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### Viewing cable 08SANJOSE159, SCENESETTER FOR CODEL COSTELLO

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08SANJOSE159 | 2008-02-27 22:10 | 2011-03-21 16:04 | UNCLASSIFIED | Embassy San Jose

`

    VZCZCXYZ0026
    PP RUEHWEB

    DE RUEHSJ #0159/01 0582251
    ZNR UUUUU ZZH
    P 272251Z FEB 08
    FM AMEMBASSY SAN JOSE
    TO RUEHC/SECSTATE WASHDC PRIORITY 9480
    INFO RUEHSN/AMEMBASSY SAN SALVADOR 5195

` `

    UNCLAS SAN JOSE 000159

    SIPDIS

    SIPDIS

    DEPT FOR H, WHA/CEN

    E.O. 12958: N/A
    TAGS: OREP PREL PGOV ETRD ECON SENV CS
    SUBJECT: SCENESETTER FOR CODEL COSTELLO

    =======
    SUMMARY
    =======

    ¶1. Embassy San Jose warmly welcomes CODEL Costello. Costa
    Rica has a history of political stability, social progress
    and commitment to peace and human rights which has been
    undermined in recent years by ineffective government
    institutions, growing domestic security problems,
    corruption scandals and dilapidated national
    infrastructure.  The continuing increase in domestic crime,
    as well as water and sanitation issues, have tarnished
    Costa Rica's image as an environmental leader and tourist
    paradise.  The administration of President Oscar Arias is
    slowly making progress to address these problems.  A
    healthy economy and confidence in Arias's leadership (64
    percent approval rating in January) give most Costa Ricans
    an optimistic outlook for 2008. Ratification and
    implementation of CAFTA is a central component of Arias's
    development agenda, but has proven to be a tough political
    challenge.  Costa Rica will be the last CAFTA signatory to
    join the agreement, sometime in 2008.  Costa Rica continues
    to be a reliable partner against transnational drug
    trafficking, but U.S. security assistance is vital.
    Targeted USG assistance in other areas can also help Costa
    Rica fuel its own development.

    ¶2.  Costa Rica depends heavily on civil aviation, an issue
    of interest to CODEL Costello.  Since a bilateral Open
    Skies Agreement was completed in 1997, passenger traffic
    has more than doubled, handled by nine U.S. carriers.  In
    2006, nearly 3.8 million passengers used Costa Rica's two
    major international airports.  END SUMMARY.

    ====================
    A STUDY IN CONTRASTS
    ====================

    ¶3.  On the one hand, Costa Rica stands out in Latin America
    as a country with a long democratic tradition and a history
    of political stability, social progress and commitment to
    peace and human rights.  Costa Rica historically has
    invested in education and health care rather than national
    defense, and in general has followed economic policies that
    favor free enterprise and globalization.  This has helped
    create a lower level of poverty (approximately 16% in 2007)
    than the norm for Latin America, and the most prosperous
    economy in Central America (gross national income per
    capita is $6,980, above the Latin America average and on
    par with Chile and Mexico). The link between stable
    democracy and economic opportunity for the average citizen
    makes Costa Rica a potential example for the region.

    ¶4.  On the other hand, Costa Rica's good name and self-
    image have suffered in recent years from ineffective
    government institutions, growing domestic security
    problems, corruption scandals and dilapidated national
    infrastructure.  As measured by the World Bank's 2008
    index, Costa Rica's ease of doing business ranks 115th out
    of 178 countries in the world (down from 99th in 2006).
    Only 35% of students that begin school in the public system
    graduate from high school. Crime has been increasing by 15-
    20% per year, and has become the public's primary concern
    as measured in opinion polls.  The judicial system is
    broken; of 37,000 robbery cases opened in 2005, for
    example, only three percent ended with a conviction.

    =======================================
    ARIAS: AMBITIOUS AGENDA; STRONG SUPPORT
    =======================================

    ¶5.  Despite these challenges, President Oscar Arias's
    ambitious goal for his 2006-2010 term is to prepare Costa
    Rica to be the first fully-developed country in Latin
    America by 2021.  To accomplish this, his administration
    must implement the U.S.-Central America-Dominican Republic
    Free Trade Agreement (CAFTA); improve the business climate;
    enact meaningful fiscal reform; and begin to rebuild
    national infrastructure, improve domestic security and law
    enforcement, and repair the broken education and health
    care systems.  These reforms are essential for Costa Rica's
    democracy to continue to deliver the promise of prosperity
    to its people.  Arias's administration has already made
    some progress in these areas.  His goals are fully
    consistent with the four pillars of USG policy in the
    hemisphere: consolidate democracy, promote prosperity,
    invest in people and protect the democratic state.

