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Cablegate: Costa Rica - Austr Visit Clearly Lays Out Remaining Cafta

VZCZCXYZ0000
PP RUEHWEB

DE RUEHSJ #0593/01 1932225
ZNR UUUUU ZZH
P 112225Z JUL 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 9931
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

UNCLAS SAN JOSE 000593

SENSITIVE
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: COSTA RICA - AUSTR VISIT CLEARLY LAYS OUT REMAINING CAFTA
IMPLEMENTATION REQUIREMENTS

REFS: A) SAN JOSE 541
B) SAN JOSE 508

-------
SUMMARY
-------

1. (SBU) Visiting Costa Rica June 24-26 at GOCR request, AUSTR
Everett Eissenstat told GOCR officials that legislative solutions
are required to resolve the state guarantee (insurance) and
biodiversity issues. GOCR officials, including President Arias,
made equally clear that new legislation at this late date in the
implementation process would be, in their view, politically
impossible, although the GOCR is willing to explore creative
non-legislative solutions. In frank but friendly discussions, both
sides agreed to set the insurance issue aside for now, and made
progress on biodiversity. Tanuja Garde (USTR Director of
Intellectual Property) and George York (USTR General Counsel's
Office) accompanied AUSTR.

2. (U) The GOCR remains optimistic that all legislation will be
completed by August-September, and hopeful that USTR will not
continue to insist on a legislative remedy for the insurance issue.
If a new bill is absolutely required, the GOCR needs to know ASAP.
Since the AUSTR visit, the existing insurance law and the revised
IPR enforcement bill were approved in second reading, becoming the
ninth and tenth CAFTA bills to be completed by the legislature. At
this point, only three bills remain. SEE ACTION REQUEST, Para 16.
END SUMMARY.

-------------
TIGHT AGENDA
-------------

3. (U) Repeated airline delays complicated the visit, which was
originally scheduled for June 23-25. A reception at the
Ambassador's residence on June 24, which had been meant to be the
culmination of a long day of political meetings, instead became the
first formal event. June 25 was devoted to political meetings in
the morning with GOCR officials and key pro-CAFTA legislators,
followed by technical meetings and a session with the private sector
in the afternoon. Events on June 26 were limited to an IPR
technical meeting and a final wrap-up with Minister of Foreign Trade
(COMEX) Marco Vinicio Ruiz and his team.

---------------
FIRST, OPTIMISM
---------------

4. (SBU) The primary purposes of the AUSTR visit were 1) to help
motivate legislators and members of the executive branch to conclude
the necessary CAFTA-DR implementation legislation on time and 2) to
advance IPR technical discussions. The GOCR had requested the
visit, believing the time was ripe to push the pro-CAFTA G-38
coalition to complete remaining legislation. NOTE: We had prepared
for a similar session with legislators during AUSTR's April visit
(Ref B), but the GOCR demurred, arguing that the timing was too
sensitive then to meet face-to-face with legislators with May 1
leadership elections looming.

5. (SBU) GOCR Ambassador Duenas, visiting from Washington, sketched
an optimistic pre-visit picture for Ambassador Cianchette on June
24. He had just come from a meeting with key pro-CAFTA legislators
and senior GOCR officials. AUSTR's delayed arrival, in fact, had
given the Costa Rican side time for this important preparatory
session. Visibly elated, Duenas described an executive-legislature
team at last ready to complete CAFTA. Although the G-38 coalition
was tired and "paper-thin," the members recognized that work needed
to be done on a few outstanding issues (insurance, IPR and
biodiversity) and were prepared to consider "creative" solutions.
Duenas hoped both the USG and GOCR sides would have "open minds."

-------------------------------
THEN, A POLITICAL REALITY CHECK
-------------------------------

6. (SBU) The opening session on June 25, hosted at the Presidential
office building, at first seemed to confirm Duenas' optimism.
Minister of the Presidency Rodrigo Arias, COMEX Minister Ruiz,
Legislature President Francisco Pacheco (PLN), PLN Faction Chief
Oscar Nunez, PUSC Faction Chief Lorena Vasquez and leading PLN
legislators Mayi Antillon (International Relations Committee Chair)
and Maureen Ballesteros (Environmental Committee Chair) all
reiterated their willingness and flexibility to resolve the
remaining insurance (state guarantee), biodiversity and
pharmaceutical issues using existing legislation, regulations, side

letters or executive decrees - anything but new legislation.
Recounting the "unique" Costa Rican political environment, all
recounted the CAFTA difficulties and "historic" progress to date,
but evinced optimism that the remaining implementation legislation
would be done by September. Vasquez and Ballesteros, in particular,
warned of changes that might affect Costa Rica's existing
biodiversity law, which had been a sensitive issue during and since
the CAFTA referendum in October.

