VZCZCXYZ0005
PP RUEHWEB

DE RUEHSJ #1650/01 2091927
ZNY CCCCC ZZH
P 281927Z JUL 06
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 5678
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

C O N F I D E N T I A L SAN JOSE 001650 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 07/27/2016 
TAGS: PGOV PREL PINR CS
SUBJECT: A/S SHANNON VISITS TOP COSTA RICAN OFFICIALS 
 
 
Classified By: Amb. Mark Langdale for reasons 1.4 (b&d). 
 
¶1. (C) Summary:  A/S Tom Shannon visited Costa Rica June 
27-29, calling on key officials of the new Arias 
Administration as well as the International Relations 
Committee of the Legislative Assembly.  A/S Shannon discussed 
security issues and prospects for ratification of the Central 
American Free Trade Agreement (CAFTA).  The visit received 
broad publicity.  End Summary. 
 
¶2. (C) Shortly after his arrival, A/S Shannon met with Vice 
President Kevin Casas, Minister of Presidency Rodrigo Arias 
(brother and closest advisor to President Oscar Arias) and 
Minister of Public Security Fernando Berrocal to discuss 
security issues.  All three officials were very interested in 
A/S Shannon's views on the November elections in Nicaragua. 
Arias stated that an Ortega victory would be a political and 
security disaster for Costa Rica, adding that many private 
Costa Ricans, especially in the business sector, were 
contributing to the Montealegre campaign.  The GOCR, however, 
was intentionally being very circumspect to avoid any action 
that could be interpreted as meddling in Nicaragua's internal 
affairs.  Casas stated that Costa Rica is in a downward 
spiral in terms of security adding that it is not in U.S. 
interests to wait for it to hit rock bottom.  Arias countered 
that perceptions of insecurity were worse than the reality 
but added that Costa Rica desperately needs to increase its 
police presence.  Arias said that he does not expect 
large-scale anti-CAFTA demonstrations nor major disruptions 
unless the GOCR is seen as unable to implement its agenda 
between now and December when he expects the treaty to come 
to a vote in the Legislature.  Berrocal agreed, stating that 
the number of CAFTA opponents willing to engage in violent 
protests is small--perhaps 500-600 students plus seven or 
eight thousand union members.  Without additional resources 
for security, however, even this small number could easily 
overwhelm security forces, he added. 
 
CAFTA in the Assembly 
--------------------- 
¶3. (C) On June 28, over breakfast with the President of the 
Legislative Assembly and members of the International 
Relations Committee which is holding hearings on CAFTA, A/S 
Shannon was treated to a first-hand look at the challenges to 
ratification.  Each Deputy had an entirely different view and 
collectively they spoke for over an hour--leaving only a few 
minutes at the end of the meeting for A/S Shannon to respond. 
 Unsurprisingly, the most strident positions and memorable 
lines came from members of the opposition PAC party (i.e. 
"history has shown that when the U.S. and Costa Rica 
disagree, Costa Rica is right"). 
 
¶4. (C) A trend among the various speeches was the view that 
the U.S. is demanding a very high price in the opening of 
state monopolies but is not offering enough in return as 
reflected in repeated requests for more bilateral assistance. 
 Examples, which came even from CAFTA supporters, included 
several requests for more help for small and medium-sized 
businesses and government-to-government technology transfers. 
 PAC Deputies presented A/S Shannon with two letters, the 
text of which they had already released to the media.  One 
letter criticized the "certification" process for determining 
that implementing legislation is compliant with the terms of 
CAFTA.  This amounts to proof, according to the PAC, that 
CAFTA can be re-negotiated.  The second letter demanded the 
White House either remove all mention of Costa Rica's 
temporary support for the Iraq Coalition or post a new list 
on its webpage without Costa Rica. 
 
¶5. (U) The breakfast was followed by a joint press conference 
in which Assembly President Fransisco Pacheco told reporters 
that the meeting had been a cordial exchange of ideas aimed 
at addressing various concerns among the Deputies.  For his 
part, A/S Shannon stressed that U.S.-Costa Rican relations 
are diverse and mature, allowing for frank discussions since 
both countries are committed to democracy and prosperity. 
The A/S also reminded the public that CAFTA is a means to an 
ends, a motor for development, and not an end in itself. 
 
