By John McPhaul and Ana Isabel Martinez
SAN JOSE, Costa Rica (Reuters) - The two sides in the Honduran political crisis headed into make-or-break mediation talks on Saturday, which deposed President Manuel Zelaya has called the last chance for reaching a deal to reinstate him.
Costa Rica's Nobel Peace Prize-winning president, Oscar Arias, is trying to broker a compromise between Zelaya and interim president Roberto Micheletti, the former speaker of Congress who replaced him in a June 28 military coup.
Arias faces a tough task as both sides appeared entrenched in their positions. The coup triggered the worst political crisis in Central America since the Cold War and poses a challenge for President Barack Obama as he tries to improve U.S. relations with Latin America.
Zelaya raised the stakes for the meeting, to be held at Arias' home in San Jose, by saying he would consider the mediation a failure unless Micheletti agreed to hand over the presidency.
Speaking from exile in Nicaragua on Friday, he vowed to return to Honduras "one way or another," regardless of the outcome of the negotiations. He will give diplomacy a chance, he said, but added that he was running out of patience.
His wife Xiomara Castro told Reuters he had set a Saturday deadline for declaring success or failure in the talks.
"Saturday is the deadline. Time runs out tomorrow," she said.
His supporters blocked roads for the past two days in the Honduran capital, Tegucigalpa, and planned a march on Saturday on a road leading to the airport. Protesters were gathering early Saturday at a union building on the way to the airport.
GLIMMER OF HOPE
Despite the posturing, Arias held out a glimmer of hope for progress in his mediation effort.
"I believe there has been a softening of the initial positions," he said.
Arias said he will propose the creation of a coalition government to break the impasse. He will also suggest an amnesty for any alleged political crimes as a step towards a truce. It was not clear whether he had set a deadline for an agreement.
Failure to find a breakthrough agreement could potentially lead to more confrontation, such as an escalation of street protests in Honduras or violence upon Zelaya's return.
The first round of negotiations in Costa Rica on July 9 ended without progress. Zelaya and Micheletti did not even meet face-to-face.
The two men will not meet on Saturday either and are sending high-level delegations to San Jose instead.
Zelaya has widespread international backing. Arias, the Organisation of American States and the U.N. General Assembly have all said that any solution to the crisis must include power being handed back to Zelaya.
But that is the one thing Micheletti has said is non-negotiable. Micheletti said he would consider stepping down or calling early elections, but on the condition Zelaya not be reinstated.
The military ousted Zelaya and whisked him out of the country on accusations of violating the constitution by trying to extend presidential term limits. Micheletti has said Zelaya will be arrested and face charges if he returns.
"There is no possibility of negotiating a return of President Zelaya to the presidency, but there is a way for Congress to grant an amnesty," said Rafael Pineda, minister of the presidency in the de facto government.
(Additional reporting by Simon Gardner, Esteban Israel and Juana Casas in Tegucigalpa and Carlos Quiroga in La Paz; Writing by Louise Egan, Editing by Anthony Boadle)
