Honduras de facto leader dampens hope of Zelaya deal

(For full coverage of Honduras crisis, click on [nHONDURAS])

* Zelaya negotiator says chance of a solution to crisis

* De facto government says no final deal on Zelaya return

* Army chief says significant progress made (Adds State Department comment, soccer celebrations, details)

By Frank Jack Daniel

TEGUCIGALPA, Oct 14 (Reuters) - Honduras' de facto leader Roberto Micheletti appeared to back away on Wednesday from a deal to end a political crisis sparked when the army ousted President Manuel Zelaya in a coup.

The central issue in negotiations this week is the return to power of Zelaya, toppled in a June 28 coup. His lead negotiator Victor Meza said the two sides agreed on Wednesday on the wording of a settlement and the army chief said a resolution was near.

But after meeting with the de facto leader in the presidential palace, Micheletti's negotiating team said no deal had been reached on reinstating Zelaya.

"The dialogue on this point has been cordial and both sides have made important advances. However, at this moment, there is no final agreement," the negotiators said in a statement.

The coup triggered Central America's worst political crisis in years. It has also become U.S. President Barack Obama's first major test in Latin America after promising better relations with the region. Obama has called for Zelaya's return and cut some aid to Honduras but has so far not been able to pressure Micheletti into backing down.

A veteran politician appointed president by Congress on the day of the putsch, Micheletti said on Wednesday that the Supreme Court would have to decide the future of his rival.

"As I understand it, Zelaya is asking that Congress determine if he can return or not," Micheletti said. "But it is the Supreme Court that has to decide."

The proposal put together by negotiators is also believed to contain plans for an interim government with representatives from both camps.

Army chief Romeo Vasquez, a key figure in the coup, said a deal appeared close. "I know that we have advanced significantly, we are almost at the end of this crisis," he told local radio HRN.


Zelaya was toppled and forced into exile by soldiers but slipped back into Honduras last month and took refuge in the Brazilian embassy in the capital to avoid arrest.

On Wednesday, he met with negotiators in the embassy to review the proposed deal.

A wealthy rancher who wears a cowboy hat, Zelaya angered powerful conservatives when he was in power by building close ties to Venezuela's President Hugo Chavez and toying with the idea of reforming the constitution, possibly to allow re-election for presidents.

The United States and other foreign governments have condemned the coup against Zelaya and threatened not to recognize elections called for November 29 if democracy is not restored before that date.

The U.S. State Department called on Wednesday for a "peaceful, negotiated restoration of democratic and constitutional order."

The reinstatement of Zelaya would be a Latin American foreign policy victory for Obama, who came out against the coup in a break with past U.S. policy that tacitly supported the ouster of leftist presidents in the region.

Socialist leaders such as Chavez have said Obama needs to push harder to force a return to democracy in Honduras, while some Republicans in the U.S. Congress complain Obama has already done too much to help the leftist Zelaya.

After months of political turmoil, Hondurans finally had something to cheer about on Wednesday night as the national soccer team qualified for the World Cup finals next year.

It is only the second time Honduras has ever made it to the finals, and celebrations erupted across the country as the team booked its place with a 1-0 win over El Salvador. (Additional reporting by Magdalena Morales, Edgard Garrido, Luis Rojas Mena and Gustavo Palencia; Editing by Kieran Murray)