TEGUCIGALPA - A tentative plan to end Honduras' political crisis has not yet been agreed to by ousted President Manuel Zelaya and the country's de facto leader but a negotiator for the leftist toppled in a coup said on Thursday a deal looked closer.

Negotiators are struggling with the thorny issue of Zelaya's restitution, a key demand both for him and countries including the United States that say democracy must return to the poor, coffee-exporting nation to validate elections scheduled for next month.

Zelaya was forced into exile by soldiers on June 28 but he crept back into Honduras last month and took refuge in the Brazilian embassy in the capital to avoid arrest.

The coup caused Central America's worst political crisis in years and has also become a test for U.S. President Barack Obama after he promised better relations with Latin America.

Victor Meza, the chief negotiator for Zelaya in talks that started last week, said on Thursday night the two sides would resume talks in the morning with the aim of agreeing to the final details of a text aimed at ending the crisis.

We are giving them an opportunity for peace, Meza said. We hope to have signed the agreement tomorrow at midday, he added.

The two sides have moved closer in recent days, but de facto leader Roberto Micheletti is resisting the push to bring his rival back to office.

Obama has called for Zelaya's return, cut some aid to Honduras and may not recognize elections on November 29 if democracy is not restored. But he is increasingly criticized by U.S. Republicans for sticking up for Zelaya and so far has failed to pressure Micheletti into backing down.

Zelaya supporters worry the talks have stalled and believe Micheletti wants to keep hold of power until the elections.

No agreement the dialogue reaches will be valid if the coup leaders do not accept the immediate restitution of Manuel Zelaya, protest leader Israel Salinas read from a statement.

A couple of hundred demonstrators gathered near the hotel where the talks were held calling for Zelaya's return.

WE'RE CLOSE

After months of unruly protests, media crackdowns and aggressive policing, representatives of Zelaya and Micheletti sat down to try to thrash out a solution last week.

A wealthy rancher who moved to the left after taking office, Zelaya angered conservatives by building close ties to Venezuelan President Hugo Chavez and toying with a reform of the constitution to change term limits for presidents.

U.S. State Department spokesman Robert Wood called on both sides to keep talking. What we're trying to do right now, from the U.S. side, is to encourage them to continue, because, as I said, we're close, and we want to see this deal happen.

Dick Lugar, the top Republican on the U.S. Senate Foreign Relations Committee, boosted Micheletti's drive to have the elections recognized by supporting a call for the Organization of American States to send observers for the vote.
He also called for Micheletti to end curbs on media and protests.

(Additional reporting by Magdalena Morales and Gustavo Palencia in Tegucigalpa and Susan Cornwell in Washington)

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