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### Viewing cable 08SANJOSE827, SECRETARY GUTIERREZ'S MEETINGS WITH PRESIDENT ARIAS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08SANJOSE827 | 2008-10-17 20:08 | 2011-03-02 16:04 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy San Jose
Appears in these articles: http://www.nacion.com/2011-03-02/Investigacion.aspx

`

    VZCZCXYZ0013
    PP RUEHWEB

    DE RUEHSJ #0827/01 2912033
    ZNR UUUUU ZZH
    P 172033Z OCT 08
    FM AMEMBASSY SAN JOSE
    TO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
    RUEHC/SECSTATE WASHDC PRIORITY 0194
    INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
    RHEHNSC/NSC WASHDC PRIORITY
    RUEHDG/AMEMBASSY SANTO DOMINGO PRIORITY 1606

` `

    UNCLAS SAN JOSE 000827

    SENSITIVE
    SIPDIS

    COMMERCE FOR ITA, TDA AND SECRETARY'S OFFICE
    DEPT FOR WHA, WHA/CEN, WHA/EPSC AND EEB
    PLEASE PASS TP USTR AMALITO AND DOLIVER

    E.O. 12958: N/A
    TAGS: ECON ETRD OVIP PGOV PINR PREL CS
    SUBJECT:  SECRETARY GUTIERREZ'S MEETINGS WITH PRESIDENT ARIAS

    REFS: A) San Jose 745 (NOTAL), B) San Jose 774, C) San Jose 823
    (NOTAL)

    ¶1.  (SBU) SUMMARY:  In two meetings held in the presidential office
    complex on September 30, President Oscar Arias and Commerce
    Secretary Carlos Gutierrez, joined by senior staff, discussed a wide
    range of political and trade issues centered on Costa Rican entry
    into CAFTA.  Arias emphasized the political cost he had paid to move
    Costa Rica almost to CAFTA implementation and asked for USG
    understanding and flexibility as the GOCR neared entry-into-force.
    Arias and his ministers asked that USTR accept a proposal permitting
    them to enter CAFTA as soon as the 13th bill (on IPR catch-all
    issues) was modified and approved, with a pledge to complete all
    other issues, including a 14th technical corrections bill, if
    needed, after entry-into-force (EIF).  Secretary Gutierrez made
    clear that any decision on a CAFTA proposal was USTR's, not his, but
    he said he would make it a priority to discuss the proposal with
    USTR when he returned to Washington.   The Secretary also briefed
    Arias on Bolivian and Cuban developments, while members of the
    Secretary's party briefed on new and continuing OPIC, Ex-Im and U.S.
    Trade and Development Agency initiatives.  Minister of Foreign Trade
    Ruiz suggested a CAFTA-related meeting on the margins of the next
    Americas Competitiveness Forum, to presage the much-delayed CAFTA
    Ministerial and to highlight the benefits of CAFTA and free trade in
    contrast to the populist alternatives being offered around Latin
    America.  President Arias also reiterated his well-known pitch for
    merit-based foreign assistance.  Secretary Gutierrez's staff cleared
    this report.  Other visit events will be reported septel.  END
    SUMMARY.

    -------------------------------
    SMALLER MEETING: CAFTA SIDE LETTER, CUBA AND BOLIVIA
    -------------------------------

    ¶2.  (U) The events opened with a small meeting in the President's
    office involving President Arias, Secretary Gutierrez, and senior
    GOCR officials.  With Arias were FM Bruno Stagno, Minister of
    Foreign Trade Marco Vinicio Ruiz, National Legislature President
    Francisco Pacheco and Ambassador Tomas Duenas from Washington.  With
    the Secretary were Ambassador Cianchette and DCM Brennan.

    ¶3.  (SBU) THE CAFTA SAGA:  Arias was more animated than Post had
    observed for some time, as he explained the long CAFTA saga in Costa
    Rica, stressing the importance of the 2007 national referendum which
    narrowly ratified the treaty, and the significance of CAFTA changing
    Costa Rica's 60 year-old traditional, statist model.  Recalling the
    long, tough political battle over the referendum, and noting that
    the anti-CAFTA forces had many factors in their favor, including the
    unions, the universities, the church, "and very probably Venezuelan
    money," Arias emphasized, "I exposed myself politically, and there
    has been a political cost."  If CAFTA doesn't go through, he warned,
    it will be a victory for Venezuela's Chavez, (the leading opposition
    party) PAC, and the extreme leftist forces that have been resurgent
    throughout the region.

    ¶4.  (SBU) PITCH FOR FLEXIBILITY:  The President admitted that he and
    "everyone else" had fully expected the last (13th) CAFTA
    implementation bill (the "catch all" on IPR issues) to get through
    the Constitutional Court easily; they were all surprised by the
    Court's September 11 ruling (which rejected a portion of the bill as
    unconstitutional, Refs A-B).  Under the circumstances, Arias
    therefore asked for understanding and flexibility on our part.  "I
    would like to ask that as soon as this law is corrected, we be
    allowed to enter into CAFTA - sin condicionamientos (without
    conditions)."

