PRESIDENTIAL CANDIDATE OSCAR ARIAS CONFIDENT OF

C O N F I D E N T I A L SECTION 01 OF 02 SAN JOSE 002909

SIPDIS

E.O. 12958: DECL: 12/09/2015
TAGS: PGOV ETRD PREL CS
SUBJECT: PRESIDENTIAL CANDIDATE OSCAR ARIAS CONFIDENT OF
VICTORY; OPEN TO COOPERATION WITH U.S.

REF: SAN JOSE 2279

Classified By: Ambassador Mark Langdale for reasons 1.4(b) and (d)

Summary
--------------

1. (C) Presidential candidate Oscar Arias told Ambassador
that he (Arias) was "an idiot" to run again for president but
that he was under a lot of pressure to come back. Arias said
that Costa Rica, which has been neglecting education,
infrastructure, and economic development, "cannot afford to
waste any more time" and needs leadership. He expected to
win the election in the first round of voting (with more than
40 percent) on February 5 and for his party to win a large
plurality, if not majority, in the legislature. Ambassador
suggested that he and Arias explore the possibility after the
election of a domestic security strategic planning workshop
organized by the Center for Hemispheric Defense Studies.
Arias responded that such a workshop could be "a good idea."
End summary.


Election Campaign
--------------

2. (U) On December 7, Ambassador paid a courtesy call on
former president (1986-90) Oscar Arias, frontrunner to be
reelected president next February 5 from a field of 14
candidates. The latest poll shows Arias with 45 percent of
the vote, compared with 21 percent for Otton Solis and 15
percent for Otto Guevara, his nearest rivals. Arias is
running on a platform that embraces the U.S.-Central
American-Dominican Republic Free Trade Agreement (CAFTA-DR)
and "a gradual, selective, and regulated opening" of some
state monopolies.


3. (C) Arias told Ambassador that he expected a 65-70 percent
voter turnout in the election with his getting more than the
requisite 40 percent of the vote to avoid a second-round
runoff election. He believed that his party, the National
Liberation Party (PLN),would win a sizeable plurality in the
Legislative Assembly, if not a majority. Arias noted the
difficulty of governing with a fragmented legislature but
believed he would be more effective than President Pacheco
has been in brokering agreements between parties. Arias was
dismissive of his opponents in the election. He said that
Solis, who is anti-CAFTA-DR, is "a populist and a
fundamentalist, like the Taliban," and that Guevara, a
libertarian, represents wealthy Costa Ricans who don't want
to pay taxes.


Economic Views
--------------

4. (C) Arias believes that tax collection needs to be
improved, but also that taxes ought to be raised from about
18 percent of GDP (including social security pensions and
health care) to 21-22 percent. He said, "It's not easy to run
as an advocate for higher taxes." Corporate taxes, however,
should be lowered, he said. They are now 25 percent, except
for "pioneer companies" (which covers most new foreign direct
investment - FDI) for which the tax rate is 15 percent.
Arias said Costa Rica will not be competitive with China and
other countries unless the tax rate applied to FDI is lowered
to 5 percent. He said that reducing corporate taxes and
finding other ways to attract FDI will be a priority in his
administration.


5. (C) Arias lamented the neglect of Costa Rica's
infrastructure and educational system, noting that the
country "cannot afford to waste any more time." He said that
Costa Rica is burdened by too much bureaucracy, too much red
tape, too many lawyers and too few engineers, "a legacy of
the Spaniards." He said it was practically impossible to
export, invest, build a house, or set up a factory, and he
promised to streamline procedures and try to remove
obstacles. He also said he was planning new legislation to
activate public works concessions.


6. (C) Arias said that Costa Rica's reputation for
high-quality public education was based on "a myth." In
fact, he said, the quality is poor at all levels and that
most Costa Ricans do not finish secondary school. Arias
believes that Costa Ricans underspend for education at 5.5
percent of GDP, and he wants to raise the rate to 8 percent.


Regional integration and security
--------------

7. (C) Ambassador asked Arias for his assessment of regional
integration and relations between Costa Rica and its
neighbors Nicaragua and Panama. Arias said Costa Rica has
been the odd man out in Central America because: "Politically
we have a superiority complex, and economically we are
isolationist. Look at our opposition to CAFTA." Then he
noted that Costa Rica is not competitive with other Central
American countries in certain sectors like sugar (in which
the Arias family has major holdings) because sugar producers
in places like Guatemala "don't pay taxes, don't pay social
security, and pay wages at one seventh the level paid in
Costa Rica." When the Ambassador pressed for finding ways
for Costa Rica to cooperate better with its neighbors, Arias
responded: "I'm for it, but the rest of the country would be
reluctant."


8. (C) Arias said that these are difficult times for the
hemisphere. While the Castro regime will inevitably come to
an end, Hugo Chavez, who, he said, is crazy, is not going
away and there is the additional prospect of left-wing
regimes in Ecuador and Bolivia. He said that opposition to
the Free Trade Area of the Americas (FTAA) on the part of
countries like Brazil was not ideological, but protectionist.
Arias added that in his presidency 20 years ago he worked on
persuading fellow heads of state to commit to peace; in his
upcoming presidency he will concentrate on persuading CEOs to
invest in Costa Rica.

9. (C) Ambassador suggested that after the election, if Arias
wins, the two of them explore the possibility of a domestic
security strategic planning workshop organized by the Center
for Hemispheric Defense Studies (CHDS). Ambassador noted
that the CHDS had done a workshop about a year ago in Panama
with some success and that it could involve NGOs as well as
politicians and government officials. Arias responded that
such a workshop could be "a good idea."


Biographic Information
--------------

10. (C) In the chit-chat between discussions of substantive
issues, Arias mentioned that since leaving the presidency in
1990 he mainly has been lecturing and teaching, including at
the John F. Kennedy School at Harvard University and at the
Massachusetts Institute of Technology (MIT). "That's what
Nobel laureates do," he said with a smile. He has also been
raising funds for his Arias Foundation and campaigning in
favor of the abolition of national armies -- successfully in
Panama and Haiti and unsuccesfully in sub-Saharan Africa.
Arias said standing armies for most countries are
unnecessary, a waste of money, and dangerous. He said he
convinced former Panamanian president Guillermo Endara to
abolish the Panamanian army in exchange for Costa Rican
recognition of his government at a time when no other Latin
American country recognized that government. Arias joked
that it was Costa Rican imperialism's finest hour. Arias
regretted the lack of U.S. support for his Arms Trade Treaty
proposal.


11. (C) Arias said that in recent years he was under a lot of
pressure to run again for president. He said that he was "an
idiot" to agree because now everyone has turned against him.
He noted that the scandals resulting in the arrests of former
presidents Calderon and Rodriguez have caused Costa Ricans to
be angry at politicians. Arias said Costa Ricans could not
have imagined the kind of corruption Calderon and Rodriguez
are accused of happening in their country, and they feel "sad
and annoyed."


12. (C) Arias, who is divorced, appears to be close to his
grown daughter and son, both of whom will be spending the
holidays with him. His daughter lives in Costa Rica and son
in London where he is studying for a masters degree in
applied math and economics at the London School of Economics.
Arias mentioned that his son graduated summa cum laude from
Harvard University.
LANGDALE