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Cablegate: Costa Rica: January 1 Cafta Eif Within Reach

VZCZCXYZ0004
OO RUEHWEB

DE RUEHSJ #0959/01 3451401
ZNY CCCCC ZZH
O 101401Z DEC 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0339
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE

C O N F I D E N T I A L SAN JOSE 000959

SIPDIS

DEPT FOR WHA, WHA/CEN, WHA/EPSC AND EEB; DEPT PLEASE PASS
TO USTR AMALITO AND DOLIVER; DEPT PLEASE PASS TO TREAS
SSENICH

E.O. 12958: DECL: 12/09/2018
TAGS: CS ECON ETRD KIPR PGOV PREL
SUBJECT: COSTA RICA: JANUARY 1 CAFTA EIF WITHIN REACH

REF: A. SAN JOSE 823
B. SAN JOSE 958

Classified By: DCM Peter Brennan per 1.4(d)

1. (SBU) The GOCR accepted USTR,s requirement to pass one
more legislative bill on three IPR-related technical
corrections which must be enacted for full CAFTA
implementation. The GOCR probably will introduce this 14th
CAFTA bill before the December 19-January 5 recess, but not
take action on it until January. The GOCR understandably
seeks to minimize the public and political attention drawn to
the bill, to treat it as a &routine8 revision of
already-enacted legislation, and to separate it as much as
possible from actual CAFTA entry-into-force (EIF) on January
1. No matter when it launches, however, this last CAFTA
bill, like the other 13, may not move quickly: the
Asamblea,s agenda is full and the 38-seat pro-CAFTA
coalition is virtually spent. (A 38-vote super-majority will
be needed to invoke fast track authority and keep the new
bill moving. Otherwise, opponents may pile on motions to
block it and delay full implementation.) Costa Rica is thus
likely to reach CAFTA EIF on January 1 with some work not
quite finished, in exchange for a holdback of some trade
preferences (likely candidate: organic sugar). This
scenario concerns the Ministry of Foreign Trade (COMEX),
because the selection of a holdback could affect pro-CAFTA
economic or agricultural sectors. In addition, a
&partial,8 &provisional,8 or &technical 8 EIF might be
vulnerable to a constitutional challenge. Minister of the
Presidency Rodrigo Arias may make one more plea against a
holdback when he meets with USG officials on the margins of
the Pathways to Prosperity Summit in Panama on December 10.
With the leading opposition figure traveling the region
calling for CAFTA &renegotiation,8 and the incoming US
administration and Congress likely to hold a different view
than their predecessors on free trade, the GOCR knows it must
(finally) close the door on CAFTA. The question is how best
to do so. END SUMMARY.

----------------------
THE &FINAL8 FINAL Bill
----------------------

2. (SBU) The status of the four technical issues has evolved
over the last two months (Ref A). COMEX now agrees with USTR
that three should be included in legislation. The fourth has
already been corrected in legislation:

IP Enforcement ) requires the addition of a phrase to
qualify the type of phonographic recordings involved in an IP
violation. COMEX agrees this legislative change must be
made, given the glaring nature of its omission. COMEX also
believes this should fix be amenable to a sufficient number
of legislators, if the new bill is presented in the right way
at the right time. This fix would correct an omission in the
IPR enforcement bill (No. 16.117) which became law in August.

Publication of Recordings - requires the substitution of text
which will re-insert a sentence that was deleted from bill No
16.955 (the IPR &catch-all8 which became law in November)
and replaced by a reference to the Rome Convention. After
USTR and COMEX debated how best to achieve the desired
result, the parties agreed that a legislative solution was
acceptable.

Data Protection ) requires the addition of a word to qualify
the type of products subject to data protection, also in bill
No. 16.955. The additional word specifies the type of new
pharmaceutical product that will have data protection. COMEX
hoped that it could incorporate this correction into an
agro-chemical bill under debate in the national assembly, but
the deal to do so fell through at the last minute.

Establishment of IP Rights ) required the deletion of the
Spanish word for &previously8 from a section of bill No.
16.955 for two reasons: to eliminate a time threshold for
the establishment of rights and to make the text of the
relevant article consistent. COMEX successfully (and rather
skillfully) made this change before bill No. 16.955 was
approved by the legislature on November 11 by indirect means;
using linguists to &correct8 the legislative language.
This avoided drawing attention to the change.

--------------------
LEGISLATIVE STRATEGY
--------------------
3. (SBU) COMEX initially recommended to Casa Presidencial to
proceed forward with a &clean-up8 bill immediately and not
wait until December 1 (which is when the GOCR controls the
legislative agenda). That did not happen. However, with the
text of the bill now under discussion with USTR, COMEX
Minister Marco Vincio Ruiz shared with us that the bill could
be introduced as early as the week of December 8. Regardless
of timetables, COMEX does not foresee super-majority (38
votes) support for the bill even with executive control of
the legislative agenda in the December-April session. Given
the political exhaustion of the fragile, pro-CAFTA coalition,
the GOCR cannot count on the 38 votes for fast track
authority. Without fast track authority, there is no
mechanism for cloture or to limit debate. Without such a
mechanism, debate on the final CAFTA bill could drag on for
weeks, as took place frequently during the debate over other
items of implementation legislation. If the new bill is
handled carefully, however, COMEX is reasonably confident it
could be approved &within 90 days,8 according to Minister
Ruiz. Approval in the new year should gain added political
impetus from CAFTA having already entered into force.

