ARIAS TOURS EUROPE, CALLS FOR DEBT FORGIVENESS AND

UNCLAS SAN JOSE 001427 SIPDIS SENSITIVE SIPDIS DEPT FOR WHA/CEN JASON MACK E.O. 12958: N/A TAGS: PREL ECON EFIN CS SUBJECT: ARIAS TOURS EUROPE, CALLS FOR DEBT FORGIVENESS AND FREE TRADE REF: SAN JOSE 1251 -------------- SUMMARY -------------- ¶1. (SBU) President Oscar Arias recently toured Europe for 13 days, meeting with political and business leaders in three countries. He once again brought forth his Costa Rica Consensus notion for debt forgiveness, and used several occasions to call for free trade and the elimination of farm subsidies. He linked Costa Rica's development goals with the successful ratification of CAFTA. With his strong advocacy of free trade and the benefits he believes it will bring Costa Rica, Arias managed to provoke grumbling among opposition members of the Costa Rican legislative assembly. Arias clearly enjoyed being back on the world stage, taking on developed nation farm subsidies and the Vatican's stance on contraception. END SUMMARY. -------------- ARIAS IN EUROPE -------------- ¶2. (U) President Oscar Arias, in the first foreign trip of his current presidency, traveled to Switzerland, Germany, and Italy. At his first destination, Switzerland, Arias spoke to the annual Conference of the International Labor Organization in Geneva. He used this occasion to once again present his so-called "Costa Rica Consensus" (reftel) which entails more generous foreign assistance and a program of debt forgiveness for those middle-income countries that engage in good governance and decrease military spending. He also made the first of several calls during this trip for the nations of the European Union and the U.S. to eliminate farm subsidies. ¶3. (U) On June 9, Arias and German Chancellor Angela Merkel watched Germany defeat Costa Rica in the inaugural match of the World Cup soccer tournament. While meeting with German business leaders later, Arias predicted that Costa Rica will pass CAFTA and encouraged German foreign investment in Costa Rica. A common theme for Arias at meetings with European business officials was how their investment in Costa Rica would give them greater access to U.S. markets because of CAFTA. During an interview with the Costa Rican daily "La Nacion," Arias mentioned that he was considering ending the Costa Rican Petroleum Refinery (Recope) monopoly on the importation of petroleum products it has enjoyed since 1993. He reiterated plans to break the monopolies of the Costa Rican Energy Institute (ICE) and the National Insurance Institute (INS),repeating his belief that Costa Rica must break these monopolies as part of a strategy to accelerate economic growth to the 6% annual rate he desires. ¶4. (U) While speaking in Florence, Italy, Arias decried the "hypocrisy" of western nations for closing their markets to agricultural products from developing countries while demanding that developing countries open markets to their goods. He repeated that "the developing world's farmers can compete with the farmers of the developed world, but not their treasuries." While meeting with former German Chancellor Helmut Schmidt later, Arias conceded that he had little optimism that farm subsidies in the European Union and the U.S. could be reduced in the short term. Italian business leaders expressed interest in business investments in Costa Rica, but stressed that this investment would only begin if Costa Rica approves CAFTA. Arias also announced that within five to six months, the countries of Central America will have initiated free trade talks with the European Union and should have a deal within 18-24 months. ¶5. (U) The final leg of Arias's European tour brought him to the Vatican and a personal meeting with Pope Benedict XVI. Arias petitioned the pope to use his leadership to help promote the "Costa Rican Consensus." Arias also requested that the church ease its stance against artificial contraception, and later explained that though he did not expect a change in the church's stance on the issue, he felt he needed to discuss the subject. After the meeting with the pontiff, Arias met with the Vatican Secretary of State, Angelo Sodano, to solicit support for Arias's pro-CAFTA position, a move for which Arias has been criticized in some quarters. According to Arias, Sodano promised to send a letter of support for free trade to Costa Rica's Catholic bishops, who have publicly raised concerns about CAFTA's possible negative effects on farmers, the environment, and an increase in social inequality. To date, no letter has come to light. -------------- OPPOSITION REACTION TO TRIP -------------- ¶6. (U) Arias's tour of Europe was a major story in the Costa Rican press throughout the 13-day trip. Elizabeth Fonseca, head of the Citizen Action Party (PAC),the second largest party in the legislature and strong CAFTA opponent, said that she would withhold comment until a full report of the trip was presented to the Legislative Assembly by Arias. Other, single-deputy party legislators were more negative, criticizing Arias for his numerous trips to museums and cultural sites. More substantial was the criticism leveled by one deputy that Arias was "disrespectful" to the deputies with his strong promotion of CAFTA in Europe, questioning how Arias can guarantee the ratification of CAFTA in the Costa Rican Legislative Assembly. Union leaders, not surprisingly, accused Arias of fondness for "carpets, palaces, and luxury" while failing to demonstrate one positive result from the trip. -------------- COMMENT -------------- ¶7. (SBU) President Arias reinforced to his international and domestic audiences his belief in free trade as a means of improving the economies of developing countries. The allure of playing once again on the international stage was manifest throughout Arias's trip. He went beyond his usual strong support for free trade, provoked the opposition by practically guaranteeing passage of CAFTA, and added fuel to the fire with talk of breaking up state monopolies. But the best indicator of renewed ardor for tilting at windmills was Arias's request that the Vatican ease its stance on contraceptives. LANGDALE