Cablegate: Costa Rica Staggers Into Second Cafta Extension

VZCZCXYZ0001
OO RUEHWEB

DE RUEHSJ #0823/01 2892243
ZNY CCCCC ZZH
O 152243Z OCT 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0187
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE IMMEDIATE
RUEHDG/AMEMBASSY SANTO DOMINGO IMMEDIATE 1602
RHEHNSC/NSC WASHDC IMMEDIATE

C O N F I D E N T I A L SAN JOSE 000823

SIPDIS

DEPT FOR WHA, WHA/CEN, WHA/EPSC AND EEB; PLEASE PASS TO
USTR AMALITO AND DOLIVER

E.O. 12958: DECL: 10/15/2018
TAGS: CS ECON ETRD PGOV PINR PREL
SUBJECT: COSTA RICA STAGGERS INTO SECOND CAFTA EXTENSION

REF: A. A) SAN JOSE 745
B. B) SAN JOSE 774

Classified By: POL/ECON Counselor David E. Henifin per 1.4 (d)

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

1. (SBU) Implementing CAFTA continues to challenge the GOCR.
The Constitutional Court's September 11 ruling that a portion
of the 13th CAFTA bill was unconstitutional (Reftels), plus
lingering technical issues in intellectual property (IP),
triggered a second entry-into-force (EIF) extension request
to Costa Rica,s CAFTA partners. The partners granted the
extension on September 30, specifying a new EIF date of
January 1. Also on September 30, President Arias asked
visiting Commerce Secretary Carlos Gutierrez to deliver a
proposal to USTR requesting EIF for the GOCR as soon as the
13th bill has been modified per the Court,s ruling and
signed into law, regardless of the status of other
outstanding issues. (This echoed Arias's request in a letter
to POTUS on September 19.)

2. (SBU) Even with this latest extension, the GOCR has its
work cut out for it. The 13th law likely faces another,
opposition-driven review by the Constitutional Court. The
four outstanding IP issues may require a new, 14th CAFTA
bill. Also, the Arias administration must finalize
CAFTA-related regulations, and launch a special intellectual
property rights (IPR) enforcement office. Even under the
best case scenario (in which a 14th law is not required), the
GOCR may not complete all its remaining CAFTA tasks before
January 1. END SUMMARY.

=========================
INTO A SECOND OVERTIME . . .
=========================

3. (SBU) Further to Ref B, during the third week of
September, Foreign Trade (COMEX) Minister Marco Vinicio Ruiz
formally requested an EIF extension from USTR. USTR and
partner CAFTA countries agreed to an extension until January
1, 2009, with Washington-based COMs signing the prerequisite
letter on September 30. (Nicaragua required special
attention and did not sign until 19:45 Washington time).
According to USTR, the GOCR expressed "a great political
need" for a formalized extension process, no doubt a) to keep
the pressure on the weary Arias administration and its
fraying pro-CAFTA coalition in the legislature and b) to
avoid buttressing the long-held view of the anti-CAFTA
opposition that an EIF extension was never technically
required (thus leaving time to renegotiate to "soften" some
of the alleged impacts of CAFTA).

===========================
. . . WHILE FIGHTING ON THREE FRONTS
===========================

4. (U) The GOCR clearly needs the extra time, first to
respond to the controversial Constitutional Court decision.
The Court found one section of the 13th bill (the IPR
catch-all bill) to be unconstitutional because the GOCR did
not consult with Costa Rica,s indigenous communities, in
compliance with ILO Convention 169, regarding CAFTA-generated
changes in the existing biodiversity law that could affect
those communities.

5. (SBU) The national legislature is to begin debate the week
of October 13 on a modified bill, which stripped out the
section the Court found objectionable. This should de-couple
the indigenous consultation issue from CAFTA EIF. However,
the PAC-led opposition, emboldened by the latest delay and
seeing one last opportunity to block CAFTA, has already
called for a Court review of the "fixed" law. The GOCR hopes
the bill will be approved in first reading and passed to the
Court for action by the week of October 20.

6. (SBU) VM Roberto Thompson, who is managing the process
for the Presidencia, was cautiously optimistic when we met
with him on October 14. The Constitutional Court has given
informal signals that it will complete its review well before
the 30 days allotted, and will not raise new concerns about
the modified law.

