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Cablegate: Arias Tours Europe, Calls for Debt Forgiveness And

VZCZCXYZ0010
PP RUEHWEB

DE RUEHSJ #1427/01 1742221
ZNR UUUUU ZZH
P 232221Z JUN 06
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 5446
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY

UNCLAS SAN JOSE 001427

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CEN JASON MACK

E.O. 12958: N/A
TAGS: PREL ECON EFIN CS
SUBJECT: ARIAS TOURS EUROPE, CALLS FOR DEBT FORGIVENESS AND
FREE TRADE

REF: SAN JOSE 1251

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SUMMARY
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1. (SBU) President Oscar Arias recently toured Europe for 13
days, meeting with political and business leaders in three
countries. He once again brought forth his Costa Rica
Consensus notion for debt forgiveness, and used several
occasions to call for free trade and the elimination of farm
subsidies. He linked Costa Rica's development goals with the
successful ratification of CAFTA. With his strong advocacy
of free trade and the benefits he believes it will bring
Costa Rica, Arias managed to provoke grumbling among
opposition members of the Costa Rican legislative assembly.
Arias clearly enjoyed being back on the world stage, taking
on developed nation farm subsidies and the Vatican's stance
on contraception. END SUMMARY.

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ARIAS IN EUROPE
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2. (U) President Oscar Arias, in the first foreign trip of
his current presidency, traveled to Switzerland, Germany, and
Italy. At his first destination, Switzerland, Arias spoke to
the annual Conference of the International Labor Organization
in Geneva. He used this occasion to once again present his
so-called "Costa Rica Consensus" (reftel) which entails more
generous foreign assistance and a program of debt forgiveness
for those middle-income countries that engage in good
governance and decrease military spending. He also made the
first of several calls during this trip for the nations of
the European Union and the U.S. to eliminate farm subsidies.

3. (U) On June 9, Arias and German Chancellor Angela Merkel
watched Germany defeat Costa Rica in the inaugural match of
the World Cup soccer tournament. While meeting with German
business leaders later, Arias predicted that Costa Rica will
pass CAFTA and encouraged German foreign investment in Costa
Rica. A common theme for Arias at meetings with European
business officials was how their investment in Costa Rica
would give them greater access to U.S. markets because of
CAFTA. During an interview with the Costa Rican daily "La
Nacion," Arias mentioned that he was considering ending the
Costa Rican Petroleum Refinery (Recope) monopoly on the
importation of petroleum products it has enjoyed since 1993.
He reiterated plans to break the monopolies of the Costa
Rican Energy Institute (ICE) and the National Insurance
Institute (INS), repeating his belief that Costa Rica must
break these monopolies as part of a strategy to accelerate
economic growth to the 6% annual rate he desires.

4. (U) While speaking in Florence, Italy, Arias decried the
"hypocrisy" of western nations for closing their markets to
agricultural products from developing countries while
demanding that developing countries open markets to their
goods. He repeated that "the developing world's farmers can
compete with the farmers of the developed world, but not
their treasuries." While meeting with former German
Chancellor Helmut Schmidt later, Arias conceded that he had
little optimism that farm subsidies in the European Union and
the U.S. could be reduced in the short term. Italian
business leaders expressed interest in business investments
in Costa Rica, but stressed that this investment would only
begin if Costa Rica approves CAFTA. Arias also announced
that within five to six months, the countries of Central
America will have initiated free trade talks with the
European Union and should have a deal within 18-24 months.

5. (U) The final leg of Arias's European tour brought him to
the Vatican and a personal meeting with Pope Benedict XVI.
Arias petitioned the pope to use his leadership to help
promote the "Costa Rican Consensus." Arias also requested
that the church ease its stance against artificial
contraception, and later explained that though he did not
expect a change in the church's stance on the issue, he felt
he needed to discuss the subject. After the meeting with the
pontiff, Arias met with the Vatican Secretary of State,
Angelo Sodano, to solicit support for Arias's pro-CAFTA
position, a move for which Arias has been criticized in some
quarters. According to Arias, Sodano promised to send a
letter of support for free trade to Costa Rica's Catholic
bishops, who have publicly raised concerns about CAFTA's
possible negative effects on farmers, the environment, and an
increase in social inequality. To date, no letter has come to
light.

---------------------------
OPPOSITION REACTION TO TRIP
---------------------------

6. (U) Arias's tour of Europe was a major story in the Costa
Rican press throughout the 13-day trip. Elizabeth Fonseca,
head of the Citizen Action Party (PAC), the second largest
party in the legislature and strong CAFTA opponent, said that
she would withhold comment until a full report of the trip
was presented to the Legislative Assembly by Arias. Other,
single-deputy party legislators were more negative,
criticizing Arias for his numerous trips to museums and
cultural sites. More substantial was the criticism leveled
by one deputy that Arias was "disrespectful" to the deputies
with his strong promotion of CAFTA in Europe, questioning how
Arias can guarantee the ratification of CAFTA in the Costa
Rican Legislative Assembly. Union leaders, not surprisingly,
accused Arias of fondness for "carpets, palaces, and luxury"
while failing to demonstrate one positive result from the
trip.

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COMMENT
-------

7. (SBU) President Arias reinforced to his international and
domestic audiences his belief in free trade as a means of
improving the economies of developing countries. The allure
of playing once again on the international stage was manifest
throughout Arias's trip. He went beyond his usual strong
support for free trade, provoked the opposition by
practically guaranteeing passage of CAFTA, and added fuel to
the fire with talk of breaking up state monopolies. But the
best indicator of renewed ardor for tilting at windmills was
Arias's request that the Vatican ease its stance on
contraceptives.
LANGDALE

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