STATUS OF THE PROPOSED LAW TO STRENGTHEN AND

UNCLAS SECTION 01 OF 02 SAN JOSE 002104

SIPDIS

WHA/CEN
EB FOR WCRAFT, BMANOGUE
EB/CIP FOR WAYALA
E FOR DEDWARDS
WHA FOR WMIELE
WHA/EPSC FOR KURS, LGUMBINER
H FOR JHAGAN
STATE PASS TO USTR FOR RVARGO, NMOORJANI, AMALITO

E.O. 12958: N/A
TAGS: ETRD ECPS ECON PREL PGOV SOCI CS
SUBJECT: STATUS OF THE PROPOSED LAW TO STRENGTHEN AND
MODERNIZE ICE

REF: SAN JOSE 01828


1. (SBU) Summary. The Legislative Assembly,s Special Mixed
Commission to review the Law to Strengthen and Modernize the
Costa Rican Institute of Electricity (ICE) ended its 28-month
tenure without coming to agreement on how to proceed with the
proposed telecommunications reform law. The contentious
legislative project is now essentially at a standstill.
Assembly members (deputies) could not agree on extending the
Commission,s charter due to profound differences between
those deputies that lean towards giving the venerated
state-owned institution unprecedented autonomy and special
treatment and those who want to encourage increased
competition that would result from implementation of the
United States-Central American-Dominican Republic Free Trade
Agreement (CAFTA-DR). Despite not moving forward on this
proposed law, the Administration states that it is ready to
submit proposed legislation in the areas on which the
Commission could not agree. End Summary.


2. (U) The stated reason for proposing the Law to Strengthen
and Modernize ICE was to give the organization the financial
autonomy and resources to be able to compete against
potential competitors in an open telecommunications market.
The Costa Rican negotiators felt that the strengthening and
modernization of ICE was so important that they inserted this
into the text of the United States-Central America-Dominican
Republic Free Trade Agreement (CAFTA-DR). (Note: The text
of CAFTA-DR actually states that this law was to be passed by
December 31, 2004.)


3. (U) The Special Mixed Commission on ICE was chaired by
Gloria Valerin, a deputy from President Pacheco,s Social
Christian Unity Party (PUSC). Other deputy members included
Federico Malavassi from the Libertarian Movement Party (ML),
Ricardo Toledo, the PUSC presidential candidate in the
upcoming February 2006 election, German Rojas (PUSC),Alvaro
Gonzalez (PLN),Carlos Benevides (PLN),Luis Gerardo
Villanueva (PLN),Rodrigo Carazo from the Citizens, Action
Party (PAC),Ruth Montoya (PAC),Emilia Rodriguez from the
Patriotic Bloc (BP),and Carlos Avendano from the Costa Rican
Renovation Party (PRC).


4. (U) The Commission also consisted of eight
representatives from several interested and knowledgeable
organizations, including ICE, the Union of Chambers of
Private Enterprises (UCAAEP),the Chamber of Information
Technology, the labor union representing ICE workers, the
non-governmental Free Consumers Association, National Council
of University Rectors, the Costa Rican Federation for
Environmental Conservation, and the Ministry of Science and
Technology. (Note: Only the deputy members of the Commission
actually had a vote in official proceedings.) This broad
representation is reflective of the importance of ICE in the
minds of many Costa Ricans.

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COMMENT
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5. (SBU) Several options exist including: (1) sending the
issue straight to the Assembly floor for a vote, (2) create
an ad hoc deputies-only Commission to review the bill, or (3)
do nothing. Realistically, creation of a new deputies-only
Commission is the most likely option, but the issue will not
be any less contentious.


6. (SBU) Given the current political situation, it is
unlikely this bill will pass in its current form prior to
CAFTA-DR ratification. Gilberto Barrantes, Minister of
Economy and Chair of the President,s Economic Council said
that the Administration is ready to submit proposed
legislation in the areas in which the Commission could not
agree. He offered no more details than that.


7. (SBU) ICE needs more financial autonomy to compete in an
open market; for instance, it should not be bound by some of
the inflexible and arduous government processes with which it
must currently comply, e.g., the cumbersome procedures for
taking on new debt. However, the proposed law to strengthen
and modernize ICE, if passed in its current form, almost
certainly would have caused problems complying with CAFTA-DR
commitments (reftel). The Administration and the Legislative
Assembly will eventually need to agree on how ICE will
function in the open telecommunications market created by
CAFTA-DR.
FRISBIE