tourism) spoke 
on the government's national transformation program to 
reduce poverty.  They were followed by Porfirio Lobo 
(President of the National Congress) and Vilma Morales 
(President of the Supreme Court) who discussed the role of 
Congress and the judicial system, respectively, in achieving 
the transformation of Honduras. 
 
5.  After lunch, representatives of the G-15 and civil 
society spoke on the roles that the G-15, civil society, and 
the National Anti-corruption Council have played and should 
play in this transformation process to reduce poverty. 
These speeches were followed by a series of brief opening 
interventions from the participating representatives from 
the international donor community.   They focused primarily 
on the need to continue with the implementation of the PRGF 
program, decentralization, transparency, and broad-based 
economic growth.  The first day ended with a reception for 
all the CG participants in the Presidential Palace hosted by 
President Maduro, the First Lady, and the Government. 
 
6.  The second day of the CG meeting focused on the 
coordination and harmonization of international cooperation 
to support the priorities of the gGovernment, and the 
national capacity of host country institutions to implement 
the Poverty Reduction Strategy (PRS).  Addressing these 
issues were Rocio Tabora (Vice-Minister of the Presidency), 
Jorge Hernandez Alcerro (Minister of Internal Affairs), and 
Arturo Alvarado.  The Ministers for Education, Agriculture 
and Forestry, Health, and Water and Sanitation spoke on the 
work on sector-wide approach programs (SWAPs) that their 
respective Ministries have been developing.  During lunch, 
President Maduro participated in a signing ceremony with a 
donors' group willing to pool their funds in an Education 
SWAP.  (USAID is supporting this program separately by 
financing activities that contribute directly to the EFA- 
Fast Track Initiative goals.) 
 
7.  After lunch, representatives from various civil 
society groups gave statements on their roles in supporting 
the PRS and their skepticism of government programs 
(especially decentralization, transformation, and food 
security) to reduce poverty effectively.  This session was 
followed by the closing statements of the international 
donor representatives, including that of Ambassador Palmer 
who focused on the importance of implementing the PRSP and 
strengthening the government's efforts in justice, 
education, health, and economic growth with equity. These 
statements were followed by the passing of the Presidency 
Pro-tempore of the G-15 from the Government of Spain to the 
Government of Sweden, the announcement that the donors' G-15 
will become the G-17 with the addition of France and 
Switzerland, and the closing remarks of Luis Cosenza and 
Miguel Martinez. 
 
8.  Minister Cosenza focused on the government's plan to 
implement the PRS and stressed the six pillars of the PRS: 
economic growth with equity, poverty reduction in rural 
areas, poverty reduction in urban areas, human capital 
formation, strengthening protection to specific groups 
living in poverty, and the programs needed for the 
sustainability of the strategy.  He encouraged the donor 
community to provide direct budget support to the Government 
whenever possible, and provide SWAP funding to the 
government's six priority program areas of education, 
health, agro-forestry, water and sanitation, justice and 
personal security, and economic infrastructure. 
 
9.  In his closing remarks, Mr. Martinez congratulated 
the Government of Honduras on the progress that it has made 
in implementing the PRS and reiterated the importance of 
continuing with the PRGF program, giving greater 
transparency in government procurement procedures, 
organizing donor cooperation in priority areas, and 
implementing the PRS in a cost-effective participatory 
manner.  He also read the Declaration of Tegucigalpa that 
was drafted by the Government, civil society, and the 
donors. 
 
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The Tri-partite Declaration of Tegucigalpa 
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10.  The tri-partite Declaration of Tegucigalpa reaffirmed 
the commitment of the GOH, civil society, and the donor 
community to the following: 
 
a) To support the transformation of the country, the 
consolidation of democracy, sustainable development, and 
poverty reduction; 
 
b) To strengthen their alliance in the future to achieve 
poverty reduction through accelerated and sustained economic 
growth with equity, with transparency in the management of 
resources, and broad citizen participation and gender 
equality in national and local decisions; 
 
c) To support the Stockholm Principles that call for the 
protection of social and environmental protection in 
Honduras, as well as better governance, decentralization, 
transparency, respect for human rights, foreign debt 
reduction, and the harmonization of international 
cooperation according to national priorities; 
 
d) To support the agreements made in the National Agreement 
of Transformation for Human Development in the Twenty-First 
Century; 
 
e) To support the PRS that constitutes the general plan that 
will guide the development policy of the country in the 
future and that is consistent with the Millennium 
Development  Objectives and Goals.   This strategy will be 
implemented with a programmatic vision based on the 
harmonization of national efforts, complemented by 
international assistance. 
 
