VZCZCXYZ0022
OO RUEHWEB
DE RUEHSJ #0969/01 3281618
ZNY CCCCC ZZH
O R 241618Z NOV 09
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0057
INFO WHA CENTRAL AMERICAN COLLECTIVE
C O N F I D E N T I A L SAN JOSE 000969
SIPDIS
DEPARTMENT FOR WHA/CEN
WHA/EPSC:SGARRO
EEB/TPP/BTA:RMANOGUE AND DGROUT
EEB/TPP/IPE:JURBAN
PLEASE PASS TO USTR:EEISSENSTAT, AMALITO AND DOLIVER
PLEASE PASS TO TREASURY:SSENICH
E.O. 12958: DECL: 2012/11/25
TAGS: ETRD ECON KIPR PREL PGOV CS
SUBJECT: Costa Rica will request an extension of CAFTA-DR deadline
CLASSIFIED BY: Schechter Torres, Julie, Counselor for Political and
Economic Affairs, State, POL-ECON; REASON: 1.4(B), (D)
1. (C) INTRODUCTION AND SUMMARY. Costa Rica's Foreign Trade
Ministry (COMEX) has informed Embassy that the GOCR most likely
will not meet the December 31 deadline for the passage of the 14th
CAFTA-DR bill and finalization of intellectual property rights
(IPR) regulations. On November 16, COMEX Director Esteban Aguero
stated that COMEX Minister Marco Vinicio Ruiz and Foreign Minster
Bruno Stagno planned to contact their USG counterparts to request
an "extension" from the USG. USTR-COMEX negotiations on IPR
regulations (the parties differ on text), the legislative calendar,
the lack of legislator support, and the 2010 Costa Rican
presidential and legislative elections, all make it likely that the
bill will not pass until April or even later in the year. Embassy
recommends that the USG formulate its strategy now on the
consequences, if any, Costa Rica should face for missing its third
CAFTA-DR deadline. We recommend that the USG should not agree to
an "extension" request by the GOCR. Furthermore, the USG should
continue with the legal mechanism put into effect last year which
will halt market access for a product category of USTR's choice
until the GOCR meets all CAFTA-DR obligations. End Introduction and
Summary.
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WHY SKATE BY ANOTHER DEADLINE AGAIN?
------------------------------------
2. (U) Costa Rica once again finds itself at odds with an
important CAFTA-DR deadline. This now makes for the third
deadline drama created by the GOCR. By agreement with
USTR, the GOCR achieved CAFTA-DR entry-into-force on
January 1, 2009. However, the GOCR did not fully meet all
of USTR's requirements -- specifically in intellectual
property rights (reftel). USTR granted the GOCR a one year
"grace period" as Costa Rica entered the agreement. A side
letter required the GOCR to meet the three lingering IPR
requirements by December 31, 2009. The consequence of
missing the deadline was the possibility of a preferential
access holdback (likely to be sugar). Despite this
extension, the GOCR made little progress during 2008 on
what became known as the 14th bill.
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SO WHAT REALLY ARE THE PROSPECTS?
---------------------------------
3. (SBU) There are four factors that shape the prospects of
the GOCR meeting USTR's legislative and regulatory
requirements:
-- Legislative Calendar: The Arias Administration controls
the legislative calendar from December 2009 until April
2010. However, the Legislative Assembly will close for
business most likely on December 17 and not reopen until
after the February 7 elections. Thereafter, the next time
the executive branch controls the legislative calendar will
be August. To become law, the bill must receive two
Legislative Assembly votes, possibly a constitutional
review (if requested by ten legislators), presidential
signature, and publication.
-- Legislative Support: The Arias administration,
according to COMEX's Aguero, lacks the 38 votes (of a total
of 57) that it needs in the Legislative Assembly to approve
the 14th bill. Also, what Aguero did not mention is that
COMEX has virtually no gravitas with legislators and thus
very little influence after the bruising implementation
process of passing the previous thirteen laws from 2007 to
2008.
