Identifier
Created
Classification
Origin
05SANJOSE2020
2005-08-26 22:27:00
CONFIDENTIAL
Embassy San Jose
Cable title:  

CHINESE ACTIVITIES IN COSTA RICA

Tags:  ECON PREL ETRD ETTC EINV ENRG EAGR EFIN PHUM EMIN CH CS ESENV 
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C O N F I D E N T I A L SECTION 01 OF 04 SAN JOSE 002020 

SIPDIS

EAP/CM FOR KLEE
WHA/PCP FOR JBISCHOFF
WHA/EPSC FOR LGUMBINER

E.O. 12958: DECL: 08/26/2025
TAGS: ECON PREL ETRD ETTC EINV ENRG EAGR EFIN PHUM EMIN CH CS ESENV
SUBJECT: CHINESE ACTIVITIES IN COSTA RICA

REF: A. SECSTATE 138041

B. SAN JOSE 01940

Classified By: Charge Russell Frisbie, reasons 1.4(b) and (d)

C O N F I D E N T I A L SECTION 01 OF 04 SAN JOSE 002020

SIPDIS

EAP/CM FOR KLEE
WHA/PCP FOR JBISCHOFF
WHA/EPSC FOR LGUMBINER

E.O. 12958: DECL: 08/26/2025
TAGS: ECON PREL ETRD ETTC EINV ENRG EAGR EFIN PHUM EMIN CH CS ESENV
SUBJECT: CHINESE ACTIVITIES IN COSTA RICA

REF: A. SECSTATE 138041

B. SAN JOSE 01940

Classified By: Charge Russell Frisbie, reasons 1.4(b) and (d)


1. (C) Summary. Costa Rica officially established
diplomatic relations with Taiwan in 1959 and is one of only
26 countries to officially recognize Taiwan. Costa Rica has
no official diplomatic ties with the People's Republic of
China (China or PRC). (Note: Post will follow WTO naming
conventions with respect to economic indicators, i.e., China
refers to the PRC but not Hong Kong.) Taiwan is actively
involved in funding transportation and other development
projects in Costa Rica. Despite the long history of close
ties with Taiwan, Chinese involvement in Costa Rica,
primarily through trade, is growing. Trade between Costa
Rica and the PRC is ten times that with Taiwan. This gap
will only continue to widen as China's development advances.
President Pacheco's recent trip to Asia in August 2005, which
included stops in Taipei and Tokyo, have brought recent media
focus on a variety of trade issues with Asian countries,
including China (Ref B). End Summary.

-------------- -
INTERVIEW WITH THE MINISTER OF FOREIGN AFFAIRS
-------------- -


2. (C) On August 1, 2005, the Costa Rican Minister of
Foreign Affairs (MFA),Roberto Tovar told us that there have
been no official government-to-government contacts with the
PRC, probably because the PRC knows that the current
administration is not interested. Minister Tovar continued
by saying that the Chinese are finding other ways to increase
their presence in Costa Rica. As an example, he stated that
imports from the PRC have grown exponentially in recent

years. He believes the PRC is trying to cultivate certain
Legislative Assembly members (deputies) and is behind
creation of an unofficial "Friends of China Committee" in the
Legislative Assembly. Note: Based on conversations with
Assembly staff members, a group of deputies is assigned to
deal with China-related issues in an ad hoc manner and on an
unofficial basis. These deputies include Guido Vega (PLN),
Jorge Alvarez (PUSC),and Francisco Sanchun (PUSC).


3. (C) From Tovar's point of view, Chinese interlocutors
appear to be concentrating on members of the National
Liberation Party (PLN),due to the likelihood that Oscar
Arias, the PLN presidential candidate, will win in the
upcoming February 2006 elections. An Arias win may also help
sweep PLN deputies into the 57-member Assembly. San Jose
Mayor Johnny Araya, a PLN member, was recently a guest of the
Chinese in Beijing. Tovar said that PLN president Antonio
Pacheco visited his office some time ago to ask for visas for
high-level PRC officials. (Tovar did not say if they
received their visas.) Finally, Tovar guessed that Arias
might look favorably on establishing relations with the PRC,
and the PRC may be working through PLN members to persuade
him to do so. Tovar stated that he thinks relations with
China, after the Pacheco administration ends in May 2006,
could develop in stages, as is occurring in Panama. Tovar
said that the PRC will most likely try to first establish a
commercial office with some diplomatic status.