    ¶5.  (SBU) LEGISLATION VS THE GOCR PROPOSAL:  When Secretary
    Gutierrez asked about USTR's expectations, Ruiz responded that USTR
    wanted some "small word changes" in IPR language that would require
    new legislation.  The GOCR had originally thought that these could
    be fixed through regulations, but now realized that they could not.
    Pacheco then chimed in, confirming that some of the changes (not
    specified) "demanded" by USTR would require legislative approval,
    and complaining that these seemed to be relatively minor and
    inconsequential given all that had been accomplished to this point.
    It would be a shame, he added, to have all of CAFTA bogged down and
    perhaps jeopardized over such seemingly small matters.

    ¶6. (SBU) Minister Ruiz then asserted that the GOCR did not want the
    tariff holdbacks that USTR seemed to be contemplating as a condition
    if Costa Rica could not complete its CAFTA EIF requirements on time.
     He and Arias said this would look very bad for everyone and would
    be touted as a victory by the PAC-led opposition.  Ruiz said they
    preferred a side letter - which Arias said he would be willing to
    sign - committing them to get the remaining items done, including
    new legislation as needed, in the next legislative session (which
    begins December 1).  Ruiz re-emphasized that the GOCR did not want
    any holdbacks.   Returning to the historical context, Arias
    reiterated that for Costa Rica, CAFTA was the culmination of a
    "process of state reform that has taken more than 20 years - we
    don't want to lose it now."

    ¶7.  (SBU) Secretary Gutierrez made clear that any decision on a
    CAFTA side letter was USTR's, not his, but he offered to take the
    proposal back to Ambassador Schwab and see what could be done.  He
    said he could not provide any guarantees or promises on the
    decision, but he would make it a priority to discuss with Schwab.
    He said he would be back in his office on October 3, and planned to
    discuss CAFTA then with Schwab, after which he would get in touch
    with Ambassador Duenas at the Costa Rican Embassy.

    ¶8.  (SBU) BOLIVIA AND CUBA:  Secretary Gutierrez used the meeting to
    raise two additional issues with President Arias: the non-renewal of
    ATPDEA for Bolivia, and Cuba's refusal of humanitarian assistance
    from the U.S. in the wake of Hurricanes Ike and Gustav.  The
    Secretary told Arias that he wanted the GOCR to understand the
    background and context on both issues.  On ATPDEA, the Secretary
    described how the U.S. had been trying very hard to work with
    President Morales and the GOB, but when they began shutting down USG
    cooperation programs and then threw out our Ambassador, there was no
    option.

    ¶9. (SBU) Regarding aid to Cuba, Secretary Gutierrez pointed out that
    the U.S. had been doing everything it could as a humanitarian
    gesture to help the Cuban people, but the GOC had repeatedly (four
    times at that point) refused our assistance.  Gutierrez added that
    he simply wanted President Arias to know and understand the USG
    position.  He pointed out that while there's a great hue and cry
    over the embargo, most countries don't know that the U.S. is the top
    food and humanitarian assistance provider to Cuba, and the 2nd top
    provider of medicines. Arias and FM Stagno acknowledged these
    points, and thanked Gutierrez for the insights.

    ------------------------------
    LARGER MEETING: HISTORY OF, NEED FOR, BENEFITS FROM CAFTA
    ------------------------------

    ¶10.  (U)  Moving to the Cabinet Room, Arias, the Secretary and the
    participants in the first meeting were joined by a larger group
    including, on the GOCR side, Minister of the Presidency Rodrigo
    Arias (briefly) and Gabriela Llobet, Director of CINDE, the GOCR's
    private, non-profit foreign direct investment development agency.
    On the USG side, OPIC President and CEO Robert Mosbacher, Ex-Im Bank
    1st VP and Vice-Chair Linda Conlin, Trade and Development Agency
    Director Larry Walther, Commerce DAS Walter Bastian and Senior
    Advisor Ambassador (ret.) Lino Gutierrez, and Embassy Pol-Econ
    Counselor (notetaker) joined the session.

    ¶11.  (U) MORE CAFTA CONTEXT:  President Arias opened by elaborating
    on the CAFTA and Costa Rican history he had described in the first
    meeting.  He stressed that Costa Rican and U.S. values were similar,
    and that his country was "the most democratic" in Latin America,
    according to a recent study by the Adenauer Foundation.  Abolishing
    the military in 1948 had allowed the GOCR to invest in education and
    health care, fueling a higher level of social development than
    elsewhere in the region.  In addition, Costa Rica had opened trade,
    the "motor" of economic development.  Arias said he made the
    "unilateral decision" during his first term as president (1986-1990)
    to lower tariffs by 40%, open the Costa Rican economy, and begin to
    better integrate with the world and the region, including by using
    free trade agreements.

