US embassy cable - 03TEGUCIGALPA726

C O N F I D E N T I A L SECTION 01 OF 06 TEGUCIGALPA 000726 
 
SIPDIS 
 
STATE FOR WHA, WHA/CEN, WHA/PPC, AND WHA/EPSC 
STATE FOR PM, INL, EB, AND CA 
STATE PASS TO AID FOR LAC/CEN 
 
E.O. 12958: DECL: 03/21/2013 
TAGS: PREL, PGOV, SNAR, ETRD, PHUM, KJUS, CASC, ECON, HO 
SUBJECT: HIGH EXPECTATIONS, DISAPPOINTING RESULTS: 
MADURO'S FIRST YEAR 
 
REF: A. 02 TEGUCIGALPA 3407 
     B. TEGUCIGALPA 532 
     C. TEGUCIGALPA 288 
     D. TEGUCIGALPA 611 
     E. TEGUCIGALPA 527 
     F. TEGUCIGALPA 606 
     G. TEGUCIGALPA 546 
 
Classified By: Ambassador Larry L. Palmer for Reasons 1.5 (B) and (D) 
 
1. (C) SUMMARY: After one year in office, Honduran President 
Ricardo Maduro faces numerous challenges in one of the 
poorest and most corrupt countries in the Western Hemisphere. 
 Maduro began his administration amid high expectations. 
While he remains upbeat about his administration's ability to 
increase security, reduce corruption, and deliver economic 
growth, many factors, both external and internal, have 
coalesced to make these tasks more difficult.  Maduro has 
been unable to move his agenda forward and public support for 
the Administration has likewise dwindled.  While Maduro often 
says the right things, many are increasingly impatient with 
his administration's lack of progress in key areas. 
Moreover, with the economy growing very slowly, the 
Administration's ambitious goals have yet to be fitted to the 
state's financial straitjacket.  Maduro has made some 
headway, particularly in the areas of governance, judicial 
reform, and support for the international campaign against 
terrorism, but he faces formidable challenges from entrenched 
economic and political interests in moving his agenda 
forward.  As he enters the second year of his single 
four-year term in office, his administration needs concrete 
results before presidential campaigning begins next year when 
he will inevitably slide toward lame-duck status. END SUMMARY 
 
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Status of the Maduro Government 
------------------------------- 
 
2. (SBU) President Maduro is facing increasing criticism from 
both the political opposition, members of his own party in 
Congress, and the public at large over his administration's 
policies and his technocratic style of leadership.  Although 
Maduro promised to modernize government processes, there has 
been little movement towards decentralization and 
depoliticalization.  Lack of planning and foresight continue 
to plague the Administration, with Maduro reacting to events 
rather than setting the agenda.  While many feel the 
President's heart is in the right place, the political 
fortitude, necessary personnel, and resources are not there 
to move the Administration's agenda forward.  Maduro has 
stated on several occasions that his personal popularity is 
not important to him as long as he does the right thing for 
the country.  Rhetoric like this has coincided with polls 
showing that a year after taking office, less than 20 percent 
believe the country is in better shape since Maduro took 
office. 
 
3. (C) Many of Maduro's initiatives require congressional 
approval but Maduro's National Party has only a plurality, 
not a majority, within the unicameral body.  Relations with 
Congress remain tense and Maduro's efforts to use his 
bully-pulpit to advance legislation have met with limited 
success.  He was, despite considerable opposition, able to 
push through a direct energy purchase contract with the 
American firm AES in January.  However, despite a solid 
working relationship with his party's President of Congress, 
Pepe Lobo, Maduro's biggest obstacle to enacting his 
reformist program has been a recalcitrant wing of his own 
Nationalist Party, known as the "dark side."  This wing of 
the party is more interested in pursuing personal gain 
through traditional political corruption rather than seeking 
to advance a Nationalist party agenda or improve the overall 
social and economic situation in Honduras for the betterment 
of the Honduran People. 
 
