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Cablegate: Costa Rica and Cafta-Dr

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

UNCLAS SECTION 01 OF 02 SAN JOSE 002389

SIPDIS

SENSITIVE

WHA/CEN
EB FOR WCRAFT, BMANOGUE
EB/CIP FOR WAYALA
E FOR DEDWARDS
WHA FOR WMIELE
WHA/EPSC FOR KURS, LGUMBINER
H FOR JHAGAN
STATE PASS TO USTR FOR RVARGO, NMOORJANI, AMALITO

E.O. 12958: N/A
TAGS: ETRD ECPS ECON PREL PGOV SOCI CS
SUBJECT: COSTA RICA AND CAFTA-DR

REF: (A) SAN JOSE 02008
(B) SAN JOSE 01828

1. (SBU) Summary. President Pacheco continues to say he
will send the United States-Central American-Dominican
Republic Free Trade Agreement (CAFTA-DR) to the Legislative
Assembly. The question remains "When?" Nicaragua's recent
passage of CAFTA-DR has brought increased focus by the media
and interested parties on the lack of movement on
ratification of the agreement in Costa Rica, with CAFTA-DR
proponents stating that each day that passes without moving
forward on CAFTA-DR, Costa Rica suffers economically and
loses business to the other countries that have already
ratified the agreement. Opponents claim that Costa Rica
should continue the national dialogue on this issue and the
other countries' decisions to ratify the agreement should
have no effect on Costa Rica's ratification process. Some
point out with pride that Costa Rica has always benefited
from taking a different path than the rest of Central
America. End Summary.

2. (SBU) After the Nicaraguan Congress passed CAFTA-DR on
October 10, 2005, Costa Rica became the last signatory
country to not have yet ratified the agreement. More
notable is the fact that President Pacheco continues to
delay in sending the agreement to the Legislative Assembly
to start the lengthy ratification process (Ref A). His
recent comments about when he will send CAFTA-DR to the
legislature have been vague, occasionally inconsistent, and
always noncommittal. Based on recent statements made by
President Pacheco, he may send CAFTA-DR to the Assembly as
early as October 20 when he returns from the 15th Ibero-
American Summit in Salamanca, Spain, or he may wait until
the sure-to-be-contentious bills to strengthen the Costa
Rican Institutes of Electricity (ICE) and Insurance (INS)
are introduced and passed by the Assembly. The latter
would surely mean that CAFTA-DR would not be submitted
before the next Administration takes office in May 2006.
The most recent press statement from the Office of the
President states that he will submit CAFTA-DR to the
Assembly at the same time the bill to strengthen ICE is
submitted.

3. (SBU) Reportedly the bills to strengthen ICE and INS
are under review by the Administration and will be
submitted to the Assembly within the next several weeks.
The Administration is careful to not give exact dates as
prior submission time period estimates have come and gone.
Another important legislative project that the GOCR says it
will submit to the legislature is the Telecommunications
Act which should propose laws to comply with the
telecommunications portion of CAFTA-DR - to gradually open
the telecommunications market to competition. All of these
legislative projects and CAFTA-DR will be intensely debated
in the Assembly and because of the Costa Rican legislative
process, CAFTA-DR likely will require at least six months
or more to ratify.

4. (SBU) To date, the only CAFTA-DR-related legislation
that has been submitted to the Assembly is that associated
with funding the complementary agenda to CAFTA-DR. This
concerns Assembly approval for three loans from the Inter-
American Development Bank, the World Bank, and the Central
American Bank for Economic Integration (Ref B) to fund
initiatives to increase the competitiveness of Costa Rican
businesses and improve infrastructure.

-------
COMMENT
-------

5. (SBU) The situation in Costa Rica regarding
ratification of CAFTA-DR has not changed since Nicaragua
passed the agreement. Pacheco may send the agreement to
the Assembly as early as the end of October or he may wait
until the Assembly passes the still-to-be-submitted
proposed laws to strengthen ICE and INS. Costa Rica,
arguably, has the most work to do with regard to the
changes that need to be made not only to comply with CAFTA-
DR but also to make fundamental changes to ensure Costa
Rica can take advantage of the opportunities offered by the
agreement. Regardless of when he sends CAFTA-DR to the
Assembly, the Costa Rican process to approve CAFTA-DR will
be lengthy and it is very likely that the agreement and
associated legislative projects will not be approved until
sometime after the next President and Legislative Assembly
members take office in May 2006.
FRISBIE

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