    ¶12.  (SBU) None of the other Costa Rican FTAs had been as polemical
    as CAFTA, however. Lacking the votes to ratify it in the
    legislature, Arias said he took CAFTA to a referendum, winning by a
    very close margin (less than 50,000 votes).  Because CAFTA would
    break up the long-popular state monopolies on telecommunications and
    insurance, it took a long time for public support to build, and
    Arias had to "gradually educate" the populace.  Now, the GOCR was
    "correcting the errors" found by the Constitutional Court in the
    final CAFTA law, the 13th to be passed by the legislature in about a
    year.  Managing the five-party pro-CAFTA coalition to get this far
    had been difficult, he stressed.  The entire process had been an
    "ordeal," and he and Secretary Gutierrez had been discussing how
    best to bring the process to a close.  The President concluded that
    foreign investment remained important to Costa Rica, which was now
    attracting more FDI per capita than Brazil or Mexico.  Costa Rica's
    tranquility, rule of law, democracy, and "absolutely independent"
    judiciary made this possible.

    ¶13. (U) LONGSTANDING US-COSTA RICAN PARTNERSHIP:  In response,
    Secretary Gutierrez thanked President Arias for his and Costa Rica's
    friendship to the United States, and offered greetings from POTUS.
    He also commended Arias for his leadership on CAFTA.  Despite the
    remaining problems reaching implementation, Costa Rica would not
    have been this far along without Arias's firm direction.  The
    Secretary noted the business delegation traveling with him to take
    advantage of the opportunities to invest in Costa Rica, even as
    CAFTA was being completed.  "CAFTA without Costa Rica would not be
    CAFTA," he stressed, and CAFTA membership had obvious benefits for
    Costa Rica.  The Secretary then opened the floor to other USDEL
    members as follows:

    -- OPIC's Mosbacher noted that his agency was not waiting for CAFTA
    completion, but was announcing USD 105 million in new lending for
    small- and medium-sized businesses and low- to moderate-income
    homeowners in Costa Rica, partnering with Banco Lafise and BAC.  He
    added that OPIC had provided over USD 200 million in projects in
    Costa Rica over the last two years, and over USD 370 million over
    OPIC's history;

    -- Ex-Im's Conlin noted that her organization "was no stranger" to
    Costa Rica, having provided USD 46 million in a "broad spectrum" of
    projects over the last six years.  Ex-Im wants that positive
    relationship to continue, she said, and agreed that finance could be
    the catalyst for the "trade and commercial engine" of the Costa
    Rican economy;

    -- TDA's Walther described his agency's long-time partnership with
    Costa Rica, in particular on infrastructure projects such as
    electrical production and the early stages of expansion for San
    Jose's Juan Santamaria International Airport; and

    -- Lino Gutierrez thanked Arias and the GOCR for their constant
    support for human rights issues around the globe, and especially on
    Cuba, which was important to both Secretaries Gutierrez and Rice.

    ¶14. (SBU) Returning to the infrastructure theme, President Arias
    noted that nearly two million tourists visited Costa Rica each year,
    equivalent to half the nation's population, but the county's
    airports, roads and ports were not able to handle the flow.  The
    GOCR hoped to concession the major Caribbean port of Limon, he said,
    but it might take four more years to convince the powerful
    dockworkers' union there.  Arias expressed thanks for all the USG
    and international support to projects and financing which aided
    small and medium companies in Costa Rica.  Many of these had the
    "export mentality" that was essential to keep the economy growing.

    ----------------------------
    A MEETING BEFORE THE FIRST CAFTA MINISTERIAL?
    ----------------------------

    ¶15.  (SBU) Minister Ruiz used the session to suggest a bi-national
    US-Costa Rica CAFTA commission meeting in the next few months,
    including "observers" from the private sector and academia.  "The
    world is watching Central America and CAFTA," he asserted, and if
    CAFTA should be "closed" to Costa Rica (by not entering into force),
    he feared a significant loss in investment and trade.  An
    international vehicle was needed to highlight the benefits from
    CAFTA and trade agreements.  A bi-national entity would not have to
    wait for the long-delayed first CAFTA Ministerial, he added, and
    could underscore the "strategic partnership" between Costa Rica and
    the United States while also countering the "alternative" political
    and development model being offered by Venezuela, Nicaragua and
    Bolivia.  DAS Bastian noted that the Secretary and his delegation
    had also been asked about the CAFTA Ministerial during their visit
    to the Dominican Republic prior to visiting Costa Rica.  A meeting
    along the lines described by Ruiz, but expanded to include other
    CAFTA partners, might be worth considering.

     ¶16.  (SBU) PITCH FOR MERIT-BASED ASSISTANCE:  President Arias
    closed the session by returning to familiar arguments about Costa
    Rica "deserving" additional international assistance.  As a "middle
    income" country, Costa Rica did not receive much USG assistance, he
    asserted, although "70% of the world's poverty" was concentrated in
    middle income nations.  Although Arias had no objection to wealthier
    nations helping the poorest countries, he was concerned by the aid
    recipient nations who purchased weapons instead of focusing on
    development needs such as education.  "Never has Latin America seen
    such a time of (inter-state) peace," he said, and yet nations like
    Venezuela and Chile are buying arms.  It is "schools and clinics"
    that the developing world really needs, he said, and not arms.  Thus
    Arias underscored his continued campaign for merit-based as well as
    needs-based foreign assistance.

    CIANCHETTE

`