US embassy cable - 03TEGUCIGALPA606

UNCLAS TEGUCIGALPA 000606 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA/CEN, WHA/EPSC 
STATE PASS AID FOR LAC/CEN 
PASS TO USTR FOR ANDREA GASH DURKIN 
 
E.O. 12958: N/A 
 
TAGS: PBTS, ETRD, PGOV, HO 
SUBJECT: MADURO ANNOUNCES RETALIATORY TARIFFS AGAINST 
NICARAGUA 
 
 
1. (SBU) Summary.  On March 3, President Maduro announced a 
number of retaliatory countermeasures against Nicaragua 
including a 35 percent tariff on goods and increased fees 
for the use of Puerto Cortez and national highways.  The 
retaliatory action by the GOH is the latest chapter in the 
long-running dispute between Honduras and Nicaragua over 
their maritime boundary.  The GOH hopes that this action 
will force the GON to repeal the 35 percent tariff they 
imposed in 1999 in response to the ratification of a 
maritime treaty between Colombia and Honduras recognizing 
the 15th parallel as the maritime boundary.  The 
announcement of the countermeasures has allowed Maduro to 
look proactive, boost his popularity ratings and has 
provided the GOH the leverage against Nicaragua.  End 
Summary. 
 
2. (U) On March 3, President Ricardo Maduro announced that 
he was sending to the Congress a decree to apply retaliatory 
countermeasures against Nicaragua in response to the GON's 
failure to repeal the 35 percent tariff that was imposed in 
1999.  The retaliatory countermeasures include a matching 35 
percent tariff on all Nicaraguan goods and increased fees 
for the use of Puerto Cortez and national highways.  In the 
announcement, Maduro stated that the Nicaraguan tariff had 
severely damaged the Honduran economy and called on the GON 
to abandon its anti-integrationist position. Further, he 
noted that the measure Nicaraguan President Bolanos had 
proposed to send to the Nicaraguan National Assembly to 
temporarily repeal the tariff was unsatisfactory.  If the 
tariffs are imposed, Honduras believes they would deal a 
serious blow to the Nicaraguan economy, especially the 
coffee industry, since almost 100 percent of Nicaraguan 
exports pass through Puerto Cortez. 
 
3. (U) The GOH's announcement of the imposition of 
retaliatory tariffs against Nicaragua is the latest chapter 
in their long-running dispute over their maritime boundary. 
The dispute began when Honduras ratified a maritime treaty 
with Colombia in 1999, recognizing the 15th parallel as the 
maritime boundary.  That same year, Nicaragua retaliated by 
filing an ICJ case and more importantly, imposing a 35 
percent tariff on Honduran goods and services.  The 
Nicaraguan tariff has remained in place despite a Central 
American Court of Justice ruling that it is illegal. 
 
4. (U) With former Nicaraguan President Arnoldo Aleman 
deposed as President of the National Assembly, the GOH had 
expressed optimism in the last few months that Bolanos would 
make good on private assurances to lift the tariff and 
thereby take an important step toward regional economic 
integration.  The ongoing U.S.-Central America Free Trade 
Agreement (U.S.-CAFTA) negotiations and the recent ICJ 
ruling in favor of the GOH's petition against the tariff 
were viewed as additional incentives. 
 
5. (SBU) Comment:  After three years of restraint, the GOH 
finally reached the point where they felt the leverage 
provided by Honduran countermeasures was the only way to 
ensure repeal of the Nicaraguan sanctions.  The Honduran 
Congress was prepared to consider a retaliatory tariff bill 
in January, but postponed the action after public assurances 
from Bolanos.  However, after intense pressure from the 
Honduran business community in the last two weeks, Maduro 
promised to take action after a ten-day waiting period.  By 
taking the initiative, Maduro was able to look proactive, 
possibly boost his sagging popularity and deflect attention 
from the recently introduced tax package.  Further, the 
announcement of the retaliatory measures solidified his 
support in the business community. 
 
6. (SBU) There still remains a possibility that the GON will 
repeal the 35 percent tariff in the next week to avoid both 
the countermeasures and regional squabbling during the U.S.- 
CAFTA negotiations.  We understand that there have been 
discussions between the countries Congressional Vice 
Presidents in an attempt to resolve the issue before 
countermeasures are enacted.  If the sanctions are adopted, 
vested interests may develop, making repeal both politically 
and economically difficult.  The Honduran press is already 
quoting figures on badly needed government revenue that will 
accrue from the countermeasures.  It remains to be seen 
whether the Honduran proposal will only add fuel to an 
already volatile situation or act as the final catalyst to 
successfully repeal the Nicaraguan tariff. 
 
Palmer