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U.S. moves toward formal cut off of aid to Honduras

Reuters Thursday, August 27, 2009; 3:23 PM

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 as much as $150 million 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 U.S. Secretary of State Hillary Clinton, who has yet to make a decision on the matter although one was likely soon.

Washington has already suspended about $18 million aid to Honduras following the June 28 coup and this 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 official said that $215 million in grant funding from the U.S. Millennium Challenge Corporation to Honduras would also have to end should Clinton make the determination that a military coup took place.

About $76 million of that money has already been disbursed and a second U.S. official said this implied that the remaining roughly $139 million could not be given to Honduras should the determination be made.
Diplomats said that 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 to power.

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

"The recommendation of the building is for her to sign it," said the first U.S. official said of the 'military coup" determination, saying this was a response to the de facto government's refusal to accept a compromise that would allow Zelaya to return to power ahead of November elections.
(Editing by Jackie Frank)