7. (SBU) All ruled out new legislation as politically impossible,
citing the still active CAFTA opposition and the frayed, tired G38
coalition. There was stunned silence, therefore, when AUSTR
stressed, as the USG had consistently made clear in discussions with
COMEX, that legislative solutions were required for the remaining
issues, or USTR may not be able to certify Costa Rica for CAFTA
entry into force.

---------------------
THE VIEW FROM THE TOP
---------------------

8. (SBU) Underscoring the GOCR's concerns, President Oscar Arias
then made a brief (surprise) appearance to appeal for USG
flexibility. Arias stressed that the U.S. "had no better friend"
than Costa Rica, a "consolidated democracy" which shared U.S. values
and which was fighting for democracy in the region. Citing the just
concluded Six-Party Agreement with the DPRK, Arias asked "if the USG
can be flexible with its enemies," why not even more so with its
"friends"? Arias added that he had gambled all his political
capital on CAFTA, and the Costa Rican people wouldn't understand if
after all this effort Costa Rica were left out because of "very
little things that frankly aren't worth the trouble." Arias said he
could not go to the legislature for a new bill (i.e., to resolve the
insurance issue), and concluded, "It would be a very big blow to
Costa Rica to be left out (of CAFTA)".

----------------------------
MORE VIEWS FROM THE COALITION
----------------------------

9. (SBU) A follow-on meeting was intended to focus on the
problematic Libertarian Party (whose legislators did not attend), as
well as helpful independents. Participants in that session
underscored the fragility of the pro-CAFTA coalition and the
political impossibility of completing new legislation in time for an
October 1 EIF. AUSTR Eissenstat responded that it was precisely
because the GOCR had come so far "in this marathon" that it should
not give up with "one last hill to climb." Eissenstat also
described the more complex political environment in Washington,
given the pending FTAs with Colombia and Panama. He explained that
USTR therefore had to handle CAFTA very carefully and correctly; the
discussion is not just about Costa Rica's EIF, but about "the entire
USG trade agenda." As discussion continued, independent Evita
Arguedes (ex-Libertarian) posed a hypothetical question: Would the
USG consider a limited, focused EIF extension to accommodate
resolution of 1-2 final issues (such as completion of a new
insurance bill)?
10. (U) Other Costa Rica participants in the June 25 morning
meetings included legislator Jose Manuel Echandi (IND), Ambassador
Duenas, VM of the Presidency Roberto Thompson, GOCR advisors Carlos
Arguedas (a former Supreme Court magistrate) and Allan Thompson, and
COMEX staff Fernando Ocampo, Suzanna Vazquez, Jose Carlos Quirce
(from the Embassy in Washington) and Gabriella Castro (COMEX). U.S.
Embassy participants included Ambassador Cianchette, ADCM Henifin
and Kevin Ludeke and Hellen Sanou (Pol/Econ Section staff).

--------------------------------
THE VIEW FROM THE PRIVATE SECTOR
--------------------------------

11. (SBU) In an afternoon session with the private sector, Michael
Borg, President of AmCham, and other business leaders pressed AUSTR
on the urgency and importance of finding a non-legislative solution
to the insurance issue. Borg and others argued that introducing
any new legislation at this time would revitalize the CAFTA
opposition, who would portray even a technical correction limiting
the state guarantee on insurance as "American interests plundering
Costa Rica while the GOCR stands by." With some hyperbole, Borg
predicted that an invigorated opposition would then not only be able
to block CAFTA, but perhaps to ensure PAC leader Otton Solis'
election as president in 2010. AUSTR Eissenstat reiterated USG
political and legal constraints, and suggested that the private
sector continue to work with the GOCR, COMEX and the legislature to
complete the implementing legislation and regulations.

--------------------------------------------- ------

TECHNICAL DISCUSSIONS MAKE PROGRESS ON BIODIVERSITY
--------------------------------------------- -------

12. (SBU) Throughout the meetings with the USTR team, GOCR officials
and legislators maintained that domestic political sensitivities on
environmental and biodiversity issues made changes to Costa Rica's
Biodiversity Law political dynamite. The COMEX team was thus under
instruction to press for non-legislative solutions to make the
Biodiversity Law CAFTA-compliant. The technical teams made
progress, but a combination of legislative fixes (in the catch-all
IPR bill under discussion in the legislature) and regulations will
be required. (Note: other IP aspects of CAFTA were understood by
Tanuja Garde to have been resolved, and were only briefly mentioned
during the summary sessions.)