4. (C) Since November, fresh rumors have been circulating 
that Maduro would make some cabinet changes in an effort to 
recapture the political momentum (ref A).  Many of Maduro's 
ministers are not well known publicly and polling data 
indicate that less than a third of those participating had 
much confidence in the President's cabinet.  This issue was 
raised publicly during a press interview in January when 
Maduro was questioned on the subject.  At that time, he 
stated he was in the process of evaluating his minister's 
performances but had not made any decisions about possible 
changes.  Although many expected movement in this area, to 
date no changes have been made.  The ministers of education, 
health, and social investment remain the main targets, 
although Foreign Minister Perez-Cadalso may also be removed. 
 
--------------------------------------------- ------- 
Bilateral Relations and Counterterrorism Cooperation 
--------------------------------------------- ------- 
 
5. (C) Relations between the U.S. and Honduras have been 
excellent, but disappointing results, particularly in public 
security, narcotics control, and the slow pace of judicial 
reform, are beginning to create stress within the bilateral 
relationship.  U.S. expectations were high when Maduro took 
office that the new Administration would be able to tackle 
some fundamental structural issues that were beyond the reach 
of its predecessors.  Some progress has been made, but 
considering the substantial U.S. investment in good 
governance programs, law enforcement, and development 
assistance, current results are insufficient to meet U.S. 
expectations. 
 
6. (SBU) President Maduro has been a good and reliable 
partner of the U.S. on counterterrorism.  He recently issued 
a statement on behalf of the GOH declaring that Honduras 
supports the U.S. war on Iraq.  Also, The first major piece 
of legislation passed under Maduro was a tough 
money-laundering bill, and his government hosted a major U.S. 
military counterterrorism exercise in March 2002.  The GOH 
has quickly responded with freeze orders to all U.S. requests 
regarding suspect terrorist bank accounts and to date no 
terrorist assets have been found in Honduran financial 
institutions.  Honduras was also the first country in Central 
America (and the second in Latin America) to sign an ICC 
Article 98 Agreement with the United States.  However, the 
GOH has yet to submit the agreement to Congress for approval. 
 Other concrete steps the GOH still needs to take are: 
designate a national coordinator for counterterrorism; file 
its national report in accordance with United Nations 
Security Council (UNSC) Resolution 1373; and most of all, 
sign and/or ratify the five outstanding international 
conventions/protocols and two OAS conventions (1971 and 2002) 
against terrorism.  It is also of vital importance for 
Honduras to improve security at its maritime ports, 
particularly Puerto Cortes.  Despite the right rhetoric, the 
GOH has been slow to follow-through on necessary 
counterterrorism actions. 
 
----------------------- 
Anticorruption Efforts 
----------------------- 
 
7. (C) Fighting Honduras' endemic corruption was one of the 
mainstays of Maduro's campaign to capture the presidency. 
While the President's public resolve appears strong, it 
remains to be seen if Maduro and his government, as well as 
the judicial system and Congress, are prepared to press for 
action against major economic and political figures involved 
in, or with a history of, corrupt practices. Since Maduro 
took office, there has not been one significant conviction, 
or even arrest, on corruption charges. It is still taken for 
granted that the rich and politically connected are above the 
law, and it is still very difficult for the GOH to manage any 
sizable government procurement efforts fairly and 
transparently. 
 
8. (SBU) Maduro's administration has successfully implemented 
some key reforms in the following areas:  the selection of an 
independent Supreme Court; establishment of a task force to 
capture white collar criminals, such as the fugitive bankers 
involved in fraudulent banking practices; the first-ever 
removal of congressional immunity from a deputy (in a rape 
case); and adoption of the national budget by Congress in an 
open and transparent process (ref B).  Yet many average 
Hondurans still feel that no real change has taken place. 
They are particularly looking for more concrete results 
against individuals involved in corrupt activities, something 
that has not happened to date. 
 
