US embassy cable - 05TEGUCIGALPA769

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 000769 
 
SIPDIS 
 
STATE FOR WHA/EPSC AND WHA/CEN 
STATE FOR EB/TRA (DHAYWOOD) 
TREASURY FOR DDOUGLASS 
COMMERCE FOR AVANVUREN, MSIEGELMAN 
STATE PASS AID FOR LAC/CAM 
 
E.O. 12958: DECL: 04/11/2015 
TAGS: EWWT, ETRD, ECPS, EINV, PGOV, KMCA, HO 
SUBJECT: HONDURAN PORT FEE REDUCTION AGREED TO IN PRINCIPLE 
BY GOH AND PRIVATE SECTOR 
 
REF: TEGUCIGALPA 546 AND PREVIOUS 
 
Classified By: Economic Chief Patrick Dunn for reasons 1.4 (b) and (d). 
 
 1. (C) Summary:  Following a public exchange of vitriol 
earlier this year over port fees -- in which accusations of 
fraud, deception, graft, tax evasion, smuggling, and 
unconstitutionality were repeatedly hurled (detailed reftels) 
-- the GOH and private sector sat down last month to work out 
a mutually-acceptable fee schedule for container scanning at 
Puerto Cortes.  The new agreement, in principle, reduces 
average fees from USD 55 to only USD 10 for the light 
industrial (maquila) sector and to only USD 15 for consumer 
imports.  The agreement also curtails exclusivity for the 
service provider, lowers the guaranteed baseline volume of 
container traffic, and calls for a jointly administered trust 
fund for all scanning revenues over and above costs.  Post 
has long been active in encouraging both sides to compromise 
and is pleased that this effort appears to have borne fruit. 
The new pricing schedule is designed to ensure that the 
desire for enhanced port security is balanced against the 
need to continue to promote poverty reduction through 
export-led economic growth.  End Summary. 
 
2. (SBU) On March 31, representatives of the Honduran private 
sector and senior GOH officials reached agreement, in 
principle, on substantially reducing fees that will be 
charged for gamma-ray scanning of all containerized traffic 
passing through Puerto Cortes.  In December 2004, the GOH 
National Congress approved legislation establishing a hefty 
per-container fee of USD 18 for empty containers and USD 37 
for loaded containers for gamma-ray scanning.  As a result of 
the recent agreement, that contract will be amended as 
follows: 
 
- The contractor performing the scanning (a consortium of 
local firm CAMOSA and U.S. firm SAIC) will receive USD 27.50 
per full container for the first 200,000 containers and USD 
25.00 per container in excess of 200,000.  This is down from 
USD 37.00 set in the original contract. 
 
- CAMOSA will receive USD 14.00 per empty container upon 
importation and will receive no payment for scanning empty 
containers being exported.  This is down from USD 18.00 per 
empty container (import or export) set in the original 
contract. 
 
- CAMOSA will have exclusivity on container scanning for 
three years and will be guaranteed a minimum of 200,000 
containers per year for years four through ten (the end of 
the contract).  This is a significant change from the 
previous deal, in which CAMOSA was to have exclusivity for 
all ten years, with a guaranteed through-put of 300,000 
containers (well above current levels of 240,000 and widely 
seen as a windfall for the company). 
 
3. (SBU) As detailed reftels, the original contract obligated 
the GOH to pay the fees to the contractor but did not specify 
what portion of those fees would subsequently be passed on to 
the port users.  This was a source of great concern to the 
business community, which anticipated up to 100 percent 
pass-through of the costs to them, potentially rendering them 
non-competitive.  (Producers of high-bulk, low value exports, 
such as bananas, felt particularly at risk and spearheaded 
the broad-based private sector rejection of the fee.)  The 
new agreement eliminates those uncertainties by specifying 
the following cost pass-through: 
 
Under the proposed agreement, port users would pay: 
 
- USD 15.00 per full imported container 
 
- USD 5.00 per empty imported container 
 
- USD 5.00 per imported container full of raw materials to be 
used in production for re-export (such products would 
include, for example, imported U.S. fabric to be used in 
apparel assembly operations in Honduras for re-export) 
 
- USD 5.00 per full container for export 
 
- No Charge for scanning of empty containers for export 
4. (SBU) Any revenues above costs that are collected by the 
GOH (including the USD 2.50 in savings for volumes above 
200,000 containers) are to be placed in a trust fund, 
approved of by the International Monetary Fund and 
administered by a non-profit body to be established jointly 
by the private sector and the GOH. 
 
5. (SBU) In exchange for this amicable resolution, the GOH 
would agree to promise not to raise any other tax or duty for 
fiscal reasons on port usage during the life of the contract 
(that is, ten years). 
 
6. (C) Comment:  Post has been actively engaged on this issue 
throughout, encouraging the GOH to listen to the private 
sector's legitimate concerns about competitiveness and 
advising the private sector to focus its arguments and to 
offer workable solutions.  Repeated interventions by EmbOffs 
(reftels) succeeded in removing the red herring topic of the 
USG and its security concerns from the debate and allowed the 
parties to focus on the core issue of transparently and 
collaboratively setting fees that are acceptable to the GOH, 
the private sector, and the service provider.  Post is 
pleased that the parties were willing and ultimately able -- 
with an occasional nudge from us -- to resolve this 
collaboratively and in a manner designed to avoid damaging 
the export sectors that are the lifeblood of this developing 
economy.  End Comment. 
 
Palmer 
Palmer