COSTA RICA RECOGNIZES CHINA

C O N F I D E N T I A L SAN JOSE 001106

SIPDIS

SIPDIS

DEPT FOR WHA/CEN, EAP, P AND D;
SOUTHCOM ALSO FOR FPA

E.O. 12958: DECL: 06/07/2017
TAGS: PREL PGOV TW XK CS
SUBJECT: COSTA RICA RECOGNIZES CHINA

REF: TAIPEI 001283 AND PREVIOUS

Classified By: ADCM Laurie Weitzenkorn per 1.4 (d).


1. (C) SUMMARY: On June 6, Costa Rica announced normalized
relations with China, ending ties with Taiwan dating back to

1944. President Arias said the decision was based on
"fundamental realism," and he expressed hope that informal
relations could be retained with Taipei. The announcement
capped months of secret negotiations, including a visit to
Beijing by Foreign Minister Stagno and Treasury Minister
Zuniga to sign an agreement on June 1. The Taiwanese Embassy
here responded swiftly and negatively, lodging a strong
protest and ending all assistance. Editorial and media
coverage has emphasized the prospective trade benefits,
recognized the long-term logic of improved ties with China,
and defended the GOCR's "soverign"decision, but criticized
Arias and Stagno for "lying" to the media about the
negotiations. Behind the scenes, GOC officials sympathetic
to Taiwan or whose ministries depended on Taiwanese
assistance, specially Minister of Public Security Berrocal,
are very concerned about the short/no-notice (to them)
decision and the way it was made. In our view, Arias's
decision is consistent with foreign policy he outlines in his
inaugural address; may help Costa Rica gain the UNSC seat it
desperately wants for 2008-9, and was no doubt fueled by a
large (USD 430 million) air package the GOCR could not
refuse. The fact that a very small circle of senior
officials around Arias were involved underscores that on
major foreign policy issues, he continues to call the shots.
END SUMMARY.

RUSH ANNOUNCEMENT CAPS SECRET NEGOTIATIONS
==========================================


2. (U) In a press conference on June 6, President Oscar
Arias announced that the GOCR had normalized relations with
China, effective June 1. Arias said this "realignment" in
diplomatic relations was not "ideological," but "an act of
fundamental realism... (and) a wake-up call to the global
context in which it is (Costa Rica's) turn to play a role."
He added that "We have decided to normalize our ties with a
country we can no longer ignore," joining the 168 other UN
member nations which had already recognized China.


3. (U) Arias explained that the opening of relations had
been finalized during a secret visit to Beijing by Foreign
Minister Bruno Stagno and Finance Minister Guillermo Zuniga.
The secrecy, he said, was required by the "transcendence" of
the decision. The GOCR was as "transparent as the
circumstances allowed," making public, for example, Stagno's
meeting with counterpart Li Zhaoxing in Mexico City in May
2006, and Arias's own meeting with Li on the margins of the
UNGA in New York last September. The President offered his
"sincere" thanks to Taiwan for its generous assistance and
support and noted that Costa Rica and Taiwan could maintain
informal relations, despite the GOCR's decision. According
to press reports, the Chinese moved quickly, dispatching
three diplomats to San Jose from their embassy in Mexico on
June 7.


4. (C) Originally set for June 7, the press conference was
hastily moved up 24 hours in light of the briefing in Taipei
which broke the news in public (Reftel). According to media
reports (and confirmed by GOCR sources),Stagno officially
informed the Taiwanese MFA in a call just two hours before
the press conference. The media was quick to note that as
recently as May 28 (just before his secret trip to Beijing),
Stagno insisted to interviewers that he foresaw "no break" in
relations with Taiwan.


5. (C) On May 31, when asked about the GOCR's controversial
May 17 procedural vote against Taiwan in the WHO, MFA Deputy
Director for External Politics Alejandro Solano gave Pol/C
and PolOff no indication of a pending shift in relations,
dismissing media reports of a possible break as speculation
and acknowledging the importance of Taiwanese assistance to
the GOCR. (Solano also told Poloffs that Stagno would miss
the opening of the Panama OASGA because of his opening a new
consulate in Rivas, Nicaragua. Instead, Stagno was
apparently on his way back from China that day.)

MONEY AND TRADE TRUMP FRIENDSHIP
================================


6. (C) The Taiwanese Embassy here responded swiftly and
negatively. In press releases on June 6 and 7, the Embassy
blamed Chinese "instigation" and "threats" for Costa Rica's
sudden and "deeply unfriendly" move, which set aside "over 60
years of friendship" with Taiwan. As a result, Taiwan
immediately severed diplomatic relations and ended all
bilateral cooperation. (COMMENT: We understand that the GOT
actually began freezing Costa Rican accounts two weeks ago,
as the GOCR's intent to recognize China became more evident
to Taiwan. END COMMENT.) Of note, the large PRC aid package
(USD 430 million, as denounced by FM Huang in Taipei, Reftel)
has not generated much media coverage and Arias did not
highlight the Chinese assistance in his press conference. On
June 7, although pressed by the media, Stagno refused to
"speculate" about rumored "astronomical sums" of Chinese
assistance in exchange for recognition.