9. (C) In response to these criticisms Maduro has publicly 
directed that his government take action against obvious 
corruption.  However, he has also laid the blame for the poor 
performance in prosecuting corruption cases on the Attorney 
General (AG).  The AG is an independent appointee from the 
Liberal Party with a seven-year term of office, which does 
not expire until next year.  Maduro has expressed that the AG 
is not in sync with the rest of his government team (ref B). 
While very possibly true, lack of action by the AG's office 
has thwarted USG interests in a number of areas.  However, a 
possible move in the coming months by the Congress to remove 
the AG before his term expires would set off a political 
donnybrook and paralyze the nation's already weak 
prosecutorial function. 
 
---------------------------------- 
Supreme Court and Judicial Reform 
---------------------------------- 
 
10. (SBU) Under Maduro's watch, the Supreme Court has been 
developing into an independent branch of power, unlike any of 
its predecessor courts since democracy was restored in 1982. 
This has only been possible due to a new transparent 
nominating procedures put in place to select the current 
court and the imposition of seven-year term limits.  Supreme 
Court President Vilma Morales is pro-reform in orientation 
and has been effectively fighting to increase the Court's 
status as a separate branch of power within the federal 
government. The established political order is fighting that 
prospect with all its might.  In fact, the Congress seized 
the political opportunity to introduce legislation that would 
amend the constitution to give itself the power to interpret 
the constitutionality of any laws it passes.  Maduro works 
closely with Morales to support her efforts.  However, he has 
not risen forcefully to the Court's defense in public on this 
issue (ref C). 
 
11. (C) While the establishment of the Court as a separate 
branch of federal power is important, the Court continues to 
be under substantial pressure from entrenched political 
interests.  Of great concern has been the weight brought to 
bear by the Nationalists in Congress over judicial 
appointments.  Nominations have been sent forward for 
unqualified and/or corrupt judges that Nationalist members of 
Congress know would do their bidding.  If this process 
continues, whatever political independence the Court has 
established will be in jeopardy.  Moreover, the credibility 
of the Maduro administration, which has touted judicial 
reform as a major accomplishment, is on the line. 
 
12. (SBU) A positive step forward was the introduction in 
2002 of a new Criminal Procedure Code (CPC), replacing a 
version that was still partially based upon Spanish colonial 
law.  Under the old system, cases were resolved based on 
written submissions rather than oral testimony.  The process 
was slow, cumbersome, not transparent, and open to 
corruption.  The new Code provides for oral trials, an 
adversarial trial process, increased protections for 
defendants, and overall changes intended to facilitate the 
growth of a more transparent and effective system.  President 
Maduro has been a strong supporter of judicial reform and 
increased efficiency.  While passed under President Flores, 
implementation of the CPC is something the Maduro 
administration can point to as advancing this agenda (ref D). 
 Similar reforms are desperately needed on civil actions, 
particularly in the commercial and labor sectors. 
 
--------------- 
Public Security 
--------------- 
 
13. (SBU) Public security remains a priority, if not the most 
important, issue for the Maduro administration and the public 
at large.  Upon taking office on January 27, 2002 President 
Maduro's first act was to fulfill his main campaign promise 
-- a zero tolerance campaign against the country's 
out-of-control crime situation.  He deployed more than 5,000 
soldiers to the streets to support the police.  The public 
responded enthusiastically.  However, despite the initial 
success of establishing a visible police presence, violent 
crime, particularly homicides and kidnappings, only fell 
marginally. 
 
14. (C) A year after taking office the campaign to reduce 
violence appears to be faltering.   According to government 
statistics the number of homicides increased in 2002 despite 
the military's augmentation of the police force.  The 
homicide closure rate in Honduras is only 1-2 percent.  Thus, 
even if the police are successful in apprehending a suspect, 
the odds of a conviction are small.  Public support is fading 
and the campaign needs some visible victories to restore 
confidence in the government's program.  The USG is helping 
the Maduro government establish an anti-kidnapping unit, 
increase intake/training of police recruits, create a model 
tourist police force, boost its counternarcotics efforts, and 
expand the frontier police.  The country's geographic 
position makes it an obvious strategic transit point for 
narcotics trafficking, alien smuggling operations and other 
organized crime activities. 
 
