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Cablegate: Secretary Gutierrez Promotes Trade, High Tech, and Produce

VZCZCXYZ0000
PP RUEHWEB

DE RUEHSJ #0835/01 2970111
ZNR UUUUU ZZH
P 230111Z OCT 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 0205
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEHDG/AMEMBASSY SANTO DOMINGO PRIORITY 1613

UNCLAS SAN JOSE 000835

SIPDIS

COMMERCE FOR ITA, TDA AND SECRETARY'S OFFICE
DEPT FOR WHA, WHA/CEN, WHA/EPSC AND EEB
PLEASE PASS TO USTR AMALITO AND DOLIVER
PLEASE PASS TO USDA
PLEASE PASS TO OPIC
PLEASE PASS TO EXIM
PLEASE PASS TO TDA

E.O. 12958: N/A
TAGS: EAGR ECON ETRD OVIP PGOV PINR PREL CS
SUBJECT: SECRETARY GUTIERREZ PROMOTES TRADE, HIGH TECH, AND PRODUCE
IN COSTA RICA

REF: A) SAN JOSE 823 (NOTAL), B) SAN JOSE 827

1. SUMMARY: Commerce Secretary Carlos Gutierrez visited Costa Rica
for two days of governmental and business meetings, September
30-October 1. The Secretary's business meetings focused on trade
and business related to American enterprise in Costa Rica. In
addition to offering encouraging words to key Costa Rican chambers
on CAFTA implementation, the Secretary and senior officials from
OPIC, Ex-Im, and the U.S. Trade & Development Agency (TDA) proposed
to assist Costa Rica "to turn CAFTA into business" by aggressively
pursuing ways to promote USG agency cooperation with the regions'
businesses and chambers. The Secretary saw first-hand the tangible
and intangible benefits of trade: at Intel, company officials,
teachers, and students described Intel's commitment to technology
education in Costa Rica; at Hortifruti (a subsidiary of Wal-Mart
Central America), company officials discussed the merits of the
Tierra Fertil program which raises the quality, marketing, and
operating standards of small farmers through training and provides
access to credit. The Secretary's governmental meetings are
reported in Reftels. The Secretary's staff cleared this message.
END SUMMARY.

BUSINESS MEETINGS HIGHLIGHT IMPORTANCE OF FDI
---------------------------------------------

2. The Secretary and key members of his delegation convened with
CINDE, a private, not-for-profit foreign direct investment (FDI)
promotion agency (supported by fundraising and a USAID endowment).
CINDE Executive Director Gabriela Llobet presented CINDE's strategic
approach to attracting FDI. By stressing Costa Rica's educated but
cost-competitive work force, transparency (ranked third in LatAm,
according to Transparency International's 2008 Corruption
Perceptions Index), free trade zone program, and proximate location
relative to North America, CINDE targets three types of FDI: (1)
advanced manufacturing (from car parts to INTEL's microchip
production), (2) medical equipment and supplies, and (3)
professional services. Llobet highlighted recent results: FDI grew
from just over USD 600 million in 2002 to USD 1.884 million in 2007,
a threefold increase in five years.

3. The Secretary praised CINDE's strategic direction and commented
that it is clear that FDI is used to establish a platform for
export. When asked about Costa Rica's relatively low ranking in the
World Bank's "Doing Business" survey (115th of 178), Llobet noted
that the study does not favor Costa Rica, as the business
environment suffers from red tape. Nonetheless, the GOCR's Free
Trade Zone regime, she added, provides an expedited set of
regulatory processes which is attractive to FDI investors.

4. President and CEO Robert Mosbacher, Jr., of OPIC, outlined his
agency's commitment to providing access to credit and facilitating
more investment. First Vice President and Vice Chair Linda Conlin
of Ex-Im Bank targeted the strengthening of Costa Rica's renewable
energy capacity as an area of Ex-Im involvement.

AMCHAM BOARD AIRS CAFTA FRUSTRATION
-----------------------------------

5. Attending a special AmCham board meeting, the Secretary heard
first hand from private sector representatives of their deep concern
over Costa Rica's long-running CAFTA-DR saga. Led by board
President Michael Borg, the Secretary heard a collective anxiety
over the re-energized PAC opposition party. This framed a
discussion largely colored by "CAFTA fatigue" as AmCham members
described their efforts to push CAFTA to the finish line and
requested help from the USG. The Secretary inquired about the
status of implementing legislation and the GOCR's and AmCham's plan
to push CAFTA to completion. He urged the Board and its members to
continue the fight by talking to employees and helping them
understand how the agreement is vital to Costa Rica.

