VZCZCXYZ0015
RR RUEHWEB

DE RUEHSJ #0232/01 0792119
ZNR UUUUU ZZH
R 192119Z MAR 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 9546
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 4216
RUEHDG/AMEMBASSY SANTO DOMINGO 1587
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SAN JOSE 000232 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA, WHA/CEN, WHA/EPSC AND EEB; PLEASE PASS TO 
USTR: AMALITO/DOLIVER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR PGOV PREL CS
SUBJECT: U/S PADILLA URGES COSTA RICA TO IMPLEMENT CAFTA 
 
 
¶1.  SUMMARY. In a timely and highly effective visit to 
Costa Rica, February 28-29, Commerce U/S Chris Padilla 
delivered a clear and consistent message to local audiences 
that Costa Rica needed to finish CAFTA implementation 
quickly, and that the US was eager to begin working with 
Costa Rican counterparts to take maximum advantage of the 
opportunities CAFTA offers.  In meetings, interviews, and 
receptions, U/S Padilla stated that the extension granted 
to Costa Rica by the CAFTA-DR countries affords it one last 
opportunity for entry-into-force (EIF) of CAFTA-DR.  This 
is a special opportunity, because free trade agreements 
(FTA) create unique relationships with the USG, thus far 
enjoyed by only 14 countries around the world.  Padilla 
also unequivocally confirmed the reality of the original 
February 29 EIF deadline.  Follow-up events include a 
review of trade and foreign direct investment (FDI) 
initiatives proposed by the GOCR, a meeting on textiles, 
and the possibility of fresh trade promotion activities in 
the US and Costa Rica.  END SUMMARY. 
 
=========================== 
STAKEHOLDERS HAVE THEIR SAY 
=========================== 
 
¶2.  U/S Padilla and staff (listed in paragraph 15) started 
their visit to Costa Rica with a country team briefing, 
which included a review of his primary message for Costa 
Ricans, a summary of his prior stops in Nicaragua and 
Honduras, and a review of the events leading to the signing 
of the extension for Costa Rica the day before in 
Washington. 
 
¶3.  In a luncheon discussion with business leaders which 
followed, Padilla expressed the key points of his message 
to Costa Rica:  that we are eager to move forward and start 
developing the trade opportunities that CAFTA-DR offers, 
but they must seize this "one last chance" to conclude 
their implementation obligations.  There will be no further 
extensions.  The U/S expanded on the uniqueness of the 
trade opportunity and then opened the floor for 
perspectives from the business leaders on the current 
economic/legal climate and the continuing CAFTA-DR debate. 
 
¶4.  The group noted the following: 
 
- Personal security is a growing concern for both business 
and the public. 
 
- Uncertainties over CAFTA-DR implementation and CBTPA 
renewal have hurt business.  One apparel manufacturer laid 
off one third of his employees due to reduced customer 
orders caused by CAFTA uncertainty. 
 
- The national legislature may lack the ability to pass 
implementation legislation with clear language on IPR data 
protection. (This was from a representative of the 
pharmaceutical industry.) 
 
- The general law enforcement environment of Costa Rica 
regarding IPR and security in general is problematic. 
Several business leaders also cited deficiencies in the 
judicial system such as an overwhelming backlog of cases 
and a priority list for judicial action which does not even 
address IPR cases. 
 
- The criminal code has a number of specific failings, 
including outdated laws, very low conviction and 
incarceration rates, and early releases from custody. 
 
- The government is generally ineffective because of 
procedural slowness, an aversion to risk, and the labyrinth 
of national legislature (Asamblea) rules that encourages a 
turgid, hyper-legalistic approach. (This was from the 
manager of the airport authority.) 
 