Tour d' Horizon with President Arias 
------------------------------------ 
¶6. (C)  A/S Shannon met with President Arias over lunch. 
Arias was accompanied by his brother Rodrigo, Minister 
Without Portfolio Marco Vargas, Foreign Minister Bruno 
Stagno, Acting Trade Minister Amparo Pacheco and Costa Rican 
Ambassador to Washington Thomas Duenas.  Arias touched 
briefly on Nicaragua and CAFTA, expressing his belief that 
Ortega is unlikely to win but worrying at some length about 
the impact of a wave of Nicaraguan refugees on Costa Rica's 
overstretched educational and health care systems.  On CAFTA, 
Arias assured A/S Shannon that he had the votes for 
ratification but complained that Costa Rica's is the only 
Assembly in the world which cannot set a specific date to 
vote on an issue.  Arias then shifted to the topic of 
Venezuela and Hugo Chavez.  Arias called Chavez a "clown" and 
quizzed A/S Shannon on Venezuela's petrochemical interests in 
the U.S. with particular interest in Venezuelan refineries 
and petrochemical plants.  Stagno pointed out that Venezuela 
disrupts or destroys every regional group it joins.  He cited 
Mercosur, the Rio Group, and the Andean Group as examples and 
added that Venezuela's heavy-handedness in its bid for a seat 
in the UN Security Council has made a GRULAC consensus 
impossible.  Stagno assessed that Venezuela has overshadowed 
Brazil's influence in these groups to the point that Lula 
would be happy if he could contain Evo Morales much less Hugo 
Chavez. 
 
¶7. (C) Both Stagno and Arias complained that Costa Rica is 
being punished for its success.  Development aid policy, 
according to their perspective, has become 
perverse--rewarding corruption and poverty by flowing aid 
toward countries that are basket cases.  According to Stagno, 
Costa Rica and other middle income countries have a higher 
absolute number (albeit a lower percentage) of people living 
in poverty but don't qualify for assistance because of 
relatively good governance.  Nevertheless, through free trade 
agreements such as CAFTA, middle income countries are 
required to compete with the developed world.  Arias added 
that Costa Rica serves as an escape valve for Nicaragua. 
Rich Nicaraguans go to the U.S., according to Arias, whereas 
Costa Rica absorbs the poorest ones.  Arias fears proposed 
reforms to U.S. immigration law will make the situation worse 
for Costa Rica since more immigrants will settle here if they 
cannot reach the U.S. 
 
¶8. (C) In response to a query by A/S Shannon, Arias stated 
that China does not offer a viable political model for Latin 
America.  Arias believes that democracy is too deeply rooted 
in the region to be threatened by engagement with China. 
Economically, however, Arias called China a very different 
story.  In response to praise regarding his personal role in 
how far Central America has come since the 1980's, Arias 
called the progress relative.  Compared with the progress 
made by Asia, and in particular China, since the 1980's, 
Arias said Central America should be considered a disaster. 
 
Perspectives of the Economic Cabinet 
------------------------------------ 
¶9. (C) The Ambassador hosted a dinner for A/S Shannon with 
leading members of Arias's economic team.  Participants 
included Minister of Production Alfredo Volio, Minister of 
Environment and Energy Roberto Dobles, Minister of Housing 
Fernando Zumbado, fomer Central Bank President Eduardo Lizano 
and Acting Trade Minister Amparo Pacheco.  A wide-ranging 
discussion ensued but central themes were the numerous 
legislative devices available for delaying CAFTA ratification 
and the even greater difficulty in drafting and enacting the 
necessary implementing legislation.  Minister Robles is 
playing a critical role in this process since he previously 
headed the telecom monopoly (ICE).  Note: legislation opening 
the telecom and insurance monopolies to competition is 
expected during extraordinary legislative sessions in August 
when the Executive branch controls the legislative agenda. 
Public sector unions recently announced that the presentation 
of this legislation will be the trigger for long-threatened 
massive demonstrations against CAFTA.  End Note.  Lizano 
asked A/S Shannon to consider U.S. observership in the 
Central American Bank for Economic Integration.  Mere 
observer status would help the bank obtain a better credit 
rating and lower its costs according to Lizano.  In addition 
to the Centrals, the bank also counts Argentina, Colombia, 
Mexico, Spain and China as members.  A/S Shannon offered to 
look into the matter upon his return to Washington. 
 
Broad Press Coverage 
-------------------- 
¶10. (U) A/S Shannon's visit received broad and positive press 
coverage.  At every stop on his June 28 itinerary A/S 
Shannon's comments on Costa Rica's leadership role in the 
region, CAFTA as a means rather than an end, and that 
re-negotiation of CAFTA on a bilateral basis is impossible at 
this point received prominent coverage.  A/S Shannon held an 
outreach event with students of English at the Bi-National 
Cultural Center which was originally funded by the U/S. 
After a tour of the facility and brief remarks, A/S Shannon 
fielded numerous questions from student and reporters. 
 
¶11. (U) A/S Shannon did not clear this cable. 
LANGDALE