4. (SBU) Since the &clean-up8 bill has yet to appear on the
legislative docket, the media (and most political leaders and
legislators) are unaware of this lingering CAFTA business.
Leading daily La Nacion quoted Minister Ruiz on 2 December as
saying CAFTA will enter into force on January 1 and the only
remaining action is for the publication of regulations.
Hence, the expected media storm questioning the credibility
of COMEX (for not making these corrections sooner) and
attacking the USG (for levying &last second demands8) has
yet to occur. The GOCR apparently will forestall the
anticipated media storm by delaying as long as possible the
introduction of the bill -- ideally, from the GOCR,s point
of view ) as close to the holiday recess as possible.

5. (C) PUSC party faction chief (and pro-CAFTA stalwart)
Lorena Vasquez, one of the few legislators aware of the 14th
law gambit, agrees it should be handled as carefully and as
low key as possible. She prefers that the new law be
&dropped in8 to the agenda during the holiday recess (which
is technically possible), or better, not launched until after
January 1 to maximize the separation from EIF. Vasquez
believes that the new law can be sold as simply completing
Costa Rica,s compliance with CAFTA obligations, and also
with standing WTO and TRIPS requirements. The more the new
law can be defended as not asking more of Costa Rica than of
any other CAFTA partner, the better. Vasquez noted that the
new bill could be approved by a simply majority (29 votes),
but she acknowledged that amassing the 38 votes required for
fast track would be difficult.

-------------------------
FAST FORWARD TO JANUARY 1
-------------------------

6. (SBU) COMEX Director Gabriela Castro outlined to Econoff
COMEX,s strategy for convincing legislators of the need to
pass the bill. She explained why the GOCR finalized
regulations now for the &clean-up8 bill even before
introducing it. This would allow the GOCR:

-- to claim (correctly) that the last bill meets the full
provisions of CAFTA; and

-- to urge skeptical legislators that a signed CAFTA treaty
with regulations but no corresponding law is legally
incomplete.

7. (SBU) Quick to point out, &this is not a way to avoid
passing the last bill,8 Castro stressed, &we are committed
to that.8 Although primarily intended to result in an
agreed EIF on January 1, this ®ulations first8 strategy
is also to protect the GOCR, specifically COMEX, since
anything technically short of full EIF could be challenged as
unconstitutional under Costa Rican law, possibly holding the
responsible officials (Minister Ruiz and his team) criminally
liable. Although the legal vulnerabilities of this scenario
are unclear (and are under examination by COMEX lawyers)
COMEX is eager to pursue a strategy to minimize
constitutional or criminal exposure.

-------------------------
A SWEET BUT SOUR HOLDBACK
-------------------------

8. (C) We understand that USTR and COMEX are discussing
holdbacks, principally focused on sugar, but there is no
final agreement on this issue yet. Minister Ruiz told the
Ambassador last month that USTR has been referring to the
example of El Salvador as a possible model for EIF with a
holdback. USTR chose sugar in that case but COMEX believes
the situation is much different in Costa Rica (with a
collection of smaller, cooperative sugar producers) than in
El Salvador (where the industry is dominated by three
producers). Choosing sugar as the holdback in Costa Rica
would affect the entire LAICA cooperative, according to
COMEX, which poses two challenges. First, the holdback would
be seen as penalizing the small and medium businesses that
comprise LAICA and actively supported CAFTA, as LAICA itself
did. Second, the GOCR,s efforts to scramble and pass a
&clean-up8 bill which was holding up TRQs for sugar might
be seen as simply helping the Arias brothers (whose family
has interests in the sugar industry). An elegant sidestep
would be to select organic sugar which is subject to
relatively more friendly TRQs, and which involves a very
limited number of growers in Costa Rica. The GOCR may make
one more push against a holdback on any kind, however. In a
late-breaking development (Ref B), Minister Rodrigo Arias
decided to attend the Pathways to Prosperity Summit in Panama
on December 10 in order to discuss the final CAFTA EIF issues
with DUSTR Veroneau and perhaps with the Secretary.

-----------
NEXT STEPS?
-----------

9. (C) The following is our understanding of the current
state of play on EIF elements:

-- AGREEMENT LETTER/HOLD BACK: COMEX and Casa Presidencial
are reviewing USTR,s agreement letter proposal which would
permit an EIF on January 1, but with a specified holdback if
the 14th law has not been completed;

-- LAST LAW: The law itself should be introduced before the
Asamblea goes to recess on December 19;

-- MEDIA POINTS: COMEX and the Embassy will work together
on a media strategy to handle inquiries generated by the
introduction of the last bill; and

-- REGULATIONS: COMEX has effectively finished its work on
IP and telecommunications regulations which will be published
by December 8, just prior to USTR,s deadline of December 10.
However, a subset of biodiversity regulations (related to
how CAFTA-related changes in the existing biodiversity law
could affect indigenous communities) must wait for the public
comment period to end on December 10. After that, COMEX has
from December 10 to December 15 (USTR,s deadline on this
issue) to obtain Ministerial approvals, the President's
approval, and officially publish the biodiversity
regulations.

COMMENT

10. (C) COMEX has managed to pull the outstanding CAFTA
elements together and is focused on finishing. A key aspect
of the political theater is how and when the last bill is
introduced. By delaying this far (the need to introduce
legislation has been known since October), the GOCR seems to
be counting on the end-year Asamblea recess and national
holidays to mute media coverage and public reaction to this
last &CAFTA problem.8 COMEX needs to end the CAFTA saga
due to &battle-fatigue8 on multiple fronts: with the
national assembly, within the GOCR, and with USTR. COMEX
will have little time to rest, however, as January 2009
ushers in a busy month with the GOCR undertaking formal FTA
negotiations with China, participating in a preliminary EU
meeting with its Central American partners, and taking part
in the sixth round of CenAm-EU trade negotiations in Brussels.
CIANCHETTE

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