US embassy cable - 04TEGUCIGALPA1984

C O N F I D E N T I A L TEGUCIGALPA 001984 
 
SIPDIS 
 
STATE FOR EB, WHA/EPSC, AND WHA/CEN 
DOL FOR ILAB 
TREASURY FOR DDOUGLASS 
STATE PASS AID FOR LAC/CAM 
 
E.O. 12958: DECL: 09/02/2014 
TAGS: ECON, EFIN, EINV, PGOV, HO 
SUBJECT: HONDURAS' FINANCIAL REFORM LAWS: THREE DOWN, ONE 
TO GO 
 
REF: TEGUCIGALPA 1899 
 
Classified By: Economic Chief Patrick Dunn; reasons 1.4 (b) and (d). 
 
1. (SBU) Summary: The Honduran Congress has approved three of 
the four financial sector reform laws required under the IMF 
agreement.  The three that have passed are the shortest and 
simplest of the laws, leaving the longest and most important 
for last.  However the President of the Banking Commission is 
confident that this fourth will also pass within the weeks to 
come, and discounts recently publicized opposition to the law 
from some Congressmen as empty political posturing.  While 
the GOH badly missed its original IMF-imposed deadline of 
June 30 for the implementation of these reforms, the general 
consensus among the IMF, GOH and Post is that late is better 
than never.  End Summary. 
 
2. (SBU) On August 27, EconOffs met with the President of the 
National Banking Commission (Honduras' banking regulator), 
Dr. Ana Cristina Mejia de Pereira, to discuss the progress of 
the four financial sector reform laws which, under the terms 
of the IMF agreement, were to have been passed by June 30. 
Mejia informed us that three of the four laws have been 
approved by Congress, and are currently undergoing a final 
legal review, after which they must be signed by the 
President and published in the official federal register (La 
Gaceta) to enter into legal force.  The three laws that have 
been approved are reforms of the Central Bank, the National 
Banking Commission (CNBS), and the bank insurance fund 
(FOSEDE).  Each of these laws is relatively short, and is a 
revision of existing legislation, which contributed to their 
relatively easy passage through Congress.  Post will provide 
a more detailed description of the bills septel once their 
final form is known. 
 
3. (SBU) The fourth and most important of the reforms, the 
financial institutions law, is still being reviewed by 
Congress.  Since this is an entirely new piece of 
legislation, and is quite long, Congress is inspecting it 
more closely than it did the other three.  Mejia cited the 
bill's complexity and this more thorough than usual debate as 
the reason for the bill's slow progress.  As of August 27, 
approximately 70 of the 180 articles in the bill had been 
debated.  Mejia assured EconOffs that she has been going 
personally to Congress every morning to move the debate 
along, provide guidance, and attempt to ensure the new law is 
not gutted during mark-up. 
 
4. (C) Mejia acknowledged that there is opposition to the 
bill from certain quarters, namely those bankers who have the 
most to gain from maintaining the status quo of looser 
regulation of the sector.  Specifically, she mentioned that 
Jorge Bueso (of Banco Occidente), Guillermo Bueso (of Banco 
Atlantida), and Jaime Rosenthal (of Banco Continental, also 
an opposition Liberal Party (PL) congressman and one of many 
PL presidential candidates), are opponents of the bill, as 
they are directors of the three banks that would have the 
most difficulty adjusting under the new laws.  As reported in 
reftel, Rosenthal announced publicly last week that he had 
succeeded in halting debate on the financial institutions 
law, but Mejia was dismissive of these claims, saying that as 
soon as Rosenthal left town, debate began again.  Despite the 
opposition that exists, Mejia assured us that sufficient 
numbers of Congressmen in both major parties understand the 
importance of the law so that its ultimate passage is not in 
doubt. 
 
5. (C) Comment: Mejia is clearly placing a very high priority 
on the passage of the financial institutions law, and has the 
support of the Ministry of Finance in doing so.  While the 
GOH badly missed its original IMF-imposed deadline of June 30 
for the implementation of these reforms, the general 
consensus among the IMF, GOH officials, and Post is: better 
late than never. 
 
Palmer 
Palmer