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Cablegate: Three More Ftas for Costa Rica Before End of Arias

VZCZCXYZ0000
RR RUEHWEB

DE RUEHSJ #0118/01 0321820
ZNR UUUUU ZZH
R 011818Z FEB 10
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 0294
INFO WHA CENTRAL AMERICAN COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0013
RUEHBS/USEU BRUSSELS 0001
RUEHGP/AMEMBASSY SINGAPORE 0001

UNCLAS SAN JOSE 000118

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECIN ECON XG CH SN CS
SUBJECT: THREE MORE FTAS FOR COSTA RICA BEFORE END OF ARIAS
ADMINISTRATION

REF: 09 SAN JOSE 256; 09 SAN JOSE 985

1. (U) SUMMARY: Costa Rica is on the verge of concluding free
trade agreements (FTAs) with the European Union (EU), China, and
Singapore. Combined with CAFTA-DR, these agreements will solidify
the free trade legacy that President Arias, who completes his term
of office on May 8, aimed to leave the country. With three new
FTAs expected to come online this year, the GOCR needs to
streamline its process to avoid backlash from exporters and
overburdening its own employees. END SUMMARY.

2. (SBU) The EU has invited five Central American countries to sign
an Association Agreement on May 18 in Madrid, at the EU-Latin
America and Caribbean Summit. While originally intended as a
bloc-to-bloc agreement, Foreign Ministry Political Director
Alejandro Solano told us January 7 that the EU is now prepared to
sign with whichever Central American countries are willing. He was
confident that Honduras would be back at the table and intimated
that Nicaragua would be the one left out if it continued its
obstructionist tactics. The EU's willingness to sign with
individual countries is striking, since the Charge of the European
Commission's mission in San Jose had emphasized in December that
one of the most important aspects of this agreement for the EU was
that it would be its first bloc-to-bloc agreement. Also, earlier
in 2009, the EU promised USD 34 million in development assistance
to Costa Rica (in addition to assistance to the other Central
American countries) in the areas of quality control, education,
women-owned businesses, and community policing. (reftel A)
Negotiations of this accord were suspended following the coup in
Honduras in June 2009. The parties plan two last negotiation
rounds, in February and April. Costa Rica is the principal Central
American exporter to the EU, shipping bananas, pineapple, computer
parts, coffee, juices, and ornamental plants to the 27-country
bloc.

3. (U) Costa Rica and China expect to conclude negotiations of
their FTA in a sixth round of talks in February. (reftel B)
Currently, the two countries have agreed on 90 percent of their
products. Negotiators for the two countries are aiming to present
the agreement to the Costa Rican Legislative Assembly before
President Arias leaves office. Many Costa Ricans have been
resistant to the FTA because of the questionable quality of Chinese
products, exacerbated by the GOCR's limited capacity to monitor
product safety. Nonetheless, it appears that the GOCR has more in
mind than just cheap goods. Chief Negotiator for the Costa Ricans
Fernando Ocampo said, "We are aiming for Chinese advanced
technology companies that will contract qualified Costa Rican
employees." Costa Rica is still the only Central American country
to have established official relations with China, and it hopes to
expand from that foundation. Ocampo continued, "To be in good with
China is the best recommendation letter we have when looking for
future relationships in Asia."

4. (U) A case in point is Singapore. Costa Rica and Singapore held
their fourth and final round of negotiations in San Jose the week
of January 11. Singapore agreed to allow all Costa Rican
agricultural products to enter the country under the free trade
agreement, a first for Costa Rica. Singapore granted immediate
access to 100 percent of Costa Rican products, and Costa Rica
granted immediate access for 90 percent of Singapore's products.
The remaining 10 percent will phase in over the next five or ten
years (depending on the product). The two countries expect do a
legal revision of the agreement in March and sign it in April.
Free trade negotiations began with Singapore in April 2009.

5. (U) The Costa Rican Chamber of Exporters (CADEXCO) has
repeatedly complained about the "chaos" in the government's
administration of free trade agreements. Over 22 distinct
government offices are involved in exporting under free trade
agreements. CADEXCO stated that the lack of coordination among
offices causes significant delay for exporters, not to mention
occasional rejection of goods at the destination port due to
incomplete paperwork.

6. (SBU) Comment: With three new FTAs expected to come online this


year, the GOCR needs to streamline its process to avoid backlash
from exporters and overburdening its own employees. We hope that
ongoing USAID-supported trade capacity building projects,
particularly in customs, can help bootstrap the process.

Anna Sparks

Economic Specialist

U.S. Embassy

San Jos????, Costa Rica

(506) 2519-2269
ANDREW

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