US embassy cable - 05TEGUCIGALPA2418

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 002418 
 
SIPDIS 
 
STATE FOR EB/IFD, WHA/EPSC, INR/IAA, DRL/IL, AND WHA/CEN 
TREASURY FOR DDOUGLASS 
COMMERCE FOR MSIEGELMAN 
DOL FOR ILAB 
STATE PASS AID FOR LAC/CAM 
STATE PASS USTR FOR AMALITO 
 
E.O. 12958: DECL: 11/30/2015 
TAGS: ECON, EFIN, PGOV, ELAB, SOCI, HO 
SUBJECT: PART I: WHAT DOES A LIBERAL PARTY VICTORY MEAN FOR 
THE HONDURAN ECONOMY AND U.S. ECONOMIC INTERESTS? 
 
REF: TEGUCIGALPA 1993 AND PREVIOUS 
 
Classified By: Economic Chief Patrick Dunn for reasons 1.4 (b) and (d). 
 
1. (C) Summary: As of early morning on November 30, exit 
polling indicates an electoral victory for Liberal Party 
presidential candidate Manuel "Mel" Zelaya Rosales.  While we 
await a formal announcement from electoral authorities, this 
is the first of three cables that assess Zelaya's economic 
platform and likely impacts on U.S. interests.  The Zelaya 
platform is a remarkably orthodox vision for economic growth. 
 Its calls for rational energy policies, agricultural 
diversification, re-energizing mining and forestry, improving 
infrastructure, and taking full advantage of CAFTA are each 
appropriate goals that also mirror U.S. interests.  Zelaya's 
gentleman's agreement with the IMF and unambiguous calls for 
fiscal discipline are sine qua nons for future macro 
stability, and his endorsement of decentralization, 
anti-corruption, improved efficiency and competitiveness are 
like music to our ears.  Some proposals remain vague (mining 
and telecomms) and some troubling (land reform, fuel taxes). 
Post will watch closely how the new administration seeks to 
balance foreign exchange inflows, exchange rates, interest 
rates, and liquidity concerns -- perhaps the pre-eminent 
macroeconomic concern facing the new administration. 
Finally, Post is encouraged to see Zelaya's platform adopt 
the Monterrey Consensus position that ultimately Honduras 
itself is responsible for implementing the reforms necessary 
to take full advantage of globalization and lay the 
foundations for sustainable economic growth.  End Summary. 
 
What a Zelaya Administration Means for the U.S. 
--------------------------------------------- -- 
 
2. (C) What is a Zelaya presidency likely to mean for the 
Honduran economy, and for U.S. economic policy interests? 
Despite having a party president (Patricia Rodas) with a 
checkered, fellow-traveler past and who is prone to 
revolutionary rhetoric, Zelaya's Liberal Party economic 
platform holds few or no obvious items that threaten U.S. 
national economic interests.  His endorsement of the IMF 
deal, CAFTA, MCC, and an emphasis on poverty reduction all 
fit squarely within established priorities.  His 
straightforward recognition of GOH responsibility for its own 
development is a fitting prologue to productive future 
engagement on technical assistance and other aid programs. 
Zelaya's calls for anti-corruption, juridical security, and 
open competition will be crucial to promoting investment.  If 
he follows through on his word in these areas, the resulting 
improvements in investment climate will be both striking and 
long-overdue. 
 
3. (C) Zelaya's emphasis on infrastructural improvement 
should provide new business opportunities for U.S. firms; his 
professed free-market orientation could provide trade 
opportunities; and any policies he implements that improve 
conditions for domestic investors will also benefit potential 
U.S. investors.  Now for the bad news: Unfortunately, all of 
the above will likely be shelved for six months or more, 
while the new administration gets itself organized.  If 
personnel turnover and political patronage are too extensive, 
key GOH institutional and technical expertise could be lost, 
setting Honduras' progress back by years.  Finally, a failure 
to adopt these policies, or worse, any backsliding into 
discredited, state-interventionist policies of the past would 
likely spook investors and stall growth.  Post does not see 
this as likely, but will stay in close contact with the 
Zelaya transition team. 
 
Zelaya's Economic Platform 
-------------------------- 
 
4. (U) Zelaya's platform (known generically in Honduras as 
the "Plan de Gobierno" and, in Zelaya's case, titled the 
"Vision of Citizens' Power" -- available at 
www.melzelaya.com) includes over 14 pages of economic policy 
statements, many of which have been previewed by Post in 
reftels.  The economic platform highlights job creation and 
macroeconomic stability as a Zelaya administration's key 
goals.  Job creation would be pursued through: support to 
small and medium businesses; support for the forestry sector; 
support for industry; diversification of the maquila (light 
assembly) sector; promotion of tourism; promotion of mining; 
and modernization of infrastructure.  On macroeconomic 
issues, the Zelaya platform focuses on exchange rate 
stability; fiscal discipline; control of inflation; the 
financial sector; energy policies; and trade and investment 
promotion. 
 
5. (SBU) Zelaya's platform calls for consolidating the 
economic reforms and policies that have spurred economic 
growth, while also seeking to extend the benefits of that 
growth to a broader segment of the population.  This 
overarching pair of goals is consistent with what senior 
Zelaya campaign officials have told Post over the last six 
months.  The platform language, taking an unfortunate (though 
brief) detour into the social-engineering rhetoric of the old 
left, says "The goal (of this vision) is to create a new 
Honduran citizen:  one who is more economically productive; 
more socially involved; more participatory, responsible, and 
tolerant in political matters; more respectful of human 
rights and therefore more peaceful in his relation with his 
fellow man; more conscious of his cultural identity; and 
proud to be Honduran." 
 
6. (U) Rhetoric aside, the specifics of the platform reveal 
an acute appreciation for the urgent need for microeconomic 
policies that deliver the benefits of recent macroeconomic 
reforms to the average Honduran.  Zelaya calls for:  improved 
market intelligence to allow the private sector to respond 
both to market opportunities and technological innovation 
much more rapidly; creation of 110,000 new full-time jobs 
annually through expansion of the small and medium-sized 
business sector; and increased domestic production in areas 
such as mining, tourism, forestry, and value-added 
agriculture. The plan explicitly recognizes the need for 
expanding available credit (including micro-credit) to 
support both small-hold farming and small and medium business 
generation.  The plan also focuses special attention on 
programs to assist women and youth to start their own 
businesses. 
 
7. (SBU) Comment:  One of Zelaya's key challenges will be to 
manage expectations from the various constituencies that 
supported him during his campaign. In the campaign he made 
several expensive promises and will have to find some way to 
implement them in an affordable way. As newcomers with a 
reputation for weak management and sometimes populist 
rhetoric, the Zelaya faction of the Liberal Party will have 
to pay careful attention to this, to ensure it does not 
undermine an otherwise largely responsible policy platform. 
End Comment. 
 
Ford 
Ford