    ¶6.  Approaching the half-way point of his administration,
    President Arias continues to receive high marks.  The
    January 2008 CID-Gallup poll gave him a 64 percent approval
    rating, with the highest net positives of any Costa Rican
    administration at the same point in its term over the last
    30 years.  Based on the CID-Gallup data, a healthy economy
    and confidence in Arias's leadership are giving most Costa
    Ricans an optimistic outlook for 2008.

    =================
    ECONOMIC SNAPSHOT
    =================

    ¶7.  The country's GDP grew at over eight percent in 2006, a
    15-year high, and neared seven percent in 2007. Foreign
    Direct Investment increased from $861 million in 2005 to
    $1.4 billion in 2006. Inflation has declined slightly from
    14.4 percent in 2005 to 8.8 percent in 2007. The tourism
    industry remains the largest employer and earner of foreign
    exchange. Integrated circuits (produced at Intel's plant
    outside of San Jose), medical equipment, bananas,
    pineapples and coffee are Costa Rica's leading exports.
    Raw materials, consumer goods, capital equipment and
    petroleum are the major imports. The U.S. is Costa Rica's
    largest trading partner, with two-way trade totaling $7.9
    billion in 2006.  Costa Ricans, like other Central
    Americans, are watching the U.S. economy closely, concerned
    about the regional repercussions from a serious downturn or
    recession.  In fact, GDP growth is expected to slow in
    ¶2008.

    =======================
    CIVIL AVIATION SNAPSHOT
    =======================

    ¶8.  As a burgeoning tourist market, Costa Rica depends
    heavily on civil aviation, an issue of interest to CODEL
    Costello.  Air travel has grown significantly since a
    bilateral Open Skies Agreement was completed in 1997.  From
    1996 to 2006, non-stop passenger service expanded coverage
    from four to thirteen U.S. cities; the number of U.S.
    airlines serving Costa Rica increased from three to nine;
    and passenger traffic more than doubled.  In 2006, 3.4
    million passengers used Juan Santamaria airport (in
    Alajuela, outside of San Jose) while 365,000 passengers
    used Costa Rica's other major international airport, Daniel
    Obuder, in the northern city of Liberia.

    ¶9.  At Juan Santamaria, American Airlines served 572,000
    passengers in 2006, leading all U.S. carriers.  Other major
    carriers serving the San Jose market include Continental,
    Delta, US Airways and Frontier.  Continental led U.S.
    carriers at Daniel Obuder in 2006 with 118,000 passengers
    followed by Delta, American, US Airways and United
    Airlines.  Juan Santamaria is also the nexus of the air
    cargo business, shipping 18,900 tons of goods in 2006 via
    carriers including UPS, DHL, and American Airlines.  Three
    companies -- COOPESA, ADS, and AeroJet -- provide light
    aircraft maintenance of which COOPESA controls 80 percent
    of the market.  Two companies -- COOPESA and Aeroman --
    provide heavy maintenance with COOPESA specializing in
    Boeing repair and Aeroman specializing in Airbus repair.

    ============================================= =
    CAFTA: A CASE STUDY IN DYSFUNCTIONAL DEMOCRACY
    ============================================= =

    ¶10.  Ratification and implementation of CAFTA is a central
    component of Arias's development agenda, (and one of the
    USG's top foreign policy objectives in Costa Rica). It has
    proven to be his administration's toughest political
    challenge for three reasons:

    -- First, the previous government took little action beyond
    signing the agreement in August 2004 and submitting it to
    the legislature in October 2005.

    -- Second, the country has been divided on the issue, as
    reflected in the close results (52 percent yes, 49 percent
    no) of the October 2007 national referendum which ratified
    the agreement (and largely silenced the CAFTA opposition).

    -- Third, the diffuse political structure of the 57-seat
    national legislature (which includes seven parties and two
    independents), plus complex, arcane rules and procedures
    which favor obstructionism (and which often require
    constitutional review of legislation) have delayed the
    process throughout.   Opposition legislators, for example,
    at times buried legislation under thousands of motions, or
    challenged legislative rules of order in the Supreme Court.

    ¶11.  Using its 38-seat (two-thirds majority) pro-CAFTA
    coalition, the Arias administration made more progress on
    CAFTA over the last three months that the previous
    administration did in four years.  However, Costa Rica will
    still be the last CAFTA signatory to join the agreement,
    probably well after the March 1, 2008 entry-in-force
    deadline stipulated in the agreement. (The other parties
    have agreed to Costa Rica's delayed entry.)  As of late
    February 2008, only two of 12 items of CAFTA implementation
    legislation had been signed into law, with the other bills
    in work in the legislature or under review by the
    Constitutional Chamber of the Supreme Court.

