Honduras rivals agree more talks to pursue solution

SAN JOSE, Costa Rica (Reuters) - The rivals for power in Honduras agreed on Friday to hold more talks to seek a solution to the crisis created by last month's coup, keeping alive hopes that dialogue would prevail over confrontation.

The talks' mediator, Costa Rican President Oscar Arias, made the announcement after chairing a first round of discussions between teams representing ousted Honduran President Manuel Zelaya and the man put in his place by the June 28 coup, Roberto Micheletti.

"Both sides have agreed to continue talks in the shortest time possible and not rest until they reach an agreement to resolve this crisis," Arias told reporters in the Costa Rican capital San Jose, saying the date for the next meeting would be set in coming days.

Both sides had committed to solving the dispute with "words not gunpowder", he said, but the task could be tough to reconcile the entrenched positions of the parties.

Mediator Arias won a Nobel Peace Prize for helping resolve Central America's Cold War conflicts of the 1980s.

While the Organization of American States and President Barack Obama's administration have thrown their weight behind Arias' mediation, leftist Venezuelan President Hugo Chavez condemned the Costa Rica talks as "dead before they started". He called for a total trade embargo on Honduras.

Chavez said Zelaya, who had angered his country's ruling elite and military by increasingly allying himself with the Venezuelan leader, was determined to return to his country "by air, land, I don't know where, but he's going to enter".

In a contrasting view of the Costa Rica talks, U.N. General Assembly president Miguel D'Escoto on Friday expressed optimism over a solution to restore Zelaya to office.

"I hear we may be very close to a solution for the restitution of President Zelaya," D'Escoto told a U.N. news conference, saying his belief was based on "conversations".

But Micheletti, installed by Honduras' Congress after the coup, has shown no signs of yielding to international pressure to give power back to Zelaya. He has said if Zelaya returns it will be to face justice, arguing the deposed president violated the constitution by trying to scrap presidential term limits.

Micheletti said in Tegucigalpa on Friday the talks would resume next week and added Honduras was "preparing for the worst" by cutting back government budgets to confront the suspension of credits and aid by foreign governments.

Chavez said in Caracas Obama's administration had made a "crass error" in engineering the Costa Rica talks, and that there could be no negotiations with "a usurper" in Honduras.

POPE, OBAMA DISCUSS HONDURAS

Washington played down Chavez' comments.

"There is a negotiation going on. It is ... the best route to try to resolve this peacefully and help Honduras return to democratic constitutional order," State Department spokesman P.J. Crowley said in Washington.

He added U.S. Secretary of State Hillary Clinton spoke to Arias by telephone on Friday to get an update on the negotiations and to discuss how the United States could help.

Obama and Pope Benedict discussed Honduras during a meeting at the Vatican on Friday, White House deputy national security adviser Denis McDonough said.

Chavez' comments about Zelaya's determination to return seemed likely to rekindle fears that he and other leftist allies of Zelaya, like Cuba and Nicaragua, might seek to help the ousted president re-enter the country against the wishes of the interim government and against U.S. advice.

Zelaya said he was working on "peaceful, non-violent methods" to return to office. He spoke in the Dominican Republic and was due travel to Guatemala on Saturday before returning to Washington.

Honduran soldiers blocked the runway when Zelaya tried to return home in a plane provided by Chavez on Sunday. At least one person was killed when the troops clashed with pro-Zelaya protesters.

"The truth is that there is still a lot of intransigence on both sides," OAS Secretary-General Jose Miguel Insulza told local radio in Chile on Friday.

Dominican Republic President Leonel Fernandez said in Santo Domingo he and Zelaya had discussed seeking resolutions to back Zelaya's return to power from leaders at a Non-Aligned Summit in Egypt next week and also from the African Union.

A CID-Gallup poll published in Honduran media on Thursday showed 41 percent of Hondurans thought Zelaya's ouster was justified versus 28 percent who opposed the coup.

In Tegucigalpa, Micheletti announced the resignation of the foreign minister of his interim government, Enrique Ortez, who had insulted Obama by calling him "negrito" -- little black guy.

But he offered Ortez a new post as minister of justice and government.

(Additional reporting by Daniel Trotta, Gustavo Palencia, Simon Gardner in Tegucigalpa, Patricia Rondon and Frank Jack Daniel in Caracas, Patrick Markey in San Jose, Anupreeta Das at the United Nations, Arshad Mohammed in Washington, and Manuel Jimenez in Santo Domingo; writing by Pascal Fletcher; editing by Mohammad Zargham)