11.  The Declaration goes on to say that the GOH is the 
leader and facilitator of the transformation process of the 
country, with broad and effective participation of civil 
society.  Therefore, it is important that the government: 
 
a) Continue strengthening the rule of law, combating 
corruption, and defending human rights; 
 
b) Strengthen the processes of transparency and 
accountability, the participative social auditing of the PRS 
implementation, and faithfully comply with the Law of State 
Contracting and related norms, the recommendations of the 
Program for the Efficiency and Transparency in State 
Purchases and Contracts, and the National Anti-Corruption 
Council, and the technical capacity and independence of the 
Superior Accounting Tribunal; 
 
c) Continue preparing and implementing the Central 
Government's budget for multiple years, based on regional 
needs, and with medium-term expenditure goals to reflect 
effectively the PRS goals, providing details of the 
implementation of the PRS expenditures and the advances made 
to reach these goals, and initiate the same budgeting 
process for sector-wide approach programs (SWAPs); 
 
d) Agree to participative mechanisms to incorporate 
citizens' demands coming from territories and priority 
sectors identified in the PRS and in the multi-year budget, 
starting this process with the 2005 budget; 
 
e) Achieve greater articulation of the PRS activities, 
programs, and projects, including the proposals of the 
different social sectors; 
 
f) Strengthen the implementation of policies to make the 
state efficient, modern, competitive, and agile, so that the 
administration is at the service of its citizens and focused 
on national development; 
 
g) Implement the Macroeconomic Program for 2004-2006 to 
reach in the first quarter of 2005 the HIPC completion 
point, and implement public policies that permit the 
development of a strategy that substantially improves 
productive infrastructure and generates wealth with greater 
equity; 
 
h) Strengthen municipal governments and local development 
through the decentralized management of the PRS with an 
integrated regional vision, taking into account municipal 
and regional realities with emphasis on the existing 
resources in the different regions and local and regional 
priorities; 
 
i) Advance in the implementation of a transparent and 
coherent policy with civil society that permits its 
strengthening and broad participation in the PRS 
implementation, complying with the commitments agreed to in 
the different international forums; 
 
j) Accelerate the efforts to achieve efficiency in the 
management of international cooperation, orienting their 
assistance to achieve the PRS goals. 
 
12.  The parties also consider that civil society should 
have a greater participation in the transformation of 
Honduras and support the democratic process and the 
consolidation of the Rule of Law.  In this respect, it is 
important that civil society: 
 
a) Deepen and broaden its base and social communication in 
its institutions; 
 
b) Strengthen its technical capacity and political 
presentations, as well as its transparency and 
accountability processes; 
 
c) Participate actively and efficiently in the 
implementation and monitoring of the PRS to strengthen the 
ownership and sustainability of the activities. 
 
13.  The parties also agree that the international donors 
are a strategic ally of the GOH and civil society in the 
transformation process of the country.  Therefore, it is 
important that the donors: 
 
a) Coordinate their activities in the framework of PRS 
implementation, giving priority to achieving the goals of 
poverty reduction and informing about the different support 
instruments used; 
 
b) Simplify and harmonize their procedures and 
administrative requirements to contribute more effectively 
and efficiently to achieving the PRS goals; 
 
c) Harmonize their support, basing it on sector strategies, 
programs, and budgets that have been defined and given 
priority in the PRS; 
 
d) Support the GOH to advance substantially in effective 
compliance with the Poverty Reduction and Growth Facility 
(PRGF) Agreement with the IMF and the PRS implementation; 
 
e) Contribute to strengthening the national capacity 
required by the GOH and civil society to overcome the 
challenges stated above. 
 