--------------
TRADE WITH CHINA AND HONG KONG
--------------


4. (U) President Pacheco's recent visit to Taiwan and Japan
in August 2005, focused the media on the economic aspect of
Costa Rican-Asian relations, including with China (Ref B).
An August 22, 2005, "La Nacion" article covered the rapid
growth in both imports from and exports to China and Hong
Kong. Exports to China and Hong Kong reached approximately
USD 300 million in 2004, up from USD 30 million in 2000.
Over the same period imports from China and Hong Kong grew
from USD 106 million to USD 330 million. In 2004, Costa Rica
ran a trade surplus of USD 79.1 million with Hong Kong and a
deficit of USD 109 million with China. It is clear that the
PRC is emerging as an important trade partner for Costa Rica,
particularly as a supplier of goods. China has outpaced
Taiwan and even Hong Kong during the last five years in terms
of total trade with Costa Rica.


5. (U) In 2000, Costa Rican imports from China were USD
78.4 million and exports were USD 12.7 million (this was
equivalent to 1.4 percent of Costa Rica's total foreign trade
that year). Statistics related to Hong Kong for 2000 were
USD 37.5 million in imports and USD 17.4 million in exports.
By 2004, imports from China had grown to USD 272.5 million
and exports to USD 162.3 million (for Hong Kong, imports
amounted to USD 57.7 million and exports were USD 136.8
million). This resulted in China accounting for 5.9 percent
of Costa Rica's total trade in 2004. In a short time, Hong
Kong and China thus have positioned themselves among Costa
Rica's top 10 trading partners. In the first seven months of
2005, exports to China grew 185.5 percent with respect to the
same period in 2004. If current trends continue, the PRC
will soon be Costa Rica's second largest trading partner
after the U.S.


6. (U) The majority of Costa Rican exports to China are
high technology electronic devices such as microprocessors,
modular circuits and semiconductors (Intel has a large
operation in Costa Rica) and leather garments. Demand for
Costa Rican exports of ornamental plants, agro-industrial
products, seafood and aqua-culture is increasing, especially
in Hong Kong. Imports from China include cotton textiles,
radio-telephone reception devices, and video- and
photo-recording and reproducing devices.


7. (U) TABLE ONE - COSTA RICAN EXPORTS*


2000 2001 2002 2003 2004

Total Exports 5,897.3 5,042.8 5,280.5 6,100.2 6,293.0
(USD and %) (100.0%) (100.0%) (100.0%) (100.0%) 100.0%)

U.S.A 3,056.7 2,504.8 2,650.4 2,834.1 2,775.7
(51.8%) (49.7%) (50.2%) (46.5%) (44.1%)

China 12.7 13.8 33.7 88.9 162.3
(0.2%) (0.3%) (0.6%) (1.5%) (2.6%)

Hong Kong 17.4 27.3 51.6 132.8 136.8
(0.3%) (0.5%) (1.0%) (2.2%) (2.2%)

PRC Total 30.1 41.1 85.3 221.7 299.1
(0.5%) (0.8%) (1.6%) (3.7%) (4.8%)

Taiwan 9.9 11.3 22.9 38.4 34.8
(0.2%) (0.2%) (0.4%) (0.6%) (0.6%)



8. (U) TABLE TWO - COSTA RICAN IMPORTS*


2000 2001 2002 2003 2004

Total Imports 6,373.3 6,546.3 7,174.5 7,643.1 8,268.0
(USD and %) (100.0%) (100.0%) (100.0%) (100.0%) 100.0%)

U.S.A 3,388.0 3,504.1 3,805.8 3,883.4 3,796.0
(53.2%) (53.5%) (53.0%) (50.8%) (45.9%)

China 78.4 100.5 121.6 160.2 272.5
(1.2%) (1.5%) (1.7%) (2.1%) (3.3%)

Hong Kong 37.5 41.8 45.0 49.9 57.7
(0.6%) (0.6%) (0.6%) (0.7%) (0.7%)

PRC Total 115.9 142.3 166.6 210.1 330.2
(0.5%) (0.8%) (1.6%) (3.7%) (4.8%)

Taiwan 65.4 68.3 66.2 66.4 71.1
(1.0%) (1.0%) (0.9%) (0.9%) (0.9%)


*Data Sources: Costa Rican Ministry of Foreign Trade
(COMEX),The Foreign Trade Corporation of Costa Rica
(PROCOMER),and the Costa Rican Central Bank (BCCR).


9. (U) Environmental degradation related to Chinese energy
or other natural resource demands is currently not a concern
in Costa Rica. Costa Rica has a long history of
environmental stewardship, and all indications are that this
policy will continue regardless of Chinese demand for
resources. However, China's growing energy needs and its
effect on oil prices may have negative economic effects in
Costa Rica, a country that imports all of its oil.

10. (U) According to the BCCR, the PRC has directly
invested approximately USD 1.7 million in Costa Rica over the
last five years, primarily in business infrastructure. This
compares to FDI of USD 2.5 billion in Costa Rica by the U.S.

