US embassy cable - 05TEGUCIGALPA1031

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 001031 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, WHA/EX, WHA/PPC, EB/OIA/IFD 
TREASURY FOR DDOUGLASS 
STATE PASS AID (LAC/CAM) 
STATE PASS USTR: ANDREA MALITO 
GUATEMALA FOR COMMAT:MLARSEN 
 
E.O. 12958: DECL: 05/13/2015 
TAGS: ETRD, ECON, PGOV, HO 
SUBJECT: ONE HONDURAN PRIVATE SECTOR GROUP PANICKING IN 
FACE OF CAFTA DELAYS 
 
 
Classified By: EconChief PDunn for reason 1.4(b,d) 
 
1. (U) This is an action request -- please see para 7. 
 
2. (C) Following publication here of reports of the CAFTA 
Presidents' 05/12/05 CNN interview, in which they indicated 
there is no "Plan B" if the U.S. Congress fails to ratify 
CAFTA, EconChief received a worried phone call from a 
prominent business leader.  Adolfo "Fito" Facusse, President 
of the Honduran Industrial Association (ANDI) and 
Vice-President of the Latin American Industrial Association, 
told Post that he remains a staunch supporter of CAFTA, but 
that he is very concerned about the apparent lack of impact 
on ratification prospects of the recent CAFTA Presidents, 
visit. 
 
3. (C) Facusse told EconChief that at its upcoming 5/17/05 
meeting, ANDI is contemplating issuing a statement calling 
for sharp retrenchment if CAFTA does not pass in the U.S.  He 
said the Association would call for imposition of 35% tariffs 
on imports, to be imposed immediately, and only to be lifted 
when a Free Trade Agreement is signed along with an agreement 
for 500,000 temporary work permits.  ANDI would also call for 
immediate initiation of FTA talks with Brazil and the EU. 
 
4. (C) Facusse said this measure is intended to support CAFTA 
ratification by demonstrating that a failure to ratify would 
lead to dire consequences for the U.S.  He also said that 
such a step would remind public and private sector officials 
in the U.S. that the Central American market is not a 
birthright, but could be lost to Brazilian or EU competitors. 
 
5. (C) EconChief stressed to Facusse that such an approach 
would be short-sighted, would harm Honduran interests in both 
the short and long terms, and could harm rather than bolster 
ratification prospects for CAFTA.  Those who oppose CAFTA on 
sovereignty grounds would see this as proof of their fears 
and could further harden their stance.  Those concerned about 
Central American dedication to free trade would see the 
threat of a sharp protectionist move as evidence that 
dedication to free trade is superficial and cannot be counted 
upon.  Threatening the U.S. Congress, we told him, is 
unlikely to be a wise or productive strategy. 
 
6. (C) Moreover, such a move would be premature.  It is too 
soon to see the real results of the CAFTA Presidents' visit, 
but early indications are of a public success.  Further, 
CAFTA has not been formally introduced into Congress, and 
once it is, there will be an additional 60 days in which ANDI 
can lobby for ratification.  Therefore, EconChief told 
Facusse to strongly encourage ANDI not to do anything 
precipitous or rash.  Statements of support for CAFTA are 
legitimate and welcome, but threats and brinksmanship are 
not. By the end of our conversation, Facusse was persuaded to 
soften his stance substantially and agreed to consult with us 
prior to making any such declaration.  That said, Facusse 
continues to harbor three significant concerns:  (1) As a 
textile manufacturer, Facusse is intensely aware that without 
CAFTA, the PRC will erode his market-share and eventually 
drive him out of business. (2) Facusse is concerned that a 
failed ratification vote for CAFTA would lead to a political 
retaliation and a "wave of protectionism."  (3) Finally, 
Facusse noted that Brazil has long held a different vision 
for regional trade (starting with a Brazil-dominated trading 
bloc), and this alternative would likely gain adherents if 
CAFTA were to fail. 
 
7. (C) Comment and Action Request:  We think we have talked 
Facusse back off the ledge, but we will follow-up with him 
again on Monday, prior to the ANDI meeting to reinforce our 
unequivocal message.  In our view Facusse remains a strong 
supporter of CAFTA and seems to genuinely believe that his 
threat of trade war would advance the cause of ratification. 
His reaction is not representative of the broader Honduran 
private sector, but he is an influential and highly visible 
personality.  Should he choose to stake out such a position, 
he could garner significant media coverage and potentially do 
real harm to the CAFTA ratification effort in the U.S. that 
he seeks to support.   We will do our utmost to prevent such 
an eventuality.  ANDI's impulse to speak out in favor of 
CAFTA, however, is laudable, and we would welcome Department 
guidance on what message from the Honduran private sector 
would most effectively support their goal of CAFTA 
ratification.  End Comment. 
 
Palmer 
Palmer