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Cablegate: Meeting with Costa Rican Minister of Economy

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

C O N F I D E N T I A L SECTION 01 OF 03 SAN JOSE 002601

SIPDIS

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

E.O. 12958: DECL: 11/04/2015
TAGS: ETRD ECPS ECON PREL PGOV SOCI CS
SUBJECT: MEETING WITH COSTA RICAN MINISTER OF ECONOMY

REF: SAN JOSE 02460

Classified By: Charge Russell Frisbie for Reasons 1.4 (b) and (d)

1. (C) Summary. On October 26, 2005, Charge met with
Minister of Economy, Industry, and Commerce Gilberto
Barrantes. Minister Barrantes commented on the status of the
United States-Central American-Dominican Republic Free Trade
Agreement (CAFTA-DR) and related legislation including the
proposed law to strengthen the Costa Rican Institute of
Electricity (ICE). Barrantes stated that the bills that will
implement the changes needed to comply with CAFTA-DR
requirements in the areas of telecommunications, insurance,
and protection of intellectual property rights would be sent
to the Legislative Assembly sometime between now and January
2006. The conversation with Barrantes supports post,s view
that it is unlikely the Legislative Assembly will be able to
complete the first of two votes on CAFTA-DR prior to the
upcoming Presidential and Assembly elections on February 5,
2006, and perhaps not even by May 8, 2006 when the new
President and entire Legislative Assembly members (deputies)
will take office. Full approval and implementation of
CAFTA-DR including all necessary changes needed to comply
with the agreement will likely be left to the next
Administration. End Summary.

----------------------------
STATUS OF REVIEW OF CAFTA-DR
----------------------------

2. (U) During the October 26, 2005 meeting with the Charge,
Barrantes who also heads President Pacheco's Economic Council
said that Costa Rica is moving forward on CAFTA-DR and the
proof was President Pacheco's sending the trade agreement to
the Assembly on October, 21, 2005 to start the relatively
long ratification process. Barrantes stated that Rolando
Lacle, a deputy from the ruling Social Christian Unity Party
(PUSC) and chair of the Assembly's International Relations
Committee that has the responsibility for reviewing the
agreement said that he will hold committee sessions four or
five times a week to discuss CAFTA-DR. (Note: As required
by law, the legislative project requesting approval of
CAFTA-DR was formally introduced into the Assembly. The
Assembly in principle had five days from October 21 to
discuss and refer the agreement to the International
Relations Committee. However, formal hearings cannot begin
until the entire agreement is published in the Costa Rican
Official Gazette, which could be several more weeks. Further
restricting the window of opportunity, the Assembly likely
will not be in session from approximately December 15 through
the week after the elections, approximately February 13,
2006. End Note.)

3. (U) Many Costa Rican political experts believe the
International Relations Committee will require at least three
months to (1) review the legislation including the agreement
and associated reports which total more than 3000 pages, (2)
hold discussions with various groups in favor of and against
CAFTA-DR, and (3) send it to the Assembly floor with
recommendations and for a first vote. If passed in the first
vote, the constitutional court will review the agreement and
the legislative procedure used to approve it and offer its
findings. This will take at least one month. (Note: One of
the issues the Constitutional Court will review is the number
of votes required to pass CAFTA-DR. Although most experts
believe only a simple majority is required, some experts
believe that a two-thirds majority is necessary to pass
CAFTA-DR. End Note.) CAFTA-DR will then be sent back to the
Assembly where, if there were no significant findings by the
Constitutional Court, there would be a second vote. In the
case that the Constitutional Court were to have significant
findings, the Assembly would then have to address the Court's
comments accordingly. Even after a successful second vote,
there may still be up to a month for (1) the President to
sign the approving legislation and (2) to publish the
approval in the Official Gazette before the agreement is
considered ratified in Costa Rica. At best, the process will
probably take at least six months.

----------------------------
CAFTA-DR-RELATED LEGISLATION
----------------------------

4. (C) Barrantes also said that in November, he, Vice
President Lineth Saborio, Gerardo Gonzalez a PUSC deputy and
President of the Legislative Assembly, and Liliana Salas,
chief of the PUSC party faction in the Assembly, will meet to
discuss the legislative priorities for the Assembly's
extraordinary session that lasts from December 1 through
April 30. They will then send the priority list to President
Pacheco for his review. (Note: During the extraordinary
session, President Pacheco sets the legislative priorities,
as opposed to the ordinary session in which the President of
the Assembly does so. End Note.) Barrantes said that he
believes the list will include the following legislative
initiatives (although he failed to give them any specific
relative priority): (1) CAFTA-DR, (2) a law to implement the
CAFTA-DR requirements regarding the telecommunications
market, (3) a law to implement the CAFTA-DR requirements
regarding the insurance market, (4) legislation approving
loans that would fund CAFTA-DR's corollary complementary
agenda, (5) legislation forming a Costa Rican development
bank to assist development of businesses under CAFTA-DR, and
(6) legislation that would ensure compliance with the
intellectual property rights provisions of CAFTA-DR. (Note:
The only legislation that has been submitted to date are
CAFTA-DR and the complementary agenda funding. End Note.)

