US embassy cable - 05TEGUCIGALPA2195

UNCLAS SECTION 01 OF 03 TEGUCIGALPA 002195 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/ESPC, DRL/IL, AND EB/IFD/OMA 
STATE PASS AID FOR LAC/CEN 
STATE PASS USTR FOR WILLIAM CLATANOFF 
TREASURY FOR DORA DOUGLAS 
DOL FOR ILAB 
COMMERCE FOR MSIEGELMAN 
 
E.O. 12958: N/A 
TAGS: ELAB, ETRD, EINV, EIND, KTEX, PGOV, HO 
SUBJECT:  Honduras:  Readout of Secretary Gutierrez 
Bilateral Meeting with Minister of Trade Irving Guerrero 
 
 
1. Summary: During an October 19 meeting in San Pedro Sula, 
Commerce Secretary Gutierrez and Honduran Trade Minister 
Guerrero concurred that Honduras is well on its way towards 
CAFTA implementation, having passed several key laws and 
proposed others.  IPR protections remain a source of concern 
for both Honduras and the USG, and a new business-to- 
business dialogue should be fostered to move beyond the 
current situation.  Customs reform will be a long-term 
process, and Honduras welcomes trade capacity building funds 
for this and other reforms as CAFTA is implemented.  MCC 
continues to move forward, and will also assist Honduras to 
benefit from CAFTA.  End Summary. 
 
2. During his trade mission to San Pedro Sula, Honduras, 
Secretary Carlos Gutierrez and his team met with GOH 
 
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Minister of Trade and Industry Irving Guerrero, to discuss 
CAFTA implementation in Honduras.  Also present were 
Department of Commerce (DOC) DAS for Western Hemisphere 
Walter Bastian, DOC Assistant Secretary and USFCS Director 
General Israel Hernandez, DOC Chief of Staff Claire Buchan, 
Embassy Charge James Williard, Millennium Challenge 
Corporation Vice President John Hewko, and Senior Commercial 
Officer Mitch Larsen (notetaker). 
 
Honduras On Track 
----------------- 
 
3. Minister Guerrero began by giving an overview of where 
Honduras stands with respect to CAFTA implementation.  The 
Minister reported that the complete implementation package 
was currently in Congress, and that the IPR package is with 
Congress as well and that the required legal analysis of the 
bill ("dictamen") is ready.  Legislation regarding Rules of 
Origin with respect to textiles is also with Congress, and a 
phytosanitary law has already been passed in Congress. 
Minister Guerrero finished by stating that effectively no 
one in Honduras is questioning CAFTA at this point, and that 
even labor groups are using the CAFTA legislation to their 
advantage. 
 
4. After acknowledging that CAFTA passed by a large margin 
in Honduras and that the country is definitely ahead of the 
game with respect to moving forward on the FTA, Secretary 
Gutierrez asked the Minister to comment on Honduras' new 
labor code.  Minister Guerrero said that the Honduran labor 
system dates back to 1950 and needs revision.  He claimed 
that negotiations for a new labor code now rest with the 
Honduran Congress, a process complicated by the polarization 
between business interests in San Pedro Sula and government 
interests in Tegucigalpa -- a situation he said is unique in 
Central America. 
 
IPR Concerns 
------------ 
 
5. Secretary Gutierrez then discussed Presidential 
certification of CAFTA, noting that our Congress would 
closely scrutinize the Agreement.  He also said he had been 
hearing concerns from U.S. and local companies with respect 
to IPR protection.  He described his concern that Honduras 
is a "loose environment" where nearly 70 percent of software 
is pirated.  He stressed this as a concern both now and in 
the future, and one that could particularly influence those 
companies considering where to invest.  The Secretary 
thanked Honduras for moving forward with adoption of the 
Information Technology Agreement, and said that the U.S. 
would appreciate GOH help getting Guatemala and other CAFTA 
countries to move forward in this area. 
 
