US embassy cable - 05TEGUCIGALPA2454

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 002454 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, EB/ABT, EB/MTA, EB/BTA, DRL/IL 
COMMERCE FOR MSIEGELMAN 
TREASURY FOR DDOUGLAS 
STATE PASS AID (LAC/CAM) FOR LLIBANATI 
STATE PASS USTR FOR ANDREA MALITO 
GUATEMALA FOR COMMAT MLARSEN 
DEPARTMENT OF LABOR FOR ILAB 
 
E.O. 12958: DECL: 11/15/2015 
TAGS: ETRD, ECON, PGOV, ELAB, HO 
SUBJECT: HONDURAS: READY AND EAGER TO MOVE FORWARD, BUT 
WAITING FOR WORD FROM USTR 
 
REF: TEGUCIGALPA 2634 
 
Classified By: ECONCHIEF PDUNN FOR REASONS 1.5 (B AND D) 
 
 1. (C) Summary:  Honduras urgently seeks USTR concurrence to 
move forward with CAFTA legislative changes as soon as 
possible.  All draft legislation has been submitted to the 
USG for review, and Honduras, political will to implement 
USTR suggestions to these drafts is palpable.  These bills 
must go to the Honduran Congress for consideration within the 
next two weeks, or risk months of delays as this Congress 
ends and an entirely new government is assembled following 
the recent Liberal Party projected upset victory in the 
November 27 elections.  GOH officials stand ready to meet 
with USTR as soon as possible to resolve any outstanding 
issues and conclude the steps necessary for CAFTA entry into 
force on January 1, 2006.  Failure to do so risks significant 
political and economic damage for both the U.S. and Honduras. 
 End Summary. 
 
2. (SBU) Honduras has submitted all requested draft 
modifications to laws and regulations to USTR in both Spanish 
and English, according to Vice Minister for Trade Melvin 
Redondo.  In a December 5 meeting, Redondo told EconChief 
that the GOH is eager to submit final draft bills and 
regulations to Congress as soon as possible, but has been 
instructed not to do so by USTR pending its own review of 
those modifications.  Redondo is extremely concerned about 
the very short period of time remaining for the GOH and USTR 
to conclude this process, since the Honduran Congress will 
come into session o/a December 12 and will likely go out of 
session o/a December 21, according to Redondo.  This leaves 
very few days to get a number of key pieces of CAFTA 
legislation passed, in addition to other vital legislative 
projects including the annual federal budget. 
 
3. (C) Redondo outlined the legislative procedure, noting 
that the responsible committees must issue a legal analysis 
("dictamen") of each bill or regulation before voting on the 
bill and then sending it to the floor for a full vote.  The 
GOH (with assistance from NGOs and the private sector) is 
helping the committees conduct this analysis, and in most 
cases the committee is expected to "rubber-stamp" the 
dictamen.  The GOH foresees few problems during the floor 
vote.  However, the dictamen process is on hold, pending 
submission of the final versions of the laws and regulations. 
 Those final versions are themselves on hold while the GOH 
awaits formal feedback from USTR and confirmation that the 
proposed modifications are sufficient to certify Honduran 
CAFTA compliance under the forthcoming Presidential 
Proclamation required by Trade Promotion Authority. 
 
4. (SBU) Ambassador and EconChief are requesting meetings 
with the five most influential Congressmen on CAFTA issues, 
including the four chairs of the committees responsible for 
the seven key pieces of pending legislation.  We will 
emphasize the importance of this legislation to prompt 
implementation of CAFTA, maintaining momentum, maximizing 
benefits to Honduras, and encouraging investor confidence. 
In a legislative calendar that is overstuffed with difficult 
issues, we want to ensure that the CAFTA legislation remains 
a top priority for the Congress.  The Ministry of Trade is 
likewise making CAFTA its top priority. Both the Minister and 
Vice Minister will remain in Tegucigalpa rather than attend 
the upcoming WTO round in Hong Kong in order to respond at a 
moment,s notice to all USTR and congressional concerns.  The 
Vice Minister is prepared to travel to Washington at any time 
to meet with USTR on these issues, and requests such a 
meeting at the earliest opportunity. 
 
5. (C) Comment:  On November 27, Honduras held national 
elections for President, Congress, and Mayors.  As of 
December 6, the results of the Presidential election have not 
yet been certified, but it seems virtually certain that 
opposition Liberal Party candidate Manuel "Mel" Zelaya 
Rosales has won.  This change of power heralds months of 
disorganization and delay as the GOH transitions from 
National Party control to Liberal Party control starting with 
the inauguration on January 27.  CAFTA legislation must be 
submitted and ratified before the current Congress goes out 
of session, or we risk significant delays while the new 
government is formed and the new Congress is educated on the 
issues.  It is unclear if this lame-duck Congress would be 
willing to return in extraordinary session between the New 
Year and the inauguration, dramatically limiting the time 
remaining to conduct legislative business. 
 
6. (C) Comment continued:  In the Congress itself, the 
situation is in flux, as this year was the first year in 
which the public could vote for individual Congressmen, vice 
a straight party-line vote.  As a consequence, the tallying 
of this vote, combined with a complex and poorly understood 
proportionality rule (reftel), will delay for some time a 
clear idea of the composition of the new Congress.  Very 
preliminary results suggest some stalwarts might have lost 
their seats, while a number of young freshmen Congressmen and 
Congresswomen were among the top vote-getters.  This 
situation poses unknown and unknowable risks for CAFTA 
implementation if that implementation is not accomplished by 
January 1, 2006.  Delaying consideration of entry into force 
beyond the close of the outgoing Congress (expected to be o/a 
December 21, according to Redondo) could result in 
politically damaging and economically devastating delays in 
entry into force for Honduras until the third or fourth 
quarter of 2006.  Such an outcome would undermine U.S. 
credibility in Honduras, eyes, jeopardize future GOH support 
on international issues, harm U.S. investors, limit new 
foreign direct investment, and potentially threaten U.S. 
national security by encouraging increased gang membership 
and illegal emigration to the U.S. as the Honduran economy 
stalls without CAFTA-related investment. 
Ford