By Andres R. Martinez and Nathan Gill

     June 29 (Bloomberg) — Hundreds of protesters clashed with riot police and soldiers outside Honduras’ presidential palace a day after the military arrested President Manuel Zelaya at gunpoint and put him on a plane out of the country.

     Regional leaders, from market-friendly Mexican President Felipe Calderon to self-declared socialist Hugo Chavez of Venezuela, met in Nicaragua in a bid to restore Zelaya to office. The coup, the first in Latin America since a two-day ouster of Chavez in 2002, was condemned by the U.S. and European Union.

     Security forces regained control of streets near the presidential palace in the capital, Tegucigalpa, even as roadblocks set ablaze by protesters smoldered. Earlier, gunshots were heard outside the palace, although it wasn’t immediately clear who fired them or whether anyone was injured. Demonstrators, some wearing face masks, threw rocks and banged on shields held by the police.

     “All the people are waiting for the elected president to return,” said Ernesto Chavez, the owner of a small business who traveled an hour to the capital to take part in a march. “I’m protesting for my people and for my kids so that democracy can continue.”

     Protesters ransacked a Pizza Hut restaurant near the palace and injured customers. They threw rocks, broke the door and rushed into the restaurant, said Hever Raudales, an employee.

“This isn’t about reforms anymore,” said Raudales, 24. “This is vandalism.”

Police Injured

     The Red Cross removed at least three injured people from the restaurant and said six police officers were also hurt there. Red Cross workers were treating two soldiers wounded near the palace, staff member Hellyn Sierra said on the scene.

     The Organization of American States said it won’t recognize a new government. President Barack Obama said today that Zelaya remains the president of Honduras and his ouster “was not legal.”

     “We can’t accept or recognize any government other than Zelaya’s,” Brazilian President Luiz Inacio Lula da Silva said in his weekly radio program today. “If Honduras doesn’t reverse its position, then it’s going to be totally isolated in the middle of an enormous contingent of democracies.”

     The military’s overthrow of Zelaya may threaten the country’s economy and put at risk a free trade agreement with the U.S., Honduras’s biggest trade and investment partner, said Alfredo Coutino, director for Latin America at Moody’s Economy.com in West Chester, Pennsylvania.

     Honduras, with 7.5 million people, has a $12.3 billion economy, the third smallest in Central America, according to the International Monetary Fund.

Gunpoint Arrest

     Zelaya said he was arrested at gunpoint in his night-shirt before dawn and put on a plane to Costa Rica. Lawmakers then ratified his removal, naming Roberto Micheletti, the head of congress, as his replacement. Lawmakers accused Zelaya of “repeated violations of the constitution.”

     Micheletti denied there had been a coup d’etat, saying Honduras is a “civil state” that isn’t controlled by the military.

     Over the past year, Zelaya alienated Honduras’s political and business elite by aligning with the Chavez-led bloc of socialist Latin American leaders, said Heather Berkman, a political risk analyst at the Eurasia Group in New York.

     “Zelaya took a substantial turn from traditional Honduran politics by moving dramatically to the left,” Berkman said in a telephone interview.

Referendum Plan

     Zelaya had planned to conduct a nationwide poll last weekend on whether to hold a referendum later this year for a national assembly to rewrite the nation’s constitution, as Bolivia, Ecuador and other countries in the region have done. He moved ahead with his plans even after Supreme Court ruled them unconstitutional, and members of the opposition and some in his own party registered objections.

     Zelaya last week tried to fire the head of the armed forces, General Romeo Vasquez, for refusing to support the poll. The general on June 26 said he would remain at his post after the Supreme Court overturned the president’s decision to fire him. The Honduran Supreme Court ordered the removal of Zelaya, Agence France-Presse said, citing unidentified officials at the court.

Micheletti said he would step down after a new president is elected in November.

OAS Statement

    

     “The transition was absolutely legal,” Micheletti said in a speech to Honduran lawmakers, who voted in favor of replacing Zelaya.

     The OAS, a 34-nation organization of Western Hemisphere countries, demanded the immediate and unconditional return to power of Zelaya.

     Zelaya will address the United Nations General Assembly tomorrow, Enrique Yeves, the assembly’s spokesman, said in an e-mail. UN Secretary-General Ban Ki-moon in a statement yesterday called for Zelaya’s reinstatement.