An anti-corruption commission set up in Honduras four years ago will cease operations on Sunday, the Organization of American States said after failing to reach a deal on extending operations in the graft-riddled country.

Negotiations between the OAS and the government of President Juan Orlando Hernandez concluded on Friday but "unfortunately, it was not possible to reach the agreements required for the renewal of the mandate," an OAS statement said.

A Central American country of more than nine million, Honduras is plagued by gangs, poverty and corruption. It has seen deadly unrest under Hernandez, whose 2017 re-election was widely seen as fraudulent.

There were public calls for his resignation last October when a New York court convicted his brother, former Honduran congressman Tony Hernandez, of drug trafficking.

Although he wasn't on trial himself, prosecutors said Juan Orlando Hernandez took millions of dollars in bribes from drug lords including jailed Mexican kingpin Joaquin "El Chapo" Guzman.

President Hernandez, an ally of US President Donald Trump, dismissed the accusation as "absurd."

Ending the Mission to Support the Fight Against Corruption and Impunity in Honduras (MACCIH) "is a negative step," the OAS statement said.

Together with the attorney general's office, MACCIH led to the prosecution of 133 people, 14 cases "and, above all, in strengthening national capacities to combat corruption and impunity."

Honduran President Juan Orlando Hernandez (C), shown at the handover ceremony for a coastal patrol vessel bought from Israel, has dismissed as "absurd" accusations that he received bribes from drug lords
Honduran President Juan Orlando Hernandez (C), shown at the handover ceremony for a coastal patrol vessel bought from Israel, has dismissed as "absurd" accusations that he received bribes from drug lords Honduran Presidency / HO

Luis Zelaya, president of Honduras's opposition Liberal Party, said Friday on Twitter that "today is a terrible day for our country, won by the corrupt and criminals who have kidnapped it."

In a statement, the government "regretted" that consensus on a new mandate could not be reached.

It said it took into account complaints from various sectors about "excesses" by the anti-corruption mission.

The MACCIH was set up in 2016, with the endorsement of Hernandez, following mass demonstrations demanding such a body.

Hernandez admitted the electoral campaign that brought him to power two years earlier took $94,000 of about $330 million embezzled from the country's social security agency.

He maintained that he did not know the origin of the money at the time.

The OAS aimed at replicating the success of a similar United Nations-backed body in Guatemala that brought down that country's government.

Honduras's business sector as well as US lawmakers had lobbied the government in Tegucigalpa to maintain the MACCIH mission.

Honduras ranks 132 out of 180 countries on Transparency International's Corruption Perceptions Index 2018.

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