VZCZCXYZ0008
OO RUEHWEB

DE RUEHSJ #2702/01 3352141
ZNY CCCCC ZZH
O 012141Z DEC 06
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6765
INFO RHEHNSC/NSC WASHDC IMMEDIATE
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY

C O N F I D E N T I A L SAN JOSE 002702 
 
SIPDIS 
 
SIPDIS 
 
WHA/CEN FOR J:MACK; NSC FOR D:FEARS 
 
E.O. 12958: DECL: 11/30/2016 
TAGS: PREL PGOV PINR ETRD ECON CS US
SUBJECT: PRESIDENT ARIAS ON HIS VISIT TO WASHINGTON 
 
REF: SAN JOSE 2685 
 
Classified By: AMBASSADOR MARK LANGDALE PER 1.5(D) 
 
 ¶1.  (C) SUMMARY:   On November 29, the Ambassador met with 
President Arias to discuss the latter,s upcoming visit to 
Washington.  The Ambassador noted Arias,s position as a 
leader with regional stature, and suggested President Bush 
would be interested in Arias,s views on developments in 
Nicaragua and Cuba, as well as his domestic agenda, topped by 
CAFTA-DR and fiscal reform.   On Nicaragua, Arias opined that 
Ortega &would have no choice8 but to be different than he 
was 20 years ago.  On Cuba, Arias said he was willing to 
discuss a peaceful transition, but hoped this issue would not 
be the major topic in Washington.   Arias noted the irony of 
Ortega making more positive statements on CAFTA-DR than some 
opposition figures in Costa Rica, giving Arias more 
ammunition to use against them at home.  Arias stressed that 
he wanted to talk more &about Costa Rica8 this visit, 
giving the Ambassador an opening to stress the need for 
CAFTA-DR implementation, tax reform, judicial modernization 
and improved protection for investors, which would generate 
long-term benefits dwarfing the short term gains from 
international development assistance.   Arias is likely to 
discuss assistance proposals, anyway, including the so-called 
Costa Rica Consensus and a debt-for-education swap idea.  Our 
response should be to continue lowering his expectations. 
Costa Rica is best placed to help itself.  END COMMENT. 
 
¶2.  (U) On November 29, the Ambassador, accompanied by 
PolEcon Officer David Henifin, met with President Arias to 
discuss the latter,s December 3-6 visit to Washington. 
Arias was alone, mentioning that FM Bruno Stagno was in 
Europe. 
 
----------------------------- 
CUBA, NICARAGUA AND CAFTA-DR 
----------------------------- 
 
¶3.  (C) Arias asked what would likely be on the President,s 
agenda.  The Ambassador reminded him that the White House had 
originally planned the meeting for after Costa Rica passed 
CAFTA-DR, but the President had accelerated the timetable. 
Given Arias,s position as a leader with regional stature, 
the President would be interested in his views on 
developments in Nicaragua and Cuba, as well as Arias,s 
domestic agenda, topped by CAFTA-DR and fiscal reform. 
 
¶4.  (C) On Nicaragua, Arias opined that Ortega &would have 
no choice8 but to be different than he was 20 years ago, 
given the changes in Nicaragua.  Ortega &must (govern) 
responsibly,8 he added, although visiting Cuba so soon after 
the election was a &mistake8 on Ortega,s part.  On Cuba, 
Arias said he was willing to discuss a peaceful transition, 
but he hoped the issue would not be the major topic of his 
conversation with the President.  On CAFTA-DR, Arias noted 
the irony of Ortega making more positive statements of late 
than some opposition political figures in Costa Rica.  Arias 
asked the Ambassador to forward pro-CAFTA statements by 
Ortega or prospective members of his government.  The more 
positive comments from Nicaragua, the more pressure Arias 
said he could apply in Costa Rica.  He dismissed hardline 
anti-CAFTA critics Alberto Salom, deputy leader of the PAC 
party,s faction in the legislature, and Jose Merino, sole 
representative of the Frente Amplio (Broad Front) party, as 
&Allende socialists8 out of step with the times. 
 
