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Cablegate: Costa Rica Scenesetter for Senator Arlen Spector

This record is a partial extract of the original cable. The full text of the original cable is not available.





E.O. 12958: N/A

1. (SBU) SUMMARY: Embassy San Jose warmly welcomes Senator
Arlen Spector. Your trip comes in the heat of the campaign
for the February 2006 general election. The political
establishment is still struggling to recover from large
scandals that resulted in two ex-Presidents awaiting trial
under house arrest, and contributed to the fragmentation of
Costa Rica's two traditional political parties. The
executive and legislative branches are both widely viewed as
inept and unable to do their jobs. To many observers,
President Pacheco lacks the vision and political clout to
govern effectively. He has so far refused to send the
U.S.-Central American-Dominican Republic Free Trade Agreement
(CAFTA-DR) to the legislature for ratification, despite
explicit calls from the legislature for CAFTA-DR's submission
issued in the wake of U.S. congressional approval of the
treaty. Bilateral relations between the U.S. and Costa Rica
are friendly. The GOCR is a close ally on U.N. cloning and
human rights issues. End Summary.

Friendly Bilateral Relationship
2. (U) The U.S. and Costa Rica enjoy a productive
relationship based on shared values in the areas of democracy
and human rights. President Pacheco, defying public opinion,
gave moral support to the U.S.-led coalition on Iraq. In
September 2004, however, the Constitutional Court ruled that
Costa's Rica participation in the Iraq Coalition was
unconstitutional (on the grounds that it was against the
country's traditional neutrality), forcing the GOCR to ask to
be removed from the list of Coalition countries. This was a
purely symbolic move; Costa Rica abolished its military in
1949 and did not contribute any resources to the Coalition.

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Corruption Scandals Discredit Political Establishment
--------------------------------------------- --------
3. (U) Last year's unprecedented corruption scandals have
contributed to a feeling of crisis and political malaise in
the country. Ex-president Miguel Angel Rodriguez (1998-2002)
faces charges of corruption related to a major
telecommunications contract negotiated during his
administration. Another ex-President, Rafael Angel Calderon
(1990-1994), is awaiting trial on corruption charges related
to his role in a healthcare equipment deal that allegedly
included several million dollars in bribes. A third
ex-President, Jose Maria Figueres (1994-1998), has come under
fire for failing to disclose earnings of $900,000 in
"consulting fees" received from a French telecom company.
Figueres refuses to return to Costa Rica to testify before
the Legislature. As of mid-August, Calderon and Rodriguez
(who both belong to the ruling Social Christian Unity Party
(PUSC)) remain under house arrest.

4. (U) Additional scandals erupted following the
catastrophic fire of July 13, which killed 19 people and
destroyed a large portion of the Calderon Guardia Hospital.
Subsequent investigations show that the hospital failed
numerous fire safety inspections, but failed to modernize
their fire control systems. Considering that the health
ministry has been at the center of many recent scandals, this
further embarrassment only served to further reduce public
faith in the system.

5. (U) A number of new parties have formed in response to
the public's mistrust and dissatisfaction with the
traditional political options. Dozens of new political
parties are now officially registered as the country prepares
for February 2006 general election. Former President Oscar
Arias is the clear front-runner in early polls. Arias has
built his platform on free trade, though polls also suggest
that average Costa Ricans are more concerned about crime than
economic issues.

Executive Branch Muddling Through Till 2006
6. (SBU) The current president, Abel Pacheco, was elected in
the country's first-ever run-off election in April 2002. His
approval rating, however, has fallen steadily since 2002.
Nearly 20 ministerial-level officials have resigned or have
been dismissed from Pacheco's cabinet since he took office.
Pacheco's government has weathered strikes by public school
teachers, telecommunications workers, dockworkers, and air
traffic controllers, but the President has been criticized
for caving in too easily to demands from powerful public
sector unions. The President is widely viewed as lacking the
necessary vision and political clout to govern effectively
and shape the future direction of the country. Pacheco has
also been subjected to close scrutiny for alleged campaign
finance irregularities and various minor ethical violations
which, coming on the heels of so many presidential scandals,
have further deteriorated his public standing.

Legislative Branch: Paralyzed
7. (U) Deputies representing five parties were elected to
the Legislative Assembly in 2002. Eleven of the 57
Legislative Assembly Deputies have since broken away and
either formed new parties or declared themselves independent.
There are now at least nine parties and three independent
legislators struggling to function within a legislative
structure that traditionally has had only two parties.
Political analysts widely refer to these splits as the
"atomization" of the Legislative Assembly and the traditional
two-party system. The Legislative Assembly is widely viewed
as unable to get anything done. While some of the problem is
institutional (poorly designed rules that procedurally savvy
minority parties exploit fully), political analysts opine
that the Assembly's main problem is a lack of leadership that
can forge consensus. Currently, in their opinion, the
Assembly is an assortment of at least a dozen different
groups that are unaccountable to any party or electorate and
that are mainly focused on
posturing for the upcoming 2006 general election.

CAFTA-DR Ratification Delayed
8. (SBU) The Costa Rican Ministry of Foreign Trade was
expected to submit CAFTA-DR to the Costa Rican legislature
shortly after its signing, but, citing the inability of the
legislature to pass a fiscal reform package, President
Pacheco has not yet introduced the bill to the Legislative
Assembly for approval. Most observers believe the real
reason for Pacheco's reluctance to present CAFTA-DR to the
legislature is his fear of threatened labor strikes and
public unrest. Pacheco recently convoked a "Commission of
Eminent Persons" to review CAFTA-DR and render their opinion
on its potential for benefit or harm. The five-person panel
is expected to submit its report in mid-September. Pacheco's
commitment to delay has spawned havoc within the trade
ministry, with several high-ranking officials resigning or
being fired for disagreeing with the president's stance.
Recent polls show strong public support for CAFTA-DR.

GOCR Saddled With Large Public Sector Debt
9. (U) One of Costa Rica's most serious macroeconomic
problems is the fiscal deficit. More than 90 percent of the
GOCR's income is used to pay government salaries, pensions,
and interest payments on the national debt. The government's
fiscal deficit in 2004 was equal to 2.5 percent of GDP, a
decrease from 3.0 percent from the previous year. At the end
of 2004, Costa Rica's public sector debt topped USD 10.5
billion. The GOCR's deficit is largely financed by
government borrowing and the surpluses generated by some
state-owned monopolies (which include telecommunications,
electrical power, insurance, and petroleum distribution). In
late 2004, the GOCR, unable to attract investors on the open
market, resorted to forcing parastatal service providers to
take on government debt to allow the GOCR to meet its
end-of-year payment obligations.

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