6. Minister Guerrero noted Honduran concerns about IPR 
related issues, citing as an example U.S. firm Pfizer. 
Guerrero claimed that Pfizer patents for Viagra were 
"confusing" and "complicated", and that the GOH had brought 
in international experts to review national requirements 
with respect to these patents.  Guerrero explained that in 
Honduras there is a perception of "threat", rather than 
"opportunity" in the IPR area.  He called for balance 
between enforcement of IPR and access to affordable generic 
medicines.  Guerrero referred to a new USAID project on IPR 
that may help to show the opportunities for Honduras. 
Regarding IPR for software, Minister Guerrero admitted that 
Honduras simply needs to find a way to better enforce 
existing laws. 
 
7. Regarding generic medicines, the Secretary responded that 
while everyone wants access, not everyone can pay or wants 
to pay for that access.  The challenge is to balance access 
with the need to maintain incentives to R&D and investment. 
On IPR as a threat rather than an opportunity, the Secretary 
pointed out that Honduras also benefits from IPR enforcement 
as its own companies with copyrights, patents, and other IP 
stand to benefit significantly.  DAS Bastian added that the 
GOH may need a new message and proposed bringing down U.S. 
firms - like Pfizer, Abbott, Baxter, etc. - to arrange 
business-to-business solutions. 
 
Customs Modernization Still a Challenge 
--------------------------------------- 
 
8. Guerrero said that the GOH is clearly moving in the right 
direction with its Customs Service, although he could not 
promise there would be no problems during the first six 
months of CAFTA implementation.  The Secretary said that 
having U.S. Customs agents in Puerto Cortes -- the only port 
in the region with this presence -- would provide a big 
opportunity for Honduras.  Minister Guerrero agreed, and 
welcomed the Secretary's visit, with President Maduro, to 
inaugurate the new Customs Office at Puerto Cortes, which 
would eventually house a staff of six U.S. Customs officials 
under the Container Security Initiative (CSI) Program. 
 
9  Minister Guerrero acknowledged that Trade Capacity 
Building (TCB) funding and support thus far had been 
excellent, but wondered aloud what comes next.  He stated 
that he was happy to see the participation of Eximbank, 
USTDA, SBA, and OPIC on the mission, but would like to see 
coordination with USTR to strengthen TCB moving forward 
because loans and other tools may simply not be enough. 
 
Textiles:  A Work in Progress 
----------------------------- 
 
10. The Secretary raised the issue of textiles, some 
portions of which still remain to be finalized.  The 
Minister responded that the GOH has an agreement on 
pocketing fabric.  The socks issue is in-process and, in the 
end, will need to be negotiated.  Guerrero said the GOH has 
cooperated closely with Assistant USTR Regina Vargo in 
recent weeks and months and that she was comfortable with 
GOH progress. 
 
MCC Moving Forward 
------------------ 
 
11. The Secretary introduced John Hewko, Vice President of 
the MCC.  Hewko reported that the MCC Compact had been 
ratified in Congress, that there were only a few issues 
regarding implementation, and that he would be traveling 
from San Pedro Sula directly to Tegucigalpa in order to deal 
with a few remaining items.  Overall, Hewko claimed that 
Honduras had been a model partner for the MCC. 
 
Encouraging Maduro to Attend Summit of the Americas 
--------------------------------------------- ------ 
 
12. The Secretary asked Guerrero for his help in convincing 
President Maduro to attend the upcoming Summit of the 
Americas in Buenos Aires.  He discussed plans for President 
Bush to host a breakfast with the CAFTA-DR presidents and 
said that President Maduro's absence would be a big 
disappointment.  The Minister implied that the President was 
committed to the Summit and that it was important for him to 
be there, although the President was currently having some 
"issues" with Congress.  (Note:  Maduro has come under fire 
recently from his own party for his extensive international 
travels just weeks before what promises to be a closely- 
fought presidential election.  End Note.) Guerrero said that 
the Honduran Congress had to approve the President's travel 
outside of the country, but he was convinced that if the 
Secretary mentioned it to President Maduro, he would indeed 
 
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attend. 
 
13. The Secretary closed noting that the private sector 
could contribute significantly to Honduran development, and 
expressed his hope that together we would all make CAFTA 
work. Guerrero agreed, and said the biggest future drivers 
of Honduran growth would be CAFTA and Central American 
integration. 
 
14.  Department of Commerce cleared this cable. 
 
Williard