US embassy cable - 05TEGUCIGALPA1728

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 001728 
 
SIPDIS 
 
STATE FOR EB/IFD, WHA/EPSC, INR/IAA, DRL/IL, AND WHA/CEN 
TREASURY FOR DDOUGLASS 
STATE PASS AID FOR LAC/CAM 
DOL FOR ILAB 
 
E.O. 12958: DECL: 08/21/2015 
TAGS: ECON, EFIN, ELAB, PGOV, HO 
SUBJECT: HONDURAS: NEW WORLD BANK RESIDENT REPRESENTATIVE 
 
 
Classified By: Classified by EconChief PDunn for reasons 1.5 (B,D) 
 
1. (C) Summary:  Recently-arrived World Bank Resident 
Representative Adrian Fozzard highlighted the Bank's current 
foci in Honduras, including closer coordination with other 
donors, encouraging GOH civil service reform and an orderly 
transition following the November 27 elections, and the 
production of a new Country Assistance Strategy for Honduras. 
 The Bank remains convinced of the net positive impact CAFTA 
will have on Honduras, and possesses some early (embargoed) 
data that indicate a significant drop in poverty rates. 
(Fozzard cautioned that this data may not be released until 
after the November elections.)  The Bank seeks to develop 
joint policy papers with other donors for the new GOH 
administration, and is looking for project areas -- such as 
clean water and sanitation -- where it can also build on the 
field work of other donors.  End Summary 
 
2. (SBU) On August 17, ADCM and EconChief met with 
newly-arrived World Bank (WB) Resident Representative to 
Honduras, Adrian Fozzard.  Fozzard said he is currently 
conducting a WB portfolio review, and will shortly be turning 
his attention to the creation of a new Country Assistance 
Strategy for Honduras.  Fozzard raised several issues of 
concern for the Bank.  First, he said, the Bank seeks to work 
more closely with the donor coordination group (known as the 
G-16).  He is encouraged by the efforts of the new German and 
Italian Ambassadors, as well as the new Canadian G-16 Chair, 
to re-invigorate the group, and expects the new U.S. 
Ambassador will play a similar role once he is confirmed and 
arrives. 
 
3.  (SBU) Fozzard also plans to raise (again) the issue of 
civil service reform with the GOH.  Such reforms, he pointed 
out, are "a critical part" of the Poverty Reduction Strategy 
Paper (PRSP).  Without them, the GOH must re-learn everything 
following each election cycle, as most or all government 
employees, including technical experts, are fired to make 
room for political patronage appointments.  However, he said, 
there appears to be little political will within the GOH for 
taking on this issue before the September 15 start of a 
Congressional recess that continues through the November 
elections.  He expressed his hope that this issue could be 
revisited early in the new administration. 
 
4. (SBU) The Bank is broadly interested in supporting an 
efficient transition following the November 27 elections, and 
to this end will be drafting a series of policy notes 
concerning policy directions the Bank would like the new GOH 
administration to take.  Fozzard hopes to fold this process 
into that of drafting background notes for the new Country 
Assistance Strategy for Honduras.  He also expressed his 
strong preference for coordinating these policy positions in 
advance with other donors, notably including the UNDP and the 
technical working groups of the G-16.  These efforts will be 
delayed for a few more weeks, however, as many of the 
European members of the G-16 are still on summer leave. 
 
5. (C) Concerning the impacts of trade liberalization, 
Fozzard pointed to a recent WB study that concluded the 
poorest rungs of Central American society are net consumers 
and therefore -- even in a worst-case scenario -- are 
expected to benefit from the increased diversity and lower 
prices of consumer goods under CAFTA.  Other economic 
liberalization measures adopted over the past four years by 
the GOH also appear to be delivering results.  (Strictly 
protect:  World Bank figures suggest the poverty rate in 
Honduras has dropped 5 percent this year, from 64 percent to 
59 percent, and rates of extreme poverty similarly dropped 
"from the low 40's to the high 30's."  This data is 
preliminary, and is embargoed until after the elections, as 
the WB does not want to be accused of being partisan or 
influencing the electoral outcome.) 
 
6. (SBU) Responding to Fozzard's offer to collaborate more 
closely with U.S. Embassy programs, ADCM recommended the WB 
look at the strategic plans many municipalities have 
developed to prioritize their infrastructure needs.  In 
particular, the Bank should consider the vast need for clean 
water and sanitation projects.  (Note:  Under the GOH plan, 
Honduran water authority SANAA continues to turn over 
responsibility for water systems to the municipalities. 
However, in many cases the systems are inadequate or 
obsolescent, and water rates are insufficient to pay even for 
operations and maintenance, not to mention system upgrades. 
Therefore, the municipalities are in urgent need of outside 
resources -- whether from privatization of the larger urban 
water systems, or donor support for the more remote, less 
economically viable ones -- to meet public needs. End Note.) 
 
Williard 
Williard