15. (SBU) Despite this assistance, drug seizures have 
continued to fall since Maduro took office.  Extrajudicial 
killings, especially of children/young adults since 1998, 
remain a source of serious concern.  The number of child 
homicides continues to grow and there have been no aggressive 
measures by the GOH to solve them.  Maduro's administration 
blames increased gang activity, but allegations that rogue 
police officials are responsible for some of the killings 
have not been sufficiently addressed (ref E).  Maduro will 
have to do better or the public will lose what confidence it 
has left in the Administration's ability to combat the 
scourge of violence.  The trafficking in persons of 
women/children for prostitution in Central America, Mexico, 
and the U.S. also continues. 
 
16. (SBU) The unsolved murder cases of 30 American citizens 
remains a thorny issue.  The GOH has established a special 
task force, including a special prosecutor, and four 
convictions have occurred within the last six months. This 
represents significant progress.  While Maduro has addressed 
these issues, the police have few resources to work with in 
order to protect Americans and prevent crime.  For example, 
six police officers on bicycles and one pick-up are 
responsible for the entire island of Roatan outside the main 
tourist areas.  Also of concern are the more than 150 land 
and commercial dispute cases involving American citizens. 
Though the GOH has worked to create a mechanism through which 
some of the expropriation cases may be eligible for 
arbitration, it remains unclear if the political will exists 
to follow-though. 
 
---------------- 
Border Relations 
---------------- 
 
17. (SBU) Honduras has border disputes with its three Central 
American land neighbors and its seven maritime neighbors. 
The disputes with El Salvador and Nicaragua are the most 
heated.  Maduro is personally engaged with his presidential 
counterparts to address these issues but there does not 
appear to have been any concrete progress.  Foot-dragging by 
El Salvador over the land border demarcated by the ICJ in 
1992 has been particularly vexing.  Maduro has tried to move 
the process forward with little success. 
 
18. (SBU) On the Caribbean coast, Honduras and Nicaragua have 
a long-standing maritime border dispute over the 15th 
parallel.   Honduras provoked Nicaraguan retaliation when it 
signed a maritime treaty with Colombia recognizing the 15th 
parallel as its maritime border in 1999.  Nicaragua filed an 
ICJ case over the maritime border and more importantly in 
1999 slapped a punitive 35 percent tariff on Honduran goods 
that remains in place despite a Central American Court of 
Justice ruling that it is illegal.  With former Nicaraguan 
President Arnoldo Aleman deposed as President of the National 
Assembly, GOH officials were hopeful that Nicaraguan 
President Enrique Bolanos would make good on private 
assurances to lift the tariff, especially given the fact that 
the Central American Court of Justice ruled in favor of the 
GOH's petition against the tariff.  Frustrated by the lack of 
progress on the issue, and under pressure from Congress to 
react, Maduro recently announced plans for a retaliatory 
tariff equal to that of Nicaragua plus increased fees for the 
use of Puerto Cortes.  This measure will be popular in 
Honduras and could boost the President's lagging popularity 
while at the same time providing the GOH leverage against the 
Nicaraguan tariff (ref F). 
----------------- 
Economic Problems 
----------------- 
 
19. (SBU) President Maduro inherited a stagnating economy and 
seriously deteriorated government finances from the previous 
government.  GDP rose by only two percent in 2002, which was 
lower than economic growth rates in the previous years.  Per 
capita income fell by 0.6 percent during the first year of 
Maduro's administration while the Consumer Price Index rose 
by eight percent.  Already one of the poorest countries in 
the hemisphere, Honduras is falling further behind (ref G). 
 