7. (SBU) Thompson acknowledged, however, that some potential
roadblocks remain. The national Human Rights Ombudswoman, a
well-known CAFTA opponent, has the right to ask for
Constitutional Court review of any law and is apparently
mulling this over for the 13th CAFTA bill. Also, the
behavior of the Court, despite the GOCR,s optimism, cannot
be guaranteed in advance. With erstwhile pro-CAFTA allies in
the Libertarian Party join the PAC in stubbornly decrying the
incorrect procedures used by the GOCR to correct the 13th
law, their vote is not 100 percent assured, either. Even
with those risks, Thompson predicted the bill should be
reviewed by the Court, approved by the legislature in second
reading, and signed into law in November, at the latest.

=================
ATTACK ON THE PAC
=================

8. (SBU) In anticipation of the second Court review, the
worried private sector resumed its media campaign against the
PAC for once again delaying CAFTA implementation and ignoring
the will of the people as expressed by the 2007 referendum
ratifying CAFTA. AmCham contacts told us they wanted PAC to
"pay the full political cost" for the continued delays, and
they hoped the ads would moderate that party,s
obstructionism, as a similar campaign did earlier this year.
Six different ads ran on TV and radio the week of October 6,
accompanied by full page newspaper ads. 3500 textile workers
also petitioned the GOCR to implement CAFTA quickly to
protect their jobs.

9. (U) The ads seem to have found their mark. In a press
conference on October 14, PAC leader Otton Solis furiously
insisted that the GOCR, and not his party, should be blamed
for any CAFTA delays, and alleged (outrageously) that "dirty
narcotrafficking money" had funded the ads against his party.
In addition, the pro-CAFTA coalition is hoping the campaign
may also remind the court of the political fallout that would
ensue if CAFTA EIF were blocked.

=========================
SECOND FRONT: TECHNICAL ISSUES, . . .
=========================

10. (SBU) In addition, the GOCR must address four remaining
IP issues, which although seemingly small, are legally
material and thus essential to CAFTA compliance. The IP
enforcement bill (signed into law in August) is missing one
word ("performance") which effects the definition of
criminality. In the trouble-plagued IPR catch-all bill,
there are three instances where a word was added which
materially changed the meaning and harmed copyright and data
protection IP concepts. USTR believes a new 14th "technical
corrections" bill is the only way to make these necessary
changes.

11. (SBU) Under other circumstances in other FTA
negotiations, such a seemingly simple piece of legislation
would be an easy fix, but the political and institutional
situation is different in Costa Rica at this time. GOCR
officials, including Legislature President Francisco Pacheco,
VM Amparo Pacheco (COMEX) and VM Thompson (Presidencia), as
well as key private sector contacts, are confident they can
squeeze "one more vote" out of the cumbersome, 38-seat
pro-CAFTA coalition, but that,s it. This last vote would be
to approve the "fixed" 13th bill, assuming the Constitutional
Court finds no new problems. (Any item of legislation must
be approved by two plenary votes in Costa Rica to become
law.)

=========================
. . . AND ONE LAW TOO MANY?
=========================

12. (SBU) Our contacts are highly pessimistic about the
prospects of new CAFTA-related legislation, however. A
technical corrections bill would not be introduced until
December, they tell us, once the annual budget is approved
(since this takes precedence over all other legislative
action in November) and once the executive branch can again
set the legislative agenda (it can do so in the
December-April extraordinary session). Given the deep-seated
CAFTA fatigue in the legislature, swift action on this last
bill is not assured. As Thompson explained, 38 votes would
again be needed to limit debate on such a bill, otherwise
discussion could be endless.

13. (SBU) Our interlocutors also worry that any new
CAFTA-related bill risks giving more ammunition to the
anti-CAFTA opposition. PAC party leader (and presidential
candidate) Solis, in a letter passed to the Embassy during
Secretary Gutierrez's visit, has already called for the IPR
catch-all bill to be removed from the CAFTA implementation
package entirely (which is a non-starter), alleging that the
USG used delays in the implementation process to "place new
demands "on Costa Rica. Solis also insisted (again) that
CAFTA be re-negotiated with Costa Rica.

