[HNA] Will US suspend aid today?

[Simon Rios]

U.S. moves toward formal cutoff of aid to Honduras Thu Aug 27, 2009 11:38pm
EDT
* U.S. State Dept toughens line on Honduras, aid at risk

* Dominican Republic suggests suspension from CAFTA pact

* Central America says won't recognize November election (Adds Central
America won't recognize election, Rodas quote)

By Arshad Mohammed

WASHINGTON, Aug 27 (Reuters) - U.S. State Department staff have recommended
that the ouster of Honduran President Manuel Zelaya be declared a "military
coup," a U.S. official said on Thursday, a step that could cut off tens of
millions of dollars in U.S. funding to the impoverished Central American
nation.

The official, who spoke on condition he not be named, said State Department
staff had made such a recommendation to Secretary of State Hillary Clinton,
who was expected to make a decision on the matter soon.

Washington already suspended about $18 million in aid to Honduras after the
June 28 coup and that would be formally cut if the determination is made
because of a U.S. law barring aid "to the government of any country whose
duly elected head of government is deposed by military coup or decree."

The president of the Dominican Republic, Leonel Fernandez, called for
Honduras to be suspended from the Central American Free Trade Agreement with
the United States as a means of putting pressure on the de facto government.

CAFTA offers its members preferential commercial terms.

Despite worldwide opposition over the past two months to the ouster of
Zelaya, who was whisked to exile in an army plane, the interim government of
former Congress head Roberto Micheletti says it will not be pressured into
stepping down.

Central American foreign ministers meeting in Costa Rica on Thursday agreed
not to recognize the result of a presidential election set for November
unless Zelaya is first restored to power.

Zelaya's foreign minister, Patricia Rodas, said after the talks that the
push in Washington to employ the term "military coup" meant the coup leaders
"have lost their patrons."

The State Department official said $215 million in grant funding from the
U.S. Millennium Challenge Corporation to Honduras would also have to end
should Clinton make the determination a military coup took place.

According to the MCC, just over $80 million of that has already been
disbursed. A second U.S. official said this implied the remaining roughly
$135 million could not be given to Honduras should the determination be
made.

MCC officials could not immediately say exactly how much of the MCC funds
for Honduras, one of the poorest countries in Latin America, were in
jeopardy.

INFALLIBLE FORMULA

Diplomats said the United States had held off making the formal
determination to give diplomacy a chance to yield a negotiated compromise
that might allow for Zelaya's return.

Such efforts appear, however, to have failed for now and the United States
is taking steps -- including a decision to stop issuing some visas at its
embassy in Tegucigalpa -- to raise pressure on the de facto government.

The U.S. official said State Department staff were recommending Clinton sign
the military coup determination.

He said that was a response to the de facto government's rejection of
proposals put forward by Costa Rican President Oscar Arias, whose mediation
effort has stalled over the government's refusal to allow Zelaya to return.
The San Jose accord proposed by the Nobel Peace Prize winner would have let
Zelaya back into power before the November election.

"I can propose an infallible formula for returning President Zelaya to power
-- suspending Honduras from CAFTA," the Dominican Republic's Fernandez said
at an event late on Wednesday in Santo Domingo. "Just do that and I'm
telling you Zelaya will be back in two or three weeks," Fernandez said.

The State Department said on Tuesday it would only provide visa services to
potential immigrants and emergency cases at its embassy in Tegucigalpa.

A U.S. official who spoke on condition of anonymity told reporters the visa
decision was "a signal of how seriously we are watching the situation" and
said Washington was considering other steps, although it was premature to
disclose them. (Additional reporting by Manuel Jimenez in Santo Domingo and
John McPhaul in San Jose; Editing by Peter Cooney)
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