US embassy cable - 05TEGUCIGALPA1910

UNCLAS TEGUCIGALPA 001910 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, EB/ESC 
ENERGY FOR IA 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EPET, ENRG, EINV, ECON, HO 
SUBJECT:  Honduran "Notables" Report Recommends GOH Keep 
Gasoline Prices Frozen 
 
REF:  Tegucigalpa 01873 
 
1. (U) This is an action request:  Please see para 4. 
 
2. (U) A special "notables" committee appointed to review 
how the GOH sets gasoline prices (reftel) issued a 
recommendation September 16 to continue the current price 
freeze in effect for the past 8 days.  Commission head 
Cardinal Oscar Rodriguez stated, "We need to continue this 
energy state of emergency until we can change the pattern of 
energy usage and implement renewable energy programs." 
 
3. (SBU) On September 16, EconChief spoke with Minister of 
Industry and Trade Irving Guerrero about the continuing 
political crisis regarding fuel prices and the Commission's 
report.  (Note:  Guerrero will be responsible for evaluating 
and implementing the Commission's recommendations, since the 
Petroleum Technical Unit -- the GOH office that sets fuel 
prices -- is part of Guerrero's ministry.  End Note.) 
Guerrero, who had only arrived from an international trip at 
mid-day that day, had not yet had an opportunity to review 
the report (also issued at mid-day September 16), but had 
already had conversations with several Commission members. 
In their discussion with him, the members praised calls in 
the report to improve competition.  Guerrero saw this as 
somewhat ironic, as these same members have postured in the 
press calling for nationalization of imports and increased 
ties to Venezuela.  Guerrero dismissed out of hand any 
nationalization proposals, noting that they were 
"philosophically unacceptable," particularly in light of 
Honduras' CAFTA commitments.  Guerrero was relieved the 
report finds no evidence of price manipulation by the GOH, 
but was somewhat irritated by the report's criticism that 
the current pricing mechanism distorts the market.  "Of 
course it distorts the market," he said. "Any government 
intervention in the free market is going to cause a 
distortion."  (Comment:  While Guerrero did not make it 
explicit, it appears to us that he would prefer a free- 
market pricing mechanism, but recognizes this is likely 
politically impossible in the short-term.  End Comment.) 
 
4. (SBU) When EconChief spoke with him, Guerrero had just 
returned from what he enthusiastically described as a 
successful visit to Brazil, where he signed an agreement 
with the GOB for technology transfer regarding ethanol and 
biodiesel.  Within 18 months, Guerrero said, Honduras will 
be using ten percent ethanol and biodiesel (though he 
predicted a five to ten percent per gallon ethanol mixture 
to start).  Guerrero also noted that new legislation lowered 
import tariffs on flexible fuel vehicles (vehicles that can 
run on gasoline or gasoline/ethanol mixtures) to zero, in a 
bid to encourage wider-spread adoption of the technology. 
Guerrero is also open to technical or policy (regulations 
and standards) cooperation with the U.S. Department of 
Energy.  Action requested:  Post would welcome Department 
assistance in evaluating what DOE assistance might be 
available. 
 
Williard