================================== 
MEETING WITH COMEX MINISTER:  CAFTA 
================================== 
 
¶5.  Padilla also met with Minister of Foreign Trade Marco 
Vinicio Ruiz, and Vice Minister Amparo Pacheco.  The 
Minister contrasted success at the WTO on an arbitration 
issue between the GOCR and the USG with the procedural 
problems plaguing the Ministry of Foreign Trade (COMEX) in 
the Asamblea with CAFTA-DR legislation.  The Minister was 
thankful for the EIF extension, and observed that the 
extension was a new chapter in the "soap opera" surrounding 
CAFTA-DR implementation.  COMEX aims to deliver all of the 
legislation to the Constitutional Chamber of the Supreme 
Court (Sala IV) for judicial review by May 1, though the 
biodiversity law is a sensitive issue with legislators. 
(NOTE: As of March 14, five of 13 CAFTA-related laws had 
completed Sala IV review, four were under review, and four 
were pending Asamblea action.) 
 
¶6.  Padilla noted that the benefits of CAFTA-DR are now 
being realized in other member countries.  With an 
extension in place, Costa Rica must look forward and plan 
for an increase in FDI and trade.  The aggressiveness of 
other member countries, including Nicaragua, is very 
impressive.  CAFTA-DR represents permanence, U/S Padilla 
explained, and investors want certainty.  He urged the 
Minister to maintain the legislative pace of the past four 
months.  Finally, Padilla voiced the "one last chance" 
message and placed its importance in the context that only 
fourteen other countries in the world have free trade 
agreements with the U.S.; Costa Rica has the unique 
opportunity to be the fifteenth. 
 
¶7.  In response to Padilla's question on the status of 
CAFTA-DR regulations, the Minister was not specific.  He 
explained that COMEX's work is well underway but there are 
hurdles.  USTR should have drafts of the regulations by 
mid-March, but the drafts do not apply to all issues.  For 
example, the drafting of the regulations for 
telecommunications cannot commence until the 
telecommunications bill is passed.  After passage, the 
Ministry of Environment and Energy (MINAE) will become the 
Ministry of Environment, Energy, and Telecommunications 
(MINAET).  Only then will it be empowered to develop the 
appropriate regulations. 
 
============================================= 
MEETING WITH COMEX MINISTER:  TRADE PROMOTION 
============================================= 
 
¶8.  Minister Ruiz described economic growth in Costa Rica 
and stressed CAFTA-DR's importance to sustain and continue 
the growth.  Though the economy is positive, a significant 
group of Costa Rican exporters are affected by rising costs 
(e.g. agribusiness facing higher costs due to fuel).  Also, 
Costa Rica has been slow in attracting investment due to 
CAFTA-DR delays, with a few notable exceptions such as 
Emerson's plan to build a design center in Costa Rica and 
Boston Scientific doubling its plant.  The German company 
Continental also announced a new investment in October to 
manufacturer car parts.  Ruiz described the GOCR's 
promotional efforts in the U.S. including opening a Costa 
Rican export office in Cleveland, Ohio (through a grant 
from the Cleveland Foundation) and an office in California. 
The Minister also requested assistance with targeting 
export opportunities for small and medium businesses in 
California and presented a list to Padilla of "trade 
capacity cooperation" and "FDI attraction cooperation" 
initiatives. 
 
¶9.  Padilla promised to review the initiatives and said 
that Commerce will respond after further discussions in 
Washington.  In addition, he cited the Competitiveness 
Forum in Atlanta in August as an opportunity for Costa Rica 
to address the issue of export opportunities for small and 
medium enterprises cooperation.  Reciprocating trade 
missions to both countries can also pursue trade and 
investment possibilities.  Textiles were discussed as 
another possibility for engagement since local textile 
companies are losing customers.  U/S Padilla thought that a 
trip to Costa Rica by Commerce DAS Matt Priest could be 
helpful in this regard given the DAS's experience with 
textile politics in the United States. 
 