--------------
ATTITUDES TOWARD CHINA
--------------


11. (C) Popular attitudes toward China vary. On the one
hand, Chinese imports offer relatively low-priced goods to
consumers. On the other hand, Costa Rica is running a trade
deficit with the PRC, and China is seen as a threat to some
Costa Rican industries. However, issues surrounding the
rapid growth of the Chinese economy are covered regularly in
the press, and it is acknowledged that China will be an
economic force to be reckoned with. There is no evidence of
widespread negative attitudes toward the PRC. COMMENT:
Attitudes toward Taiwan also vary. Because of Taiwan's
funding of many development projects, Taiwan is generally
viewed positively. However, Taiwanese officials have been
implicated in several high-profile scandals involving illegal
campaign contributions and funding the MFA, and this has
resulted in a degree of skepticism of Taiwanese government
motives in Costa Rica. END COMMENT.


12. (C) With respect to trade issues, many Costa Ricans
look upon the Chinese as fierce competitors and, in some
industries, an imminent threat. Anecdotal evidence may lead
to the conclusion that some jobs, especially in the textile
and apparel industries, have moved from Costa Rica to China
due to lower wages. Textile industry experts in Costa Rica
have told Econoff that it is getting more difficult to
compete against the Chinese, and the United States-Central
American-Dominican Republic Free Trade Agreement (CAFTA-DR),
which will make permanent tariff-free textile exports to the
U.S. market, is seen as the industry's only hope to survive
in Costa Rica. (Note: For reasons unrelated to the subject
of this correspondence, Costa Rica has not yet ratified
CAFTA-DR.)


13. (C) Econoff attended a textile industry sourcing
seminar held in Costa Rica in July 2005 in which U.S.,
Central, and South American manufacturers were urged not only
to study the successful nature of the Chinese textile
industry in order to learn about their competition, but also
to seek Chinese companies with which they could partner in an
attempt to leverage the efficiencies of the Central and South
American manufacturers.

--------------
CHINESE IN COSTA RICA
--------------


14. (C) Based on a June 2000 census, the Costa Rican
National Institute of Statistics and Census (INEC) states
that there were approximately 8,000 respondents who
identified themselves as Chinese out of an estimated 4
million Costa Ricans. (Note: There was no differentiation
drawn between Taiwanese and persons from China or Hong Kong.)
This number, however, is probably far lower than the actual
number of Chinese who reside in Costa Rica and does not
include Costa Ricans of Chinese ethnicity. Anecdotal
evidence revealed that there are probably more Chinese who
have immigrated to Costa Rica than Taiwanese over the last
several years. According to Costa Rican immigration sources,
approximately 4,400 Chinese and 2,300 Taiwanese currently
have resident status in Costa Rica. Also, the annual number
of PRC tourists in Costa Rica has ranged from 2,500 to 5,000.
The numbers from Taiwan are about 3,000 per year.
Non-immigrant visa applicants at the U.S. consulate in San
Jose average about 400 Chinese per year and 200 Taiwanese per
year.

--------------
NO MILITARY TIES TO THE PRC
--------------


15. (C) Costa Rica's military forces were disbanded by the
Constitution that was ratified in 1949. There are no
military forces per se, although a Coast Guard force does
exist under the auspices of the Ministry of Public Security.
Post maintains close contact with this Ministry, and there
are no indications of any interactions with the PRC.

--------------
PRC PRESS IN COSTA RICA
--------------


16. (C) The Xinhua News Agency, the official PRC state-run
information organization, has an office in San Jose and
maintains a Spanish-language website
(www.spanish.xinhaunet.com). This organization covers news
of interest to China as well as Central American current
events. This agency also offers information about all
aspects of Chinese culture including economics, history,
politics, etc. The local television cable system carries one
Beijing-based, Chinese-language station.

--------------
COMMENT
--------------


17. (C) China has no official ties with Costa Rica.
However, due to the burgeoning Chinese economy and
accelerating pace of development, trade between the two
countries will grow and may result in closer ties. Although
still running a trade deficit with China, Costa Rican exports
to the PRC jumped ten-fold from 2000 to 2004. These numbers
will only increase and result in closer economic ties between
the two countries. However, it may be difficult to establish
official relations with China considering the long history of
diplomatic and financial ties between Costa Rica and Taiwan.
President Pacheco's recent trip to Taipei has reinforced
those diplomatic ties, but it will be difficult to ignore the
ever-growing economic presence of a developing China. A new
administration will take office in May 2006, which may bring
gradual changes to the relationship with the PRC.
FRISBIE