--------------------------------- 
DOMESTIC AGENDA:  NEEDED REFORMS 
--------------------------------- 
 
¶5.  (C) Recalling that when he visited Washington 20 years 
ago, senior USG officials &only wanted to discuss 
Nicaragua,8  Arias stressed that this time, &I want to talk 
about Costa Rica.8  Taking the opening, the Ambassador 
outlined the new USG framework for foreign assistance, which 
placed Costa Rica in the highest tier as a &sustaining 
partner.8   The Ambassador highlighted how Costa Rica is 
doing, compared to OECD standards, in terms of governing 
justly and democratically and investing in people.  Costa 
Rica is considerably below OECD standards in terms of 
economic growth and the business environment.  For example, 
the Ambassador noted that Costa Rica ranked 160th out of 175 
on tax collection as measured in the World Bank,s &Doing 
Business8 index, highlighting the need for an effective and 
workable tax system to help underwrite Arias,s domestic 
agenda.  With CAFTA-DR implementation, appropriate fiscal 
reforms and improved protection for investors, Costa Rica has 
the potential to become the Singapore of the region. 
¶6. (C) Arias was receptive, especially on the need for tax 
reform, but rejoined that Costa Rica,s overall economic 
growth was good, and may top seven percent for 2006.  In 
overall foreign direct investment in the region, Costa Rica 
ranked third behind Chile and Mexico.  The Ambassador 
suggested that the performance of Costa Rica-based 
multinationals like Intel and the impact of the lucrative but 
narrow real estate market (mostly appealing to high-end 
foreign buyers) skewed these figures.  Over the long run, 
growth in small to moderate businesses, and job generation 
outside the tourism sector, would be the keys to core 
economic growth in Costa Rica. 
 
--------------------------------------------- ----- 
USG ASSISTANCE: EDUCATION AND COSTA RICA CONSENSUS 
--------------------------------------------- ----- 
 
¶7. (C) Turning to assistance issues, Arias floated two 
proposals for discussion in Washington, the first a debt for 
education swap, modeled on the debt for land arrangements 
that launched many of Costa Rica,s national parks 20 years 
ago.  The Ambassador cautioned that such a proposal probably 
was not realistic, as the new Congress is likely more 
interested in boosting education spending at home than 
helping education systems abroad.  In the long run, opening 
and reforming Costa Rica,s economy would give the GOCR far 
more resources to spend on education and other social 
projects. 
 
¶8. (C) Arias then asked for USG reaction to his Costa Rica 
Consensus idea (for more assistance and debt relief for 
&responsible8 middle-income countries which spend more on 
social programs than on defense).  The Ambassador replied 
that the concept was interesting, even noble, and possibly 
worth a closer examination from a disarmament perspective, 
given the remilitarization in the region (i.e., Venezuela). 
The idea, however, does not mesh with the USG,s new foreign 
assistance framework, which is geared instead towards helping 
developing countries to help themselves.  Targeted technical 
assistance is likely, but extensive bilateral aid, such as 
Costa Rica benefitted from in the past, is unlikely.  The 
Ambassador added that realistic international consideration 
of the Consensus idea would take time and certainly not bear 
fruit before Arias,s term ends in 2010. 
 
¶9.  (C) COMMENT: Arias,s comments suggest an opening for 
more focused discussion on his domestic agenda, stressing the 
need to make reforms at home without expecting large-scale 
bilateral help from abroad.  Arias,s views seem to be 
changing, but he still views the region and Costa Rica 
through the prism of the 1980s, when Costa Rica relied on 
extensive USG assistance.  A lingering sense of 
exceptionalism, which argues that Costa Rica deserves special 
treatment (and international assistance) because of its 
record as a stable democracy and responsible international 
actor, will need to be diplomatically overcome. 
LANGDALE