A/S SHANNON VISITS TOP COSTA RICAN OFFICIALS

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06SANJOSE1650 28 July 2006 Confidencial Embassy San José

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VZCZCXYZ0005
PP RUEHWEB

DE RUEHSJ #1650/01 2091927
ZNY CCCCC ZZH
P 281927Z JUL 06
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 5678
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

C O N F I D E N T I A L SAN JOSE 001650

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/27/2016
TAGS: PGOV, PREL, PINR, CS
SUBJECT: A/S SHANNON VISITS TOP COSTA RICAN OFFICIALS

Classified By: Amb. Mark Langdale for reasons 1.4 (b&d).

1. (C) Summary: A/S Tom Shannon visited Costa Rica June
27-29, calling on key officials of the new Arias
Administration as well as the International Relations
Committee of the Legislative Assembly. A/S Shannon discussed
security issues and prospects for ratification of the Central
American Free Trade Agreement (CAFTA). The visit received
broad publicity. End Summary.

2. (C) Shortly after his arrival, A/S Shannon met with Vice
President Kevin Casas, Minister of Presidency Rodrigo Arias
(brother and closest advisor to President Oscar Arias) and
Minister of Public Security Fernando Berrocal to discuss
security issues. All three officials were very interested in
A/S Shannon’s views on the November elections in Nicaragua.
Arias stated that an Ortega victory would be a political and
security disaster for Costa Rica, adding that many private
Costa Ricans, especially in the business sector, were
contributing to the Montealegre campaign. The GOCR, however,
was intentionally being very circumspect to avoid any action
that could be interpreted as meddling in Nicaragua’s internal
affairs. Casas stated that Costa Rica is in a downward
spiral in terms of security adding that it is not in U.S.
interests to wait for it to hit rock bottom. Arias countered
that perceptions of insecurity were worse than the reality
but added that Costa Rica desperately needs to increase its
police presence. Arias said that he does not expect
large-scale anti-CAFTA demonstrations nor major disruptions
unless the GOCR is seen as unable to implement its agenda
between now and December when he expects the treaty to come
to a vote in the Legislature. Berrocal agreed, stating that
the number of CAFTA opponents willing to engage in violent
protests is small—perhaps 500-600 students plus seven or
eight thousand union members. Without additional resources
for security, however, even this small number could easily
overwhelm security forces, he added.

CAFTA in the Assembly


3. (C) On June 28, over breakfast with the President of the
Legislative Assembly and members of the International
Relations Committee which is holding hearings on CAFTA, A/S
Shannon was treated to a first-hand look at the challenges to
ratification. Each Deputy had an entirely different view and
collectively they spoke for over an hour—leaving only a few
minutes at the end of the meeting for A/S Shannon to respond.
Unsurprisingly, the most strident positions and memorable
lines came from members of the opposition PAC party (i.e.
"history has shown that when the U.S. and Costa Rica
disagree, Costa Rica is right").

4. (C) A trend among the various speeches was the view that
the U.S. is demanding a very high price in the opening of
state monopolies but is not offering enough in return as
reflected in repeated requests for more bilateral assistance.
Examples, which came even from CAFTA supporters, included
several requests for more help for small and medium-sized
businesses and government-to-government technology transfers.
PAC Deputies presented A/S Shannon with two letters, the
text of which they had already released to the media. One
letter criticized the "certification" process for determining
that implementing legislation is compliant with the terms of
CAFTA. This amounts to proof, according to the PAC, that
CAFTA can be re-negotiated. The second letter demanded the
White House either remove all mention of Costa Rica’s
temporary support for the Iraq Coalition or post a new list
on its webpage without Costa Rica.

5. (U) The breakfast was followed by a joint press conference
in which Assembly President Fransisco Pacheco told reporters
that the meeting had been a cordial exchange of ideas aimed
at addressing various concerns among the Deputies. For his
part, A/S Shannon stressed that U.S.-Costa Rican relations
are diverse and mature, allowing for frank discussions since
both countries are committed to democracy and prosperity.
The A/S also reminded the public that CAFTA is a means to an
ends, a motor for development, and not an end in itself.

