Cablegate: Costa Rica Will Request an Extension of Cafta-Dr Deadline

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TO RUEHC/SECSTATE WASHDC IMMEDIATE 0057
INFO WHA CENTRAL AMERICAN COLLECTIVE

C O N F I D E N T I A L SAN JOSE 000969

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DEPARTMENT FOR WHA/CEN
WHA/EPSC:SGARRO
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E.O. 12958: DECL: 2012/11/25
TAGS: ETRD ECON KIPR PREL PGOV CS
SUBJECT: Costa Rica will request an extension of CAFTA-DR deadline

CLASSIFIED BY: Schechter Torres, Julie, Counselor for Political and
Economic Affairs, State, POL-ECON; REASON: 1.4(B), (D)

1. (C) INTRODUCTION AND SUMMARY. Costa Rica's Foreign Trade
Ministry (COMEX) has informed Embassy that the GOCR most likely
will not meet the December 31 deadline for the passage of the 14th
CAFTA-DR bill and finalization of intellectual property rights
(IPR) regulations. On November 16, COMEX Director Esteban Aguero
stated that COMEX Minister Marco Vinicio Ruiz and Foreign Minster
Bruno Stagno planned to contact their USG counterparts to request
an "extension" from the USG. USTR-COMEX negotiations on IPR
regulations (the parties differ on text), the legislative calendar,
the lack of legislator support, and the 2010 Costa Rican
presidential and legislative elections, all make it likely that the
bill will not pass until April or even later in the year. Embassy
recommends that the USG formulate its strategy now on the
consequences, if any, Costa Rica should face for missing its third
CAFTA-DR deadline. We recommend that the USG should not agree to
an "extension" request by the GOCR. Furthermore, the USG should
continue with the legal mechanism put into effect last year which
will halt market access for a product category of USTR's choice
until the GOCR meets all CAFTA-DR obligations. End Introduction and
Summary.

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WHY SKATE BY ANOTHER DEADLINE AGAIN?

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2. (U) Costa Rica once again finds itself at odds with an

important CAFTA-DR deadline. This now makes for the third

deadline drama created by the GOCR. By agreement with

USTR, the GOCR achieved CAFTA-DR entry-into-force on

January 1, 2009. However, the GOCR did not fully meet all

of USTR's requirements -- specifically in intellectual

property rights (reftel). USTR granted the GOCR a one year

"grace period" as Costa Rica entered the agreement. A side

letter required the GOCR to meet the three lingering IPR

requirements by December 31, 2009. The consequence of

missing the deadline was the possibility of a preferential

access holdback (likely to be sugar). Despite this

extension, the GOCR made little progress during 2008 on

what became known as the 14th bill.

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SO WHAT REALLY ARE THE PROSPECTS?

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3. (SBU) There are four factors that shape the prospects of

the GOCR meeting USTR's legislative and regulatory

requirements:

-- Legislative Calendar: The Arias Administration controls

the legislative calendar from December 2009 until April

2010. However, the Legislative Assembly will close for

business most likely on December 17 and not reopen until

after the February 7 elections. Thereafter, the next time

the executive branch controls the legislative calendar will

be August. To become law, the bill must receive two

Legislative Assembly votes, possibly a constitutional

review (if requested by ten legislators), presidential

signature, and publication.

-- Legislative Support: The Arias administration,

according to COMEX's Aguero, lacks the 38 votes (of a total

of 57) that it needs in the Legislative Assembly to approve

the 14th bill. Also, what Aguero did not mention is that

COMEX has virtually no gravitas with legislators and thus

very little influence after the bruising implementation

process of passing the previous thirteen laws from 2007 to

2008.

-- Regulatory Text: COMEX (and other parts of the GOCR)

and USTR need to agree on language for agro-chemical

regulations. Originally, this issue was one of the three

technical corrections in the 14th bill. COMEX and USTR

agreed that addressing the agro-chemical issue through

regulations would work. The two parties discussed agrochemical

language from April to July. However, it became

apparent that COMEX had not gained full support of the

Ministries of Health and Industry-Economy-Trade on

fundamental aspects of the agro-chemical issue. Due to the

lack of progress, discussions on the issue stalled in July.

In October, the USTR-COMEX dialogue re-started but an

agreement on text has yet to be reached.

-- Elections: During January, all Costa Rican political

hands will focus on the presidential and legislative

elections on February 7. If PLN candidate Laura Chinchilla

wins, then the possibility of legislative action in the

February-April "lame-duck" period exists, but is unlikely.

After April, the 14th bill becomes the business of the new

president. (Note: Director Aguero mentioned that PLN

presidential candidate Chinchilla and advisor Fernando

Sanchez are "aware" of the issues associated with the 14th

bill and are "worried." End note.)

4. (SBU) When asked about legislator awareness of an endof-

year deadline for the 14th bill, Director Aguero

answered that COMEX has explained the importance of the

bill's schedule to the legislators. The legislators have

chosen to ignore or discount the explanation. In contrast,

a key legislative staffer told us that COMEX has not even

been trying to draw this issue to legislators' attention,

focusing instead on upcoming trade agreements with Europe

and Singapore. The bill currently ranks 120th on the

Legislative Assembly's bill roster.

5. (SBU) With this assessment, the odds of passing the

14th bill in 2009 rate less than 5 percent. Only one month

ago COMEX officials, including Minister Ruiz and Director

Aguero, espoused a much sunnier prognostication to Charge

Peter Brennan and Econoff by assuming that the GOCR would

overcome the first three factors listed above, plus clear

the GOCR's legislative process by the December 31 deadline.

6. (U) Looking ahead, the nature of the bill's legislative

support will change when the new legislators arrive in

office on May 1, 2010. Legislators cannot serve

consecutively, which means a new set of legislators could

very well review the 14th law in mid-2010. However,

whether this is positive or negative largely depends on the

party affiliation and the size of the mandate of the new

president.

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ARE THERE CONSEQUENCES?

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7. (SBU) With the news of the GOCR's interest in an

"extension," the USG must now weigh how to handle such a

request. According to Costa Rica's CAFTA-DR obligations,

if the GOCR does not meet the December 31 deadline, then

the holdback on market access can go into effect.

Evidently, the GOCR wants to re-focus the CAFTA-DR

discussion with the USG away from the consequences of not

meeting the deadline by proposing an "extension." A third

"extension" sharply contrasts with the spirit of the signed

documents from the entry-into-force process of December

2008. When sharing the news of the "extension" request,

Aguero never mentioned the side letter or preferential

access holdback. Moreover, an "extension," in whatever

form it could take, will likely bridge two administrations.

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COMMENT

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8. (C) Post recommends that the USG institute the

holdback on market access as a consequence of the GOCR not

meeting the December 31 deadline. After two deadline

extensions and a one year grace period, Post doubts that

another "extension" will spur the GOCR into action. In

2010, GOCR action depends on the elections combined with an

unhelpful legislative calendar. These two factors will

likely complicate -- not ease -- completing the 14th bill

and the lingering IPR regulations.

9. (C) As for a new administration, if the new president

is friendly to the 14th bill, the bill may still not

receive action until August, the first time the new

administration will control the legislative calendar. And

even then, the bill could be buried on the priority list as

the new administration attempts to score some quick

legislative victories on high profile projects (for example

in security, education, or infrastructure). This means

that the bill could miss the August "window" and the USG

could repeat this very same discussion twelve months from

now, looking ahead to still another deadline in December

2010.

BRENNAN

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