6. When asked how to respond to charges that free trade agreements
"only benefit the wealthy," the Secretary commented that the same
argument was raised (and overcome) in the other CAFTA countries. It
is a question of organizational and public relations strategy, he
said; "There is nothing like grassroots pressure". If the worker
becomes informed and realizes that his job depends on the agreement,
then action will follow. The Secretary emphasized the need to tell
CAFTA success stories and encouraged AmCham members to work together
as a coalition of traders. Some members expressed reluctance to be
"public" in their support of CAFTA, for fear of being targeted by

the opposition. In response, the Secretary urged businesses "to get
up and fight."

PROPOSED COOPERATIVE PROGRAM WITH CHAMBERS
------------------------------------------

7. The Secretary plus OPIC's Mosbacher, Ex-Im's Conlin, TDA
Director Larry Walther and Commerce DAS Walter Bastian met with
representatives of several Costa Rican chambers on two different
occasions. The first, chaired by Foreign Trade Minister Marco
Vinicio Ruiz, worked to familiarize key Costa Rican chambers with
the capabilities of Commerce, OPIC, Ex-Im, and TDA. The second
focused on developing issues for cooperation between the USG and the
Costa Rican chambers. Notable attendees included Oscar Cabada,
President of Chamber of Commerce, and Rodolfo Molina, President of
the Chamber of Textiles.

8. At the second meeting, Bastian summarized that "what we have on
the US side around this table is people who can turn CAFTA into
business." After dialogue on how the chambers supported CAFTA, the
topic turned to next steps after CAFTA implementation. The
participants agreed to aggressively pursue ways to promote USG
agency cooperation with the region's businesses. A video conference
was proposed for the near future and other steps will follow.

CAFTA EQUALS PREDICTABILITY (AND INVESTMENT)
--------------------------------------------

9. At a lunch hosted by AmCham, the Secretary delivered his keynote
speech for the Costa Rican segment of the trip. The Secretary
emphasized three themes: (1) CAFTA supporters should not let down,
but continue the fight for the completion of CAFTA implementation in
Costa Rica; (2) "capital is a coward" (particularly in the current
unsettled financial environment) and will seek, in the form of FDI,
destinations with predictable laws on market access, safeguards,
rules of origin, remedies and arbitration, procurement, intellectual
property, etc., as defined by USG trade agreements; and (3) a
commitment to opportunity and prosperity depends on economic growth
which is a direct result of flourishing trade (as NAFTA
demonstrated).

10. A question from the audience regarding how the next USG
administration "might give Costa Rica a better deal" was met with a
straightforward observation by the Secretary: When an agreement is
opened up, both sides can demand changes, and this might not result
in the "better deal" envisioned by one side or the other.

AN INTEL HIGH TECH MOMENT
-------------------------

11. Intel arrived in Costa Rica in 1998 to build what is still its
only microchip manufacturing facility in Latin America, at a cost of
USD 800 million, six times its initial commitment of USD 115
million. Intel accounts for 20 percent of the value of Costa Rican
exports (Source: COMEX, Central Bank of Costa Rica). Site manager
Mike Forrest welcomed the Secretary to Intel's plant outside of San
Jose and provided a background briefing. The program then focused
on Intel's efforts to provide a modern educational experience for
Costa Rican students.

12. Intel provides training programs in technology for teachers and
students, scholarships for graduate students in engineering,
affordable PCs, and facilitates internet connectivity in schools.
By using computers and the internet to research and create projects
for the classroom, Intel's programs have increased the interest of
local children in learning. Two fifth-grade students presented the
results of their projects to the Secretary, illustrating how Intel's
involvement in the classroom supports its broader strategy of
creating a labor force that is prepared to work in the technology
industry, while concurrently creating a more tech-savvy populace
that would eventually buy the computers that incorporate Intel's
products.

AGRICULTURAL COOPERATIVES BENEFIT SMALL PRODUCERS
--------------------------------------------- ----

13. The Secretary then visited Hortifruti, a cooperative program
devoted to agricultural development, storage, and marketing of
fruits, vegetables, and grains. Wal-Mart of Central America
operates a regional agro-industrial program which includes
Hortifruti. Wal-Mart Vice Presidents Carlos Uribe and Jose Manuel

Rodriguez greeted the Secretary and provided a presentation on key
elements of the Central American agricultural sector, which included
producer size (small, traditional subsistence farmers), market
access (isolation and logistical problems), and credit (lack of
access).

14. Through training on growing techniques and what to grow for
retail marketing distribution, Hortifruti's Tierra Fertil program
improves the lives of small farmers. The training links product
quality to payment as the Hortifruti program guarantees to farmers
on-time payment for produce that meets established quality
standards. A regular payment allows farmers to re-invest in
diversifying their crops and thus gradually improve farm operation
efficiencies and quality standards. Through Hortifruti, 2,500
producers in Costa Rica now have access to markets throughout
Central America and to some extent in Europe, as well. Tierra
Fertil operates in five countries (Guatemala, El Salvador, Honduras,
Nicaragua, and Costa Rica), produces more than 243 products, and
involves more than 10,000 families.

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