OAS delegation to visit Honduras

A high-level delegation is going to Honduras to seek a negotiated end to the country's political crisis, the Organisation of American States says.
The foreign ministers of six OAS states will arrive on Tuesday and hold talks with the Honduran interim government.
They hope it will accept a plan under which ousted President Manuel Zelaya would return and elections be held.
Mr Zelaya was sent into exile after a coup in June amid a power struggle over his plans for constitutional change.
His critics said the move was aimed at removing the current one-term limit on serving as president, and paving the way for his re-election.
Following the army-led coup on 28 June, the speaker of Congress, Roberto Micheletti - constitutionally second in line to the presidency - was sworn in as interim leader.
The OAS has demanded Mr Zelaya's immediate reinstatement.
It suspended Honduras' membership after the interim government failed to abide by a deadline to restore Mr Zelaya to power.
The OAS delegation will include the foreign ministers of Argentina, Canada, Costa Rica, Jamaica, Mexico and the Dominican Republic. They will be accompanied by Secretary-General Jose Miguel Insulza.
--------------------
Midence Says Honduras Economy to Shrink After Crisis (Update1) By Blake Schmidt
Aug. 7 (Bloomberg) -- Honduras’s central bank cut its economic outlook today, predicting a contraction of as much as 2 percent as the global slump and a political crisis curtail trade and tourism.
The $14.1 billion economy will shrink 1 percent to 2 percent this year, compared with a previous estimate for growth of as much as 3 percent. A decline in money transfers from Hondurans living abroad also has hurt Central America’s second- poorest country, Bank President Sandra Midence , 54, said in an Aug. 5 interview in Tegucigalpa.
Consumer spending, exports and inflows of tourism dollars have all declined since the military removed President Manuel Zelaya from the country at gunpoint on June 28. Acting President Roberto Micheletti has defied pressure from the U.S., Brazil, the United Nations and the Organization of American States to reach an accord with Zelaya and restore him to power.
“If this political situation keeps up into next year, we’ll have problems,” Midence said, sitting behind a desk piled with stacks of papers in her central bank office. “It’s intensifying the economic crisis.”
The bank’s foreign reserves have fallen because of a jump in demand for U.S. dollars amid political uncertainty, Midence said. Bank reserves on Aug. 4 were $2.19 billion, down 9 percent from the end of last year, according to the bank’s Web site.
Export Drop
Falling exports and lower remittances took a toll on the economy even before the political crisis, she said. Exports in the first six months of the year dropped 13 percent from the year-ago period to $1.37 billion, while remittances to the country of 7.6 million people have dropped 10 percent to $1.19 billion, according to bank figures.
Honduras’s currency, the lempira, is pegged at 18.89 per U.S. dollar. The currency is named for an Indian leader who fought the Spanish in the 16th century. He’s also honored in the national anthem.
The narrow streets below Midence’s second-floor office have been the site of protests in recent weeks by Zelaya supporters. Television coverage of the protests, as well as soldier-enforced curfews and checkpoints, have scared away investors, she said.
Economist Alcides Hernandez, director of the Tegucigalpa- based National Autonomous University ’s economics program, estimates the crisis is costing the country $20 million daily in lost trade, aid, tourism and investment.
‘Quickly Buckle’
“I don’t know how long the Micheletti government can resist international pressure,” Hernandez said. “If they start blocking trade too, a country as poor as ours would quickly buckle.”
Moody’s Investors Service said in a statement this week it could lower Honduras’s B2 credit rating if the crisis deepens and more economic sanctions come.
The inflation rate may be less than originally forecast on lower oil and food prices. Consumer prices will probably climb 3.5 percent to 5.5 percent in 2009, compared with a previous forecast of 8 percent to 10 percent, the bank said today. Prices rose 4 percent in July from a year earlier, the lowest rate in 21 years, the bank said on its Web site .
The economy will grow 2 percent to 3 percent in 2010 and inflation will quicken to 5 percent to 7 percent, according to today’s projections.
Midence previously was the Inter-American Development Bank’s director for Central America and deputy finance minister for Honduras. She replaced former central bank President Edwin Araque after Zelaya was forced out.
Economic Sanctions
Guillermo Matamoros, head of the Honduran Association of Manufacturers, said the effects of protests have been dwarfed by the economic slump and companies are prepared to endure economic sanctions.
“Zelaya conveyed a message that he was going to undo the economy,” Matamoros, also vice-president of the College of Economists, said in a phone interview. “At the end of this we’ll be better off in terms of investment. There’s the perception that once this is resolved, the country will be stronger.”
Micheletti said this week Zelaya will “never” be restored as president, rejecting a main point in Costa Rican President Oscar Arias ’s proposal to resolve the crisis. He said protests are “weakening the economy” and vowed to crack down on roadblocks and protester violence.
The Zelaya government received $199 million in discounted oil and aid this year under accords with Venezuelan President Hugo Chavez , according to Midence.
Minimum Wage
The Honduran construction, mining and financial industries were hit hardest by the economic crisis this year, Midence said. Zelaya caused small businesses to trim payrolls by ordering a 60 percent increase in the minimum wage in January, she added.
The U.S., European Union and World Bank have suspended aid and financing to Honduras to protest Zelaya’s ouster.
Zelaya was in Mexico this week to build support for his return to power and is slated to be in Brazil next week. While Zelaya’s return is unlikely due to staunch resistance from the country’s business community, aid will eventually be restored once Micheletti cedes power following November presidential elections, she said.
“The international community can’t keep denying us once we hold free and democratic elections,” she said. “That would be cruelty. We’re a weak country with a weak economy.”
To contact the reporter on this story: Blake Schmidt in Tegucigalpa at bschmidt16@bloomberg.net .
Last Updated: August 7, 2009 14:47 EDT