-- Regulatory Text: COMEX (and other parts of the GOCR)
and USTR need to agree on language for agro-chemical
regulations. Originally, this issue was one of the three
technical corrections in the 14th bill. COMEX and USTR
agreed that addressing the agro-chemical issue through
regulations would work. The two parties discussed agrochemical
language from April to July. However, it became
apparent that COMEX had not gained full support of the
Ministries of Health and Industry-Economy-Trade on
fundamental aspects of the agro-chemical issue. Due to the
lack of progress, discussions on the issue stalled in July.
In October, the USTR-COMEX dialogue re-started but an
agreement on text has yet to be reached.
-- Elections: During January, all Costa Rican political
hands will focus on the presidential and legislative
elections on February 7. If PLN candidate Laura Chinchilla
wins, then the possibility of legislative action in the
February-April "lame-duck" period exists, but is unlikely.
After April, the 14th bill becomes the business of the new
president. (Note: Director Aguero mentioned that PLN
presidential candidate Chinchilla and advisor Fernando
Sanchez are "aware" of the issues associated with the 14th
bill and are "worried." End note.)
4. (SBU) When asked about legislator awareness of an endof-
year deadline for the 14th bill, Director Aguero
answered that COMEX has explained the importance of the
bill's schedule to the legislators. The legislators have
chosen to ignore or discount the explanation. In contrast,
a key legislative staffer told us that COMEX has not even
been trying to draw this issue to legislators' attention,
focusing instead on upcoming trade agreements with Europe
and Singapore. The bill currently ranks 120th on the
Legislative Assembly's bill roster.
5. (SBU) With this assessment, the odds of passing the
14th bill in 2009 rate less than 5 percent. Only one month
ago COMEX officials, including Minister Ruiz and Director
Aguero, espoused a much sunnier prognostication to Charge
Peter Brennan and Econoff by assuming that the GOCR would
overcome the first three factors listed above, plus clear
the GOCR's legislative process by the December 31 deadline.
6. (U) Looking ahead, the nature of the bill's legislative
support will change when the new legislators arrive in
office on May 1, 2010. Legislators cannot serve
consecutively, which means a new set of legislators could
very well review the 14th law in mid-2010. However,
whether this is positive or negative largely depends on the
party affiliation and the size of the mandate of the new
president.
-----------------------
ARE THERE CONSEQUENCES?
-----------------------
7. (SBU) With the news of the GOCR's interest in an
"extension," the USG must now weigh how to handle such a
request. According to Costa Rica's CAFTA-DR obligations,
if the GOCR does not meet the December 31 deadline, then
the holdback on market access can go into effect.
Evidently, the GOCR wants to re-focus the CAFTA-DR
discussion with the USG away from the consequences of not
meeting the deadline by proposing an "extension." A third
"extension" sharply contrasts with the spirit of the signed
documents from the entry-into-force process of December
2008. When sharing the news of the "extension" request,
Aguero never mentioned the side letter or preferential
access holdback. Moreover, an "extension," in whatever
form it could take, will likely bridge two administrations.
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COMMENT
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8. (C) Post recommends that the USG institute the
holdback on market access as a consequence of the GOCR not
meeting the December 31 deadline. After two deadline
extensions and a one year grace period, Post doubts that
another "extension" will spur the GOCR into action. In
2010, GOCR action depends on the elections combined with an
unhelpful legislative calendar. These two factors will
likely complicate -- not ease -- completing the 14th bill
and the lingering IPR regulations.
9. (C) As for a new administration, if the new president
is friendly to the 14th bill, the bill may still not
receive action until August, the first time the new
administration will control the legislative calendar. And
even then, the bill could be buried on the priority list as
the new administration attempts to score some quick
legislative victories on high profile projects (for example
in security, education, or infrastructure). This means
that the bill could miss the August "window" and the USG
could repeat this very same discussion twelve months from
now, looking ahead to still another deadline in December
2010.
BRENNAN