13. (SBU) The following is a summary of the technical-level
discussion on how to make the Biodiversity Law CAFTA-compliant:

-- Article 7: USTR believes that the definition of a micro organism
raises doubt concerning the non-patentability of plants and tissues.
USTR thus asked to re-define microorganisms. The GOCR believes
such a redefinition is not CAFTA language and shouldn't be required
by USTR. The GOCR team (Suzanna Vazquez and Fernando Ocampo) agreed
to accept a clarification via regulation but not in the law.

-- Article 78: Very clearly states that IP protection won't be
extended to certain things [non-genetically-modified organisms and
plants are notably on the list]. The law therefore must be changed
to eliminate those exceptions. COMEX agreed.

-- Article 80: Gives effective veto power over IP applications to
the Technical Commission formed under the Biodiversity Law. This is
unacceptable to USTR. USTR proposed that the Biodiversity Law
requirements run on a separate track from IP protection, with weekly
or daily fines levied on companies that obtain patent protection
without having completed the Biodiversity Law requirements. COMEX
had argued earlier that such a fine would be criticized for "putting
a price on biodiversity," but appears to have agreed with the basic
concept.

-- Article 81: Gives the GOCR the power to require obligatory IP
licenses in the case of a declared national emergency "without the
need to pay". USTR insists that this provision cannot stand. COMEX
agrees.

CONCLUSIONS: Articles 78 and 81 of the Biodiversity Law will be
modified by law. Articles 7 and 80 will probably be modified by
regulation (otherwise by law).

---------------------------------------------
REGULATIONS MOVING IN PARALLEL TO LEGISLATION
---------------------------------------------

14. (SBU) In a separate meeting with AUSTR (chaired by Minister
Ruiz), GOCR officials reported that CAFTA regulations were moving in
parallel to the remaining legislation, to speed the implementation
process. Their goal was to go final with regulations as soon as the
relevant laws were completed. Representatives from ARESEP and
CONASSIF (GOCR regulatory bodies) described the internal/public
review and gazetting process, and predicted that telecom and
insurance regulations should be completed by August. According to
COMEX officials, SPS and other regulations would be complete "in the
next few weeks." Eissenstat urged the GOCR to share the text of the
draft regulations before they went to public review. He also
reminded the GOCR officials that a special IPR prosecution unit
needed to be established before CAFTA EIF, as agreed to in earlier
discussions on IPR penalties.

---------------------
OFFICIALS OPTIMISTIC
---------------------

15. (SBU) GOCR officials have been optimistic, even buoyant, in the
wake of CAFTA progress following AUSTR's visit. The existing
insurance law was approved in second reading on July 1, and the
revised IPR enforcement bill on July 7. These two become the ninth
and tenth CAFTA bills completed by the legislature (of thirteen).
Of the three remaining, the telecommunications bill is due back from
the Constitutional Court in mid-month, and could be approved by the
end of July, assuming the Court finds no problems. The catch-all
IPR bill ("No. 12") is due out of committee in mid-month, and should
be approved in first vote in August. The GOCR hopes the amendments
bill, already out of committee, will be approved in first vote by
the end of July. Both of those bills are likely to require
Constitutional Court review before becoming law.

----------------------------------------
COMMENT: AN ESSENTIAL, WELL-TIMED VISIT
----------------------------------------

16. (SBU) Although it took a while to gel, the timing was right for
this visit. Both sides came away with a very clear picture of the
others' interests and limitations. The need for a legislative fix
on insurance should not have been such a shock to the GOCR; the USG
side has been explicitly pressing for this since January. Despite
the clarity of AUSTR's message, the GOCR side still appears to be
hoping that a new insurance law will not/not be required. Minister
Ruiz plans to be in Geneva July 19 and is willing to discuss the
issue further there with USTR Schwab, if necessary. If a new
insurance law is absolutely required, the GOCR needs to know ASAP.
Also, the media and the GOCR are assuming that Costa Rica has until
September 30 to complete the CAFTA legislation. ACTION REQUEST: To
debunk this myth, please advise the realistic deadline to complete
the legislation.

17. (U) This cable was cleared by AUSTR Eissenstat.

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