=========================== 
AUDIENCE WITH THE PRESIDENT 
=========================== 
 
¶10.  Padilla later met with President Arias, Minister of 
the Presidency Rodrigo Arias, Minister of Foreign Affairs 
Bruno Stagno, Minister Ruiz, and Ambassador to the U.S. 
Tomas Duenas.  CDA Brennan, FCSO, PAO, and EconOff 
accompanied.  The President began by asking Padilla, "What 
can you do for us," regarding support for CAFTA-DR. 
Padilla referred to the previous meeting with Ruiz and 
described the possible visit of DAS Priest regarding 
textiles and the possibility of FDI and trade initiatives. 
 
¶11.  The President turned to Costa Rican politics and 
described the intransigence of the opposition, which had 
accused the GOCR of inventing the February 29 EIF deadline 
and denied the need for an extension, despite the GOCR's 
attempts to explain the reality and urgency.  Padilla 
acknowledged this issue but also referred to the declining 
interest in the US for trade agreements.  He reiterated his 
"one last opportunity" for Costa Rica message and noted the 
small number of countries with free trade agreements with 
the USG now benefiting from permanent trade benefits. 
Padilla noted that Costa Rica had originally been the 
leader in seeking and negotiating CAFTA-DR, but had become 
the laggard in approving and implementing it. 
 
¶12.  U/S Padilla thanked the President for his leadership 
on cuts in agricultural subsidies and support on issues of 
importance to the USG such as Cuba, the NAMA agenda at the 
WTO in Geneva (advocating for market access among less 
inclined emerging markets like Brazil and India), and the 
Colombian FTA.  On the latter topic, the President offered 
his assistance in support of President Uribe. 
 
===================== 
COMMENTS TO THE MEDIA 
===================== 
 
¶13.  Following their meeting President Arias and U/S 
Padilla held a joint press conference, at which Padilla 
stressed his "one last chance" message and the finality of 
the deadlines established in such agreements, as well as 
the U.S. desire to see Costa Rica reaping the benefits of 
CAFTA-DR.  Padilla also provided a more extensive 
interviews to La Nacion, Costa Rica's leading daily, and 
Eco-News, a leader in political reporting on the radio in 
the greater San Jose area.  In response to (expected) 
questions about the legitimacy of the February 29 EIF 
deadline and possible unilateral deposit at the OAS (both 
concepts advocated by the PAC-led opposition), Padilla 
delivered a very clear message.  He stressed that the USG 
as a sovereign government "does not sign an agreement that 
is a lie."  In addition, he added, five other countries 
(the other CAFTA-DR members), all sovereign governments, 
"do not sign an official document that is a lie." 
 
================================= 
TOUGH MEETING WITH THE OPPOSITION 
================================= 
 
¶14.  At a reception that evening, Post arranged a private 
pull-aside between the U/S and PAC faction leader Elizabeth 
Fonseca and legislative members Rafael Madrigal and 
Francisco Molina.  Both sides spoke frankly.  Padilla 
reprised his firm messages on the legitimacy of the 
original EIF deadline and the need for the extension, the 
uniqueness of the opportunity to conclude an FTA, and the 
urgency to move forward.  The PAC legislators presented 
their critique of the Arias government and the tactics of 
the pro-CAFTA legislative coalition, as well as their 
complaints about CAFTA itself.  The opposition team 
remained largely unconvinced, but seemed to take seriously 
the messages that 1) there would be no further extensions, 
and 2) should Costa Rica be excluded from CAFTA and the 
expressed will of the people (in the October 7 referendum) 
not be fulfilled, they would be to blame.  Fonseca 
acknowledged that this would be the case.  She and her team 
appeared sincerely grateful for the opportunity to exchange 
views candidly with a senior USG trade official, and 
following the meeting engaged animatedly with the largely 
pro-CAFTA crowd at the reception. 
 
¶15.  Delegation Members: 
 
 -- U/S of International Trade Chris Padilla 
 -- Chief of Staff, Office of the U/S, Michael DiPaula- 
Coyle 
-- Senior Director, Office of Western Hemisphere, Market 
Access and Compliance, John Andersen 
 
¶16.  This cable has been cleared by the office of U/S 
Padilla.