20. (C) The GOH missed all key International Monetary Fund 
(IMF) targets in 2001, and a limited effort in 2002 to enact 
austerity and tax measures sill resulted in a government 
budget deficit of 5.6 percent of GDP.  The GOH failed to 
reach agreement with the IMF mission in November 2002 on 
draft terms of a three-year Poverty Reduction and Growth 
Facility Program (PRGF) because of the GOH's limited efforts 
to address the budget deficit.  On January 29, GOH's economic 
team went to Washington to discuss with the IMF its planned 
measures (elimination of tax exemptions and loopholes, 
freezing of many government salaries, and a draft civil 
service reform law).  The GOH believes it can reduce the 
central government deficit to three percent in 2003 and take 
measures to control the burgeoning wage bill, thereby paving 
a way to an agreement with the IMF.  However, it has yet to 
enact any of these difficult changes. 
 
21. (SBU)  International Financial Institution (IFI) and 
bilateral donor disbursements (USD 140 million) will be held 
up until the new IMF program is in place.  There will also be 
pressure for renewed GOH Paris Club debt service payments 
(USD 100 million per year).  For example, Embassy has just 
received instructions to deliver a demarche on potential 
Brooke amendment sanctions if DOD loan payments are not 
resumed.  In the meantime, the completion point for Highly 
Indebted Poor Countries (HIPC) debt reduction (worth USD 900 
million) continues to slip back further.  If unaddressed, the 
country's fiscal situation and the lack of a new IMF program 
could also impact Honduras' eligibility for Millennium 
Challenge Account grants. 
 
--------------------------------------------- ---- 
U.S. Central America Free Trade Agreement (CAFTA) 
--------------------------------------------- ---- 
 
22. (SBU) Recognizing the benefits of increased trade and 
economic integration between the U.S. and the Central 
America, Maduro has promoted U.S.-CAFTA as the road to 
economic growth.  However, the GOH was slow to prepare for 
the negotiations and the negotiating team remains weak and 
understaffed.  The GOH trade team has been leaning on the 
more sophisticated Costa Rican team for advice and this 
scenario seems likely to continue throughout the 
negotiations.  The main objectives for the GOH in the 
negotiations are to maintain the U.S. market access they 
already have now, protect sensitive agricultural products, 
and hopefully provide an improved investment climate in which 
the vital textile sector can compete with Asia after the 
elimination of quotas in 2005.  U.S.-CAFTA holds the 
prospects of bringing much needed economic growth to Honduras 
and the general attitude toward a free trade agreement is 
positive.  Getting the agreement smoothly though Congress 
though, where protectionist instincts run high, could be 
problematic. 
 
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Storm Clouds Gathering? 
----------------------- 
 
23. (C) COMMENT:  The jury is still out on whether or not 
Maduro will be successful in moving his agenda forward; the 
challenges ahead are imposing.  The government's ability to 
fund new programs is extremely limited and little prospect 
exists to raise government revenues in the short-term.  While 
Maduro remains optimistic, progress on his administration's 
key goals are stalled:  no major convictions in the 
government's crusade against corruption; crime (particularly 
homicide rates) at historic levels, although there has been a 
reduction in areas such as bank robberies, kidnappings, and 
car thefts; and the economy is performing poorly.  The areas 
where the Administration has made progress, such as reform of 
the Supreme Court and the new CPC, will not bear political 
fruit for some time. 
 
24. (C) In order to assuage his lagging popularity, Maduro 
needs to show demonstrable progress soon on topics of major 
concern to the voters.  If not, any mandate the president may 
have had will be squandered and his desire to transform 
Honduras thwarted.  President Maduro faces a very difficult 
political challenge which requires his sustained engagement. 
One major short-coming of his first year has been his 
inconsistent engagement on critical issues and lack of 
decisive leadership at crucial moments.  Just as the 
underachieving talented student, he does respond and produce 
the necessary effort to keep his government from failing. 
But thus far, his efforts fall far short of receiving top 
marks, despite his loquacious policy rhetoric. 
 
25. (C) Next month's possible visit to meet President Bush 
will provide Maduro a much needed political lift, but will 
also present the U.S. with an important opportunity to press 
him for more concrete actions rather than just "nice words." 
A strong exhortation from the highest levels of the U.S. 
government could help him realize his administration's full 
potential.  END COMMENT 
 
 
Palmer