    ============================================= =========
    SECURITY:  DOING A LOT WITH A LITTLE, BUT HELP NEEDED
    ============================================= =========

    ¶12. Despite limited security resources, Costa Rica
    continues to be a reliable partner against transnational
    drug trafficking. Under a bilateral maritime agreement
    signed in 1999 (the first in the region) U.S.-Costa Rican
    joint narcotics operations have seized more than 55 tons of
    illicit narcotics since the Arias administration took
    office, including over 30 tons of cocaine and 4.5 tons of
    marijuana in 2007 alone.   Unfortunately, these record
    seizures also reflect the tremendous narcotics flow through
    the region.  Illegal migrants, especially from China, are
    also smuggled via land or sea through Costa Rican
    territory.

    ¶13. U.S. security assistance is vital to strengthen Costa
    Rica's ability to fight domestic and regional threats,
    especially as the nexus between drug trafficking and crime
    becomes clearer.  Marking a significant departure from his
    past attitude, President Arias himself asked the Embassy
    for help, but funding has been problematic.  Primarily due
    to heavy budgetary demands elsewhere, the State Department
    counter-narcotics program in Costa Rica received only
    $31,000 in funding between FY 2007-2009.  This makes the
    security and counter-narcotics assistance in the pending
    Merida Initiative all the more important.  With the right
    assistance and training, Costa Rica can serve as a regional
    model for combating drug trafficking, money laundering and
    violent domestic crime.

    =================
    CONSULAR SNAPSHOT
    =================

    ¶14.  The continuing increase in domestic crime has
    tarnished Costa Rica's image as a tourist paradise.  Rising
    crime has also increased the workload of the Consular
    Section in U.S. Embassy San Jose, which replaces more
    stolen passports annually than any other in the world.
    Two-thirds of tourists visiting Costa Rica annually are
    American citizens.  (More than 700,000 Americans vacationed
    in Costa Rica in 2006, and between 30,000 and 50,000
    resided there.)  The number of Americans traveling to or
    residing in Costa Rica rose in 2007-2008 and is expected to
    increase again in 2009.  The Consular Section is also on
    track to process 600,000 non-immigrant visa applications in
    ¶2008.

    ======================
    ENVIRONMENTAL SNAPSHOT
    ======================

    ¶15. Costa Rica has a well-founded reputation for
    environmental protection, with nearly 25 percent of the
    country preserved in national parks, a commitment to
    sustain the country's extraordinary biological diversity,
    model environmental legislation, a well-developed eco-
    tourism industry and an activist international agenda.
    However, the country's success with "green" issues has not
    been matched on "brown" issues, especially urban water
    supplies, sanitation and solid waste disposal.  An
    antiquated infrastructure system and a lack of resources
    dedicated to law enforcement, control and monitoring, for
    example, means that less than three percent of the
    country's sewage is treated.  Other major environmental
    challenges include an increased dependence on fossil fuels
    for energy generation, overdevelopment in marine and
    coastal zones, unorganized urban development, and air
    contamination.

    ============================================= ======
    FOREIGN POLICY: THE UN, NEW FRIENDS AND OLD RIVALS
    ============================================= ======

    ¶16.  Costa Rica was elected as a non-permanent member of
    the UN Security Council (UNSC) for the 2008-2009 term.  The
    Arias administration sees this as a prerequisite to
    furthering its primary international goals, which include
    conventional disarmament, environmental protection, foreign
    aid reform (with more assistance directed to middle income
    countries like Costa Rica), and improved UN operations.
    Costa Rica was the first government in Central America to
    recognize China (in June 2007), and the "state" of
    Palestine (in February 2008).

    ¶17.  Arias has been one of the very few Latin American
    leaders to speak out for self determination in Cuba and to
    openly worry about loss of democratic institutions in
    Venezuela.  This has drawn fire from both countries and
    from Nicaragua.  Costa Rican-Nicaraguan relations have been
    prickly at times, in particular since Daniel Ortega
    returned to power in 2007. The Arias Administration is
    handling relations carefully, given that 300,000-500,000
    Nicaraguans are estimated to be in Costa Rica.  This work
    force harvests coffee and performs other manual labor
    largely shunned by Costa Ricans.

    =======================
    USG ASSISTANCE SNAPSHOT
    =======================

    ¶18.  As a "sustaining partner" according to the State
    Department's foreign assistance scale, Costa Rica should be
    able to fuel much of its own development.  Targeted USG
    assistance is intended to help, however.  As a CAFTA
    signatory, Costa Rica is eligible for a share of $60
    million in regional trade, environmental and labor capacity
    building funding from FY 2005-2009. Under the Tropical
    Forest Conservation Act (TFCA) agreement concluded in
    October 2007, Costa Rica will be eligible for targeted debt
    forgiveness that, by 2024, will generate $26 million to
    protect fragile forest areas.  The Merida Initiative, if
    approved, would give Costa Rica a share of $150 million in
    regional security assistance from FY 2008-2010.  USG
    assistance from all sources totaled approximately $6.3
    million in FY 2006.

    BRENNAN

`