Why U.S. hasn't sanctioned Honduras

Followers of ousted President Manuel Zelaya demand his return to Honduras during a demonstration in Tegucigalpa, Honduras.

TEXT OF STORY

STEVE CHIOTAKIS: There's been fast economic reaction to the military coup in Honduras. Neighboring countries in Central America have suspended trade. The World Bank's postponed millions of dollars in loans. But the United States has held off on sanctions for now. From the Americas Desk at WLRN in Miami, here's Marketplace's Dan Grech reports.


DAN GRECH: President Barack Obama says the overthrow of Honduran President Manuel Zelaya sets a "terrible precedent" for Latin America. But his administration has not formally labeled it a coup, because that would cut off development aid. Gabriel Torres is a sovereign risk analyst with Moody's Investors Services.

GABRIEL TORRES: There is a legal procedure, by which, if you formally certify it as a coup, then certain amounts of money would be put in jeopardy.

For instance, more than $200 million dollars in funding from the Millennium Challenge aid program. Torres says the U.S. could turn the economic screws further. It could cut off trade to Honduras, or even inhibit the flow of money sent home by Honduran immigrants.

TORRES: None of that has yet happened. The government of the United States is still trying to work behind the scenes to help resolve this.

The Organization of American States, with U.S. backing, gave the Honduran military until Saturday to restore Zelaya to power.

I'm Dan Grech for Marketplace.

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