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### Viewing cable 09SANJOSE498, LULA'S VISIT TO COSTA RICA - PROMOTING TRADE AND

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09SANJOSE498 | 2009-06-17 16:33 | 2011-04-18 20:00 | CONFIDENTIAL | Embassy San Jose

`

    VZCZCXYZ0000
    PP RUEHWEB

    DE RUEHSJ #0498/01 1681633
    ZNY CCCC ZZH
    P 171633Z JUN 09
    FM AMEMBASSY SAN JOSE
    TO RUEHC/SECSTATE WASHDC PRIORITY 0934
    INFO RUHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
    RUEBR/AMEMBASSY BRASILIA PRIORITY 0835

` `

    C O N F I D E N T I A L SAN JOSE 000498

    SIPDIS

    DEPT FOR WHA/CEN; WHA/EPSC:FCORNEILLE; WHA/BSC;
    EEB/ESC/IEC/EPC:MMCMANUS

    E.O. 12958: DECL: 06/12/2019
    TAGS: KDEM PGOV ECON EFIN ETRD ENRG PREL BR CS
    SUBJECT: LULA'S VISIT TO COSTA RICA - PROMOTING TRADE AND

    RENEWABLE ENERGY

    REF: SAN JOSE 419 NOTAL

    Classified By: Classified by DCM Peter Brennan per 1.4 (d).

    ¶1. (SBU) SUMMARY: Brazilian President Luiz Inacio Lula da
    Silva visited Costa Rica June 2-3 to advance cooperation
    between the Mercado Comun del Cono Sur (MERCOSUR) and the
    Sistema de Integracion Centroamericana (SICA), of which Costa
    Rica will assume the Presidency in July, and to strengthen
    bilateral economic ties between the two countries.  Da Silva,
    making the brief visit en route home after attending the
    swearing in of El Salvadorian President Mauricio Funes, also
    sought to promote the idea of Brazilian companies using Costa
    Rica's tariff-free access to U.S. markets (granted through
    CAFTA) to export sugar cane ethanol to Costa Rica, refine it
    there, and sell it to the U.S.  President Oscar Arias was
    visibly delighted to host his Brazilian counterpart and hopes
    that his administration can further trade and renewable
    energy initiatives with the GOB before leaving office next
    year.  END SUMMARY.

    --------------------------------
    AN EMERGING REGIONAL TRADE PACT?
    --------------------------------

    ¶2. (C) Da Silva's visit, which reciprocated Arias, visit to
    Brasilia in June 2008, focused in part on plans for greater
    economic cooperation between MERCOSUR and SICA, with both
    leaders expressing interest in a trade agreement between the
    two regions.  According to Linyi Baidal, Deputy Director of
    Foreign policy in Costa Rica's MFA, Costa Rica will use its
    presidency of SICA to "feel out" Central American interest in
    a free-trade agreement with MERCOSUR.  Costa Rica hopes a
    trade agreement would help to correct the massive trade
    imbalance between the two regions. As Arias noted during da
    Silva's visit, Central American import taxes are so much
    lower than those of Brazil, that "for every dollar that
    Central America exports to Brazil, (Central America) imports
    twenty-four dollars."  Both da Silva, and Uruguayan President
    Tabare Vazquez, who visited Costa Rica in April and takes
    over the presidency of MERCOSUR this year, used their visits
    to reiterate interest in opening up trade negotiations
    between the two regions.
    ------------------------------------
    RENEWABLE ENERGY AND WATER TREATMENT
    ------------------------------------

    ¶3. (SBU) Da Silva and Arias also discussed the production of
    ethanol and the potential participation of Brazilian
    businesses in infrastructure projects in Costa Rica.  Da
    Silva promised Arias technical support and technology
    transfer in the area of biofuels, specifically relating to
    sugar cane ethanol.  Da Silva also presented the possibility
    of Brazilian companies opening up ethanol plants in Costa
    Rica, in order to make use of Costa Rica's CAFTA-granted
    access to U.S. markets.  CAFTA affords Costa Rica unlimited
    tariff-free access to the U.S. for originally-grown and
    produced ethanol, and an annual quota of 31 million gallons
    for third-country grown, Costa Rican-produced ethanol. Brazil
    would like to take advantage of that latter quota, since it
    currently pays 54 cents per gallon in taxes on biofuels
    exported to the U.S.

    ¶4. (SBU) Da Silva's final piece of business was to sign an
    agreement under which Brazil will provide technology and
    skills training in waste water treatment to Costa Rica's
    national water utility (AyA).  The project will focus on
    smaller treatment plants, as several large plants in the San
    Jose metropolitan area are well advanced in planning and
    financing.  A Brazilian company and AyA will jointly manage
    the project, which is related to discussions currently under
    way between Banco de Brazil, the Central American Bank for
    Economic Integration and the AyA to finance three large water
    treatment plants in Costa Rica.

    -------------------
    A CELEBRITY WELCOME
    -------------------

    ¶5. (U) The often taciturn Arias could barely contain his
    pleasure at welcoming Lula, whom he described as "one of the
    most loved and admired presidents in Latin America" and as a
    "political farmer," "troubadour for equality," "symbol of
    social justice" and "poet for democracy".  He offered Costa
    Rica as a "bridge" for Brazilian products (via CAFTA) to the
    United States.

    -------

    COMMENT
    -------

    ¶6. (C) If the lavish praise and promising prose bears fruit,
    both countries stand to gain from closer relations, but Costa
    Rica (and the Arias administration) may be the bigger
    winners.  Renewable energy sources are high on the GOCR,s
    agenda and appeal to Costa Rica,s green image.  A tangible
    benefit from CAFTA, such as local ethanol production, would
    also be welcome, although this will take time.  Waste water
    treatment is a major challenge here, so Brazilian assistance
    may help the GOCR make long-needed progress, especially in
    the crowded Central Valley around San Jose.

    ¶7.  (C) Legacy may be at the very top of Arias, agenda with
    Lula, however, as the clock begins to wind down on his
    administration, which ends in May 2010.  The SICA presidency,
    along with the last six months of Costa Rica's term on the
    U.N. Security Council (which ends December 31, 2009), provide
    Arias with more opportunities to build on his international
    reputation while in office.  Starting talks on a free trade
    agreement between SICA and MERCOSUR, as well as launching any
    CAFTA-related ethanol initiative, would allow Arias to take
    credit for any future success.  Not mentioned publicly, but
    perhaps discussed in their private meeting, is Arias, "Good
    Friend" initiative, which would include Lula in a select
    group of regional leaders, along with Arias, who would help
    craft a new USG policy towards Latin America with the
    Secretary and POTUS (Reftel).  In short, the Arias
    administration made the most of da Silva's short visit,
    hoping to further trade, energy and international relations
    initiatives before leaving office next year.
    CIANCHETTE

`