5. (C) One notable absence on Barrante,s list was that of
the government,s fiscal reform bill. When asked about the
status of this tax bill, Barrantes said that he was not sure
what would happen - that a lot depended on the strategy to be
adopted by Gerardo Gonzalez, the President of the Assembly.

6. (C) Barrantes also talked about the proposed law to
strengthen ICE that was sent to the Legislative Assembly on
October 18, 2005, three days prior to sending CAFTA-DR. He
stated that the President chose to proceed this way and to
insist on the Assembly passing the law to strengthen ICE
prior to passing CAFTA-DR to win good will from members of
some of the many labor unions that have voiced opposition to
CAFTA-DR. The bill is supposed to give ICE the financial and
administrative autonomy necessary to compete in a gradually
opened telecommunication industry as required by CAFTA-DR.
Barrantes acknowledged that from a CAFTA-DR compliance point
of view, this proposed law was problematic since it exempts
ICE from having to pay any taxes and gives concessions for
use of most of the telecommunications spectrum. (Note: Annex
13 to Chapter 13 of CAFTA-DR basically requires a strong
regulator of the telecommunications market that ensures equal
treatment and access for all competitors be they publicly- or
privately-owned. End Note.)

7. (C) Barrantes said that the issues noted above would be
fixed in the Telecommunications Act that is currently under
review by the Administration and ICE, and that may be
submitted to the Assembly in as early as a few weeks or as
late as January 2006. Barrantes said that perhaps the GOCR
would wait until December or January to lessen the likelihood
that anti-CAFTA forces could marshal university and high
school student support for protests.

8. (C) Barrantes said that a significant issue under
discussion regarding the Telecommunications Act was how to
regulate the telecommunications spectrum. He referred to a
World Bank study that is not publicly available that, he
stated, confirms there is enough available telecommunications
spectrum to allow sufficient competition, i.e., it would not
be necessary to take any spectrum away that ICE currently has
the rights to use. At the same time, he also said that the
Telecommunications Act would "clean up" the spectrum.
Barrantes said that President Pacheco personally intervened
over the objections of some ministers and to make the
decision not to address spectrum issues in the proposed law
to strengthen ICE. Barrantes said Pacheco wants to avoid
confrontation with the labor unions at this time by not
appearing to take anything away from ICE in that bill.

9. (C) Barrantes stated that the proposed bill to
strengthen ICE would be sent for review by a special
deputies-only committee which would consist of three PUSC
deputies, three deputies from the opposition National
Liberation Party (PLN) and probably one to three deputies
from other parties. He said most of the deputies that will
be on this committee will have served on the now-defunct
special mixed committee to review ICE that reviewed the
previously proposed law to strengthen ICE.

10. (C) Barrantes also said that a new and independent
regulatory body would be formed and would be named the
Superintendent of Telecommunications. He admitted that the
Regulatory Authority of Public Services (ARASEP), which had
been rumored to be the responsible regulatory agency, is not
qualified to do the job. Barrantes recognized the difficult
task of building such an organization from the ground up
including finding properly trained and experienced personnel
and generating regulations and defining procedures for an
open telecommunications market. He did say that the
Administration was working with several international
consultants on these issues.

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

11. (C) Barrantes,s comments served to underline the
significant barriers to rapid movement toward CAFTA-DR
ratification that remain, and which complicate passage in
2006. President Pacheco's insistence that the Assembly pass
the newly introduced law to strengthen ICE which contains
articles, which go against CAFTA-DR commitments, further
muddies the waters. Moreover, Barrantes,s comments about
the possibility of not "freeing up" telecommunications
frequencies highlights a key potential CAFTA-DR compliance
issue. In short, for the GOCR negotiating the agreement may
well have been the easy part, ratifying CAFTA-DR more
difficult, and passing the necessary legislation to comply
with its commitments could well constitute the biggest
challenge.
LANGDALE

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