US embassy cable - 05TEGUCIGALPA2057

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 002057 
 
SIPDIS 
 
E.O.  12958: N/A 
TAGS: EIND, SENV, HO 
SUBJECT: THE TELA BAY RESORT PROJECT AND TOURISM ON 
HONDURAS' NORTH COAST 
 
 
1. Summary:  Honduran investors and government officials 
continue to market the USD 280 million Tela Bay project, a 
luxury resort that has been in the pipeline for more than 
thirty years and has yet to break ground.  The resort, 
projected to include four hotels, 250 residential lots, and 
a golf course, will cover approximately 1000 acres of land 
on Honduras' Caribbean coast, on a site bracketed between 
two indigenous villages.  The project investors group FITH 
has announced that construction will begin in November 2005, 
and that the USD 127 million first phase will be completed 
in September 2007 with the opening of the first two hotels. 
Meanwhile, smaller tourism projects are also in development 
along Honduras' North Coast, including World Bank-financed 
sustainable tourism projects in six coastal communities. 
These projects seek to promote economic growth along the 
coast by developing a strategy for coastal tourism that 
takes into account natural resources and attractions along 
with social, environmental, and conservation concerns. End 
summary. 
 
2. The Tela Bay project has undergone a number of revisions 
since its conception in 1972, although it has never 
progressed beyond the planning stages due to lack of 
organization and insufficient funding.  In its present 
incarnation, the USD 280 million project is being funded by 
the GOH Institute of Tourism (IHT), which has already 
contributed USD 2.7 million in start-up costs; a sustainable 
tourism loan from the IDB; and private investment, including 
major Honduran banks and businesses and US-owned Resorts of 
the World, which will invest USD 11 million.  These public 
and private investors will collectively hold a 51% share of 
the resort, with the GOH holding the remaining 49%.  (Note: 
The list of private Honduran investors includes businesses 
owned by a wide range of the most politically influential 
families in the country, with direct connections to several 
members of the current administration.  End note.)  Hector 
Rodriguez, the IHT Tela Bay investment manager, says that 
the present design of the resort, with two four-star hotels, 
two five-star hotels, 250 residential lots to be sold as 
sites for luxury villas, an 18-hole golf course designed by 
Gary Player, a tennis club, horse stables with riding 
trails, beach access, and nature trails through the Jeanette 
Kawas National Park, suits the profile of the "ideal" type 
of tourism that Honduras should be attracting to the North 
Coast. 
 
3. The site of the project has been somewhat problematic for 
the planners.  The resort will run along 3.2 kilometers of 
Caribbean Sea beachfront, verge into Jeanette Kawas National 
Park, dislodge a number of property claimants, and border 
two indigenous villages inhabited by the Afro-Honduran 
Garifuna community.  Rodriguez told Econoffs that all 
property concerns have now been resolved.  (According to 
Rodriguez, the land, which the GOH has been reclaiming since 
1992, was never legally owned by private citizens.)  To 
adhere to Honduran law that cedes beachfront property to the 
public, plans for the project call for a set back from the 
beach to ensure continued public access to the beachfront. 
No construction will take place on the beach itself. 
Rodriguez also said that the planners have taken natural 
resource protection into account, and will include a buffer 
zone to ensure that the construction and usage of the resort 
does not interfere with or damage the national park's 
ecosystem.  And lastly, Rodriguez says that they anticipate 
no problems with the local Garifuna villages, as the resort 
will attract tourist revenue, provide employment, and add 
services to the communities. 
 
4. In a visit to the coastal towns of Omoa and Tela, Econoff 
spoke to local tourism authorities who were less optimistic 
about the Tela Bay project. Both towns are among the six 
coastal communities that have received World Bank funding to 
develop sustainable tourism projects.  Although the tourism 
coordinators in both communities agreed that an influx of 
wealthy tourists could benefit their local economies, they 
also expressed concerns over the potentially negative 
environmental and social impact of the resort.  They fear 
damage to the protected areas of the national park as well 
as to the beachfront, question the resort's capability for 
handling services such as sewage, and are uneasy about 
possible exploitation of the Garifuna communities as tourist 
attractions.  (According to the IHT, the Garifuna 
communities are in favor of the project as a means of 
employment and tourist revenue.  Andrea Valerio, a leader of 
the Garifuna community of Tornab, told Econoff that while 
the Garifuna communities do not directly oppose the project, 
their support is tempered by caution.  Lacking the resources 
to carry out their own studies, the communities have had to 
rely upon impact studies done by the IHT, and they are not 
confident that the project proposal adequately addresses 
their social, economic, and environmental concerns.)  Both 
tourism coordinators also worried that the self-contained 
nature of the Tela Bay resort could prevent tourists from 
visiting other coastal communities, and thus stall local 
tourism projects. 
 
5. The sustainable tourism projects underway in Omoa and 
Tela, in contrast, aim to strengthen local economies by 
promoting the communities' natural assets and involving 
residents in the tourism industry.  In Omoa, the project has 
helped to organize a collective of women embroiderers, 
reclaim for public use some of the beachfront lost to small 
business sprawl, and outfit a bicycle rickshaw taxi service. 
The tourism coordinator is also working to improve the 
quality of local restaurants and clean up the streets to 
make Omoa more attractive to the cruise ship passengers who 
occasionally visit when ships dock at nearby Puerto Cortes. 
(The GOH port authority is also extending Omoa's local dock 
by 150 meters, which could provide docking facilities for 
smaller cruise ships.)  In the much larger community of 
Tela, the tourism coordinator has focused upon providing 
better information and materials at the tourism office, 
training workers for the tourist industry, and developing 
programs to attract festivals and fairs to the city. 
 
6. Comment: Given the decades of delay in getting the Tela 
Bay project off the ground, Post remains quietly skeptical 
about the prospect of construction beginning on schedule. 
While the IHT claims that conflicts over land ownership and 
usage have been resolved, land issues are a perennial source 
of controversy in Honduras, and environmental protests over 
the resort's location close to the beach and within the 
boundaries of a national park seem at the very least a 
possibility.  The lineup of influential private investors 
also gives pause as a potential source of rivalries instead 
of partnerships.  It would not be a stretch to envision 
squabbles and territoriality overtaking working 
relationships to cause further delays.  The potential for 
corruption also cannot be ignored.  Post will continue to 
follow and report on the development of this project as 
events warrant. End comment. 
 
Williard