14.   Also, the parties agreed to reaffirm: 
a) Their interest in strengthening the work of the PRS 
Consultative Council to allocate and monitor the PRS funds; 
 
b) Their conviction that in order to achieve the common good 
it is necessary to favor the interest of the nation over 
those of individual interest groups and partisan politics; 
 
c) Their commitment to strengthen the constructive and 
transparent dialogue without prejudicing differences in 
opinion that could exist in confronting the challenges of 
the country.  They reiterate that the objectives and goals 
of the transformation should be independent of changes in 
the government so as to guarantee the sustainability of the 
reforms and the medium and long-term policies; 
 
d) The importance of the work of the Follow-up Group, today 
known as the G-17, as a monitoring mechanism of the donor 
community in the transformation process of Honduras. 
Likewise, they agree to continue developing and 
strengthening the tri-partite mechanisms that allow them to 
give continuity to the agreements reached in this 
Consultative Group Meeting, which will constitute an 
invaluable guide to reduce poverty and transform Honduras. 
 
15.  Martinez also announced that the donor community had 
pledged a total of $1.8 billion to support the Poverty 
Reduction Strategy of Honduras over the next three years, 
with approximately $810 million coming in the form of 
donations and the remaining billion coming in the form of 
loans.  This pledged amount has yet to be confirmed and has 
not been broken down by donor or by sector. In hisIn his 
closing remarks, Ambassador Palmer stated that the U.S. 
Government is committed to continue its support to Honduras 
for poverty reduction with USAID planning to give a total of 
$235 million over the next five years and other U.S. 
Government agencies, such as the Department of State, 
Department of Agriculture, Department of Labor, Peace Corps, 
and possibly the Millennium Challenge Corporation, adding to 
that amount. 
 
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Follow-up Actions to the CG Meetings 
------------------------------------ 
 
16.  In conclusion, Martinez also read the following 
principal follow-up actions to this CG meeting: 
 
a) Consolidation of the Economic Program 
      Continue implementing the macroeconomic program and 
take all the necessary steps to be able to reach the 
completion point of the HIPC initiative. 
 
b) PRS Implementation 
      Prepare before the end of September a proposed budget 
for the implementation of the PRS for the 2005-2006 period 
that is integrated into the multi-year budget and is 
consistent with the PRS implementation plan for 2004-2005. 
This plan would be presented to the PRS Consultative Council 
for future consideration by the Social Cabinet and its 
incorporation into the national budget 
 
      Prepare before the end of September a plan of concrete 
actions to consolidate and strengthen the advances in the 
implementation of the PRS monitoring system (SIERP), 
including the community social audits and the monitoring 
systems for the PRS expenditures (SIAFI) and the financing 
from external cooperation. 
 
c) Legislative Agenda 
  - Reform of the Penal Code to Combat Financial Crimes 
  - Law of Financial Institutions 
  - Law of the Fund for Deposit Insurance 
  - Law of the Bank and Insurance Commission 
  - Organic Law of the National University 
  - Law of Public Servants 
  - Forestry Law 
  - Organic Law for the Judicial Power 
  - Law of the Judicial Council and of the Judicial Career 
  - New Civil Procedures Code 
  - Notary Code 
 
d) Modernization of the Justice Sector 
      Implementation of the institutional reforms for the 
modernization and systematization of the management models 
of justice that allow for the increase in the independence 
and efficiency of the judicial system.  These include 
progress in the selection process of judicial personnel 
through opposition procedures with the participation of 
civil society, and substantial progress in the finalization 
of the processes initiated under the Penal Procedures Code 
that allows its conclusion in 2006. 
 
e) Transparency and Accountability 
      Prepare before the end of September an action plan 
with steps to take before the end of 2005 that permits the 
continuation of increasing the transparency of managing 
public funds, especially in the area of State purchases and 
contracts, and to strengthen the control process and 
accountability. 
 
f) Coordination of the International Cooperation 
      Achieve before the end of September agreement by 
consensus on the strategies with sector focus for education, 
health, potable water and sanitation, agro-forestry, and 
justice, and continue the actions to define the sector 
strategy for housing, all based on the working documents 
prepared for the current Consultative Group Meeting. 
 
      Prepare before the end of September an action plan 
with concrete steps to carry out through December 2005 a 
program to strengthen the coordination process for each 
sector table. 
 
      Achieve before the end of July a workshop to review 
the lessons learned about the functioning of the sector 
tables, as well as the relevant experiences in other 
countries of the region, and prepare before the end of 
August a proposal to improve the functioning of the sector 
tables, particularly in relation to the active participation 
of civil society. 
 
PalmerALMER