Tour d’ Horizon with President Arias


6. (C) A/S Shannon met with President Arias over lunch.
Arias was accompanied by his brother Rodrigo, Minister
Without Portfolio Marco Vargas, Foreign Minister Bruno
Stagno, Acting Trade Minister Amparo Pacheco and Costa Rican
Ambassador to Washington Thomas Duenas. Arias touched
briefly on Nicaragua and CAFTA, expressing his belief that
Ortega is unlikely to win but worrying at some length about
the impact of a wave of Nicaraguan refugees on Costa Rica’s
overstretched educational and health care systems. On CAFTA,
Arias assured A/S Shannon that he had the votes for
ratification but complained that Costa Rica’s is the only
Assembly in the world which cannot set a specific date to
vote on an issue. Arias then shifted to the topic of
Venezuela and Hugo Chavez. Arias called Chavez a "clown" and
quizzed A/S Shannon on Venezuela’s petrochemical interests in
the U.S. with particular interest in Venezuelan refineries
and petrochemical plants. Stagno pointed out that Venezuela
disrupts or destroys every regional group it joins. He cited
Mercosur, the Rio Group, and the Andean Group as examples and
added that Venezuela’s heavy-handedness in its bid for a seat
in the UN Security Council has made a GRULAC consensus
impossible. Stagno assessed that Venezuela has overshadowed
Brazil’s influence in these groups to the point that Lula
would be happy if he could contain Evo Morales much less Hugo
Chavez.

7. (C) Both Stagno and Arias complained that Costa Rica is
being punished for its success. Development aid policy,
according to their perspective, has become
perverse—rewarding corruption and poverty by flowing aid
toward countries that are basket cases. According to Stagno,
Costa Rica and other middle income countries have a higher
absolute number (albeit a lower percentage) of people living
in poverty but don’t qualify for assistance because of
relatively good governance. Nevertheless, through free trade
agreements such as CAFTA, middle income countries are
required to compete with the developed world. Arias added
that Costa Rica serves as an escape valve for Nicaragua.
Rich Nicaraguans go to the U.S., according to Arias, whereas
Costa Rica absorbs the poorest ones. Arias fears proposed
reforms to U.S. immigration law will make the situation worse
for Costa Rica since more immigrants will settle here if they
cannot reach the U.S.

8. (C) In response to a query by A/S Shannon, Arias stated
that China does not offer a viable political model for Latin
America. Arias believes that democracy is too deeply rooted
in the region to be threatened by engagement with China.
Economically, however, Arias called China a very different
story. In response to praise regarding his personal role in
how far Central America has come since the 1980’s, Arias
called the progress relative. Compared with the progress
made by Asia, and in particular China, since the 1980’s,
Arias said Central America should be considered a disaster.

Perspectives of the Economic Cabinet


9. (C) The Ambassador hosted a dinner for A/S Shannon with
leading members of Arias’s economic team. Participants
included Minister of Production Alfredo Volio, Minister of
Environment and Energy Roberto Dobles, Minister of Housing
Fernando Zumbado, fomer Central Bank President Eduardo Lizano
and Acting Trade Minister Amparo Pacheco. A wide-ranging
discussion ensued but central themes were the numerous
legislative devices available for delaying CAFTA ratification
and the even greater difficulty in drafting and enacting the
necessary implementing legislation. Minister Robles is
playing a critical role in this process since he previously
headed the telecom monopoly (ICE). Note: legislation opening
the telecom and insurance monopolies to competition is
expected during extraordinary legislative sessions in August
when the Executive branch controls the legislative agenda.
Public sector unions recently announced that the presentation
of this legislation will be the trigger for long-threatened
massive demonstrations against CAFTA. End Note. Lizano
asked A/S Shannon to consider U.S. observership in the
Central American Bank for Economic Integration. Mere
observer status would help the bank obtain a better credit
rating and lower its costs according to Lizano. In addition
to the Centrals, the bank also counts Argentina, Colombia,
Mexico, Spain and China as members. A/S Shannon offered to
look into the matter upon his return to Washington.

Broad Press Coverage


10. (U) A/S Shannon’s visit received broad and positive press
coverage. At every stop on his June 28 itinerary A/S
Shannon’s comments on Costa Rica’s leadership role in the
region, CAFTA as a means rather than an end, and that
re-negotiation of CAFTA on a bilateral basis is impossible at
this point received prominent coverage. A/S Shannon held an
outreach event with students of English at the Bi-National
Cultural Center which was originally funded by the U/S.
After a tour of the facility and brief remarks, A/S Shannon
fielded numerous questions from student and reporters.

11. (U) A/S Shannon did not clear this cable.
LANGDALE