THOUSANDS of Hondurans waving the blue and white national flag staged a boisterous anti-Zelaya demonstration near the presidential palace.

Mr Insulza met politicians, church leaders and judicial figures but did not talk directly to Mr Roberto Micheletti, named by Congress as caretaker president, as the OAS wanted to avoid giving his government legitimacy.

The interim government's deputy foreign minister, Ms Martha Alvarado, told local television immediately after Mr Insulza's remarks that Mr Zelaya's return as president was 'not negotiable.' Mr Insulza said he did not rule out violence.

'So far, unlike in other military coups, there have not been fatalities to lament, I cannot rule out the possibility of clashes,' the OAS chief said.

Mr Insulza, a former Chilean foreign minister, was told firmly by the Honduran Supreme Court that Mr Zelaya would be arrested if he returns home.

'The president of the court told him the decision had been taken and there was no going back. If the president returns he will be arrested,' a court spokesman said after the meeting.

The Honduras turmoil is Central America's biggest political crisis since the US invasion of Panama in 1989.

The United States has criticised the coup and will decide next week whether to cut economic aid to Honduras, one of the poorest countries in the Americas. But the Obama administration has let the OAS take the lead in trying to resolve the crisis.

The upheaval has not yet affected coffee supplies, although Central American neighbours staged a two-day trade blockade of Honduras to protest against the coup.

No foreign governments have so far imposed economic sanctions, and Micheletti's industry and commerce minister Benjamin Bogran told Reuters that an embargo would mainly hurt the country's poor. -- REUTERS