14. (SBU) Introducing a new, 14th bill does risk making the
USG the issue, since it would fuel Solis,s and other CAFTA
opponents' arguments that the USG added one more CAFTA
requirement "at the last minute." With the early political
maneuvering in full swing for the 2009-2010 election
campaign, and with the Arias administration down in the polls
and feeling against the ropes, GOCR officials and pro-CAFTA
legislators fear that even technical corrections legislation
would be a bill too far. Best case: completing work on such
a bill probably would delay EIF into the new year.

========================
THE "SIDE LETTER" GAMBIT
========================

15. (SBU) Given the GOCR,s strong aversion to introducing
and processing another CAFTA bill, Arias used Commerce
Secretary Gutierrez,s visit to propose an alternate course
of action, which, if accepted, would permit Costa Rica,s
CAFTA EIF on January 1 (or as soon as the 13th bill becomes
law), regardless of progress on the other issues. The GOCR
would pledge to complete any remaining issues as soon as
possible after January 1, in a side letter signed by
President Arias himself, if that were necessary. In the
GOCR,s (accurate) calculus, EIF would make Solis,s and the
opposition,s arguments moot.

========================
THIRD FRONT: IPR ENFORCEMENT
========================

16. (SBU) The GOCR's third front is fulfilling the handshake
agreement with USTR to create a special enforcement office
(SEO) to enforce IP law and prosecute IP crimes. As
explained to Ambassador Cianchette and DCM Brennan in early
August by COMEX Minister Ruiz, the GOCR,s Fiscal General,
Francisco Dall'Anese, must request the authorization of the
funds for the SEO from the Corte Plena, the full 22-member
Supreme Court.

17. (SBU) Since then, the Arias administration and President
of the Supreme Court Luis Paulino Mora have acknowledged to
us the importance of launching the SEO, and Dall'Anese and
then-Minister of Justice Laura Chinchilla exchanged letters
on the topic. Progress has been slow, however. The Fiscal
General's most recent letter named a prosecutor, a location
of the office, and responsibilities by citing articles from
IP law, but the SEO does not yet have a budget, office or
staff.

18. (SBU) We are continuing our pressure, enlisting a number
of private sector allies and lower-level GOCR officials who
well understand the need for, and importance of, effective
IPR enforcement, not only for CAFTA, but also for TRIPS and
Special 301 compliance. Thompson told us October 14 that he
would push again for a proper budget and staff for the new
SEO.

=======================
REGULATIONS MOVING, AT LEAST
=======================

19. (SBU) The Costa Rican Embassy in Washington has provided
one piece of good news, at least. The GOCR will soon
finalize the remaining CAFTA-related regulations on
telecommunications, and the new regulatory body, SUTEL,
should staff its board by October 31.

=======
COMMENT
=======

20. (SBU) We provide this context as an explanation, not an
excuse. Renewed GOCR leadership and private sector pressure
should keep CAFTA from derailing in Costa Rica at the last
minute. Although more grouchy than inspirational, President
Arias has been slightly more vocal recently in pressing PAC
and the anti-CAFTA opposition to respect the will of the
people and get CAFTA done.

21. (SBU) The latest extension is not all bad. Although due
mostly to the Court,s rejection of the 13th bill, it has
given both sides more time to work out the final thorny
technical issues, and it has avoided the politically
problematic scenario of the GOCR seeming to have completed
all its EIF work by the earlier October 1 deadline, only to
have the USG appear to "deny" CAFTA compliance certification
because of a few outstanding issues.

22. (C) Leadership, pressure and time may not be enough to
ensure Costa Rica,s CAFTA EIF, however. Although the USG
has shown considerable flexibility through this long and
torturous saga, a little more may be required, in particular
given CAFTA's importance to USG policy in the region in
general, and on trade, in particular. If Arias's proposal is
not accepted, for example, and a 14th CAFTA bill is required,
then we do not expect to see Costa Rican EIF until early
2009, and perhaps later. This might give PAC leader Solis
and other CAFTA opponents the last chance they seek to push
Costa Rica's EIF into the next U.S. administration, during
which they still believe they may be able to "get a better
deal" on CAFTA for Costa Rica. Such a notion may be totally
misguided, but combined with a tired, deflated Arias
administration and the many "veto points" built into the
hyper-legalistic Costa Rican political system, Solis and the
anti-CAFTA forces still have weapons to deploy.

CIANCHETTE

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