7. (U) The media has been quick to emphasize Taiwan's
considerable past assistance to Costa Rica, totaling USD 8
million during the Arias administration alone for items such
outboard motors for the Coast Guard; uniforms, ballistic
vests and equipment for the tourist police; and a fleet of
new pick-ups and motorcycles for the regular police. Media
also noted large-scale infrastructure projects, such as the
USD 27 million Friendship Bridge spanning the Tempisque River
in Guanacaste. During the Pacheco administration (and into
the first months of the Arias administration),Taiwan even
paid salary stipends to some MFA employees (a practice
stopped in 2006 by Stagno).


8. (U) Local media also reported that nearly USD 70 million
in future or on-going assistance projects were now at risk,
including for the San Carlos-Naranjo highway, the Calderon
Guardia Hospital and another USD 3 million in aid for the
police, unless Beijing or other donors take Taiwan's place.
On the other hand, political and media commentators noted the
huge Chinese market, stressing that China is already Costa
Rica's second largest trading partner after the U.S., and
predicting that normalized relations should increase these
commercial ties. President Arias told AFP that he hopes to
visit China after the October CAFTA referendum. (COMMENT:
China is Costa Rica's second largest trading partner, thanks
to Intel's computer chips exports to Hong Kong. Some of
these, ironically, are bound ultimately for Taiwan. END
COMMENT.)

DECISION-MAKING STYLE DRAWS CRITICISM
=====================================


9. (SBU) Editorial and media coverage has recognized the
long-term logic of improved ties with China and defended
Costa Rica's "sovereign" and "visionary" decision, but also
criticized Arias and Stagno for "lying" about the
negotiations. In response, Stagno insists that the two
meetings with Li in 2006 were "clear signals" of an impending
change in relationship. Diplomatic contacts here have been
critical of how the decision and announcement were handled,
reminiscent of the sudden and clumsy way the GOCR announced
in August 2006 that its embassy in Israel would be moved from
Jerusalem to Tel Aviv. Conservative politicians, such as ML
party's Otto Guevara, the PUSC party's Lorena Vasquez and the
PUN party's Jose Manuel Echandi have all made comments or
issued statements deploring Arias's decision to cut ties with
a "democracy" in favor of "despots." Ironically, Arias
critics Otton Solis (PAC Party) and Jose merino (AF Party)
found themselves applauding the decision.


10. (C) Behind the scenes, we understand that GOCR
officials sympathetic to Taiwan or whose ministries depended
on Taiwanese assistance are very concerned about the
short/no-notice (to them) decision and the way it was made.
Minister of Public Security Fernando Berrocal, ex-Minister of
Production Alfredo Volio and Intelligence Service Director
Roberto Solorzano have been the most vocal, in private.
Berrocal was completely blind-sided, and worries now about
the lost security assistance from Taiwan. Even the
President's brother, Minister of Government Rodrigo Arias,
seemed to have been uncharacteristically out-of-the-loop
regarding the Taiwan-China decision.


11. (C) A wider circle of political players was apparently
aware of the decision, even if key ministers were not. PLN
General Secretary Rene Castro told us of a "heated" debate
within the party leadership on when to announce the China
decision. The goal, he said, was to let any political
fallout dissipate well before the referendum is launched.
(COMMENT: Thanks to the Electoral Tribunal's decision to
postpone the referendum and its official launch by a few
weeks, the GOCR and PLN seem to have achieved this objective.
END COMMENT.) The fact that leftists critics like Merino
and Solis would have to support the GOCR's decision was an
added political benefit, Castro said.

COMMENT
=======


12. (C) We attribute Arias's decision to recognize China to
three ingredients. First, it is wholly consistent with his
"politically-correct" and somewhat legalistic world view. It
is also consistent with the foreign policy he outlined in his
2006 inaugural address, based on the "founding principles" of
the UN Charter (which translated in this case, means not
going against the majority UN view on China). Arias may have
also taken some pride in making Costa Rica the first country
in Central America to recognize China. Second, also
UN-related, is the Arias's administration's almost obsession
with gaining a rotational UNSC seat for 2008-9. (According
to the MFA Solano, Costa Rica has support from "all the
major" UN members in Asia, implying that a deal may have been
struck already). Third, the USD 430 million aid package was
no doubt and offer the GOCR could not refuse, not to mention
improved trade with and investment from one of the world's
largest economies. According to a former PUSC party
legislator with close ties to the GOCR, Taiwan's reluctance
to shift to more direct investment instead of grants was the
deciding factor which moved Arias to his decision. The fact
that a very small circle of senior officials around Arias
were involved underscores that on major foreign policy
issues, Arias continues to call the shots, and that he
continues to envision Costa Rica playing a much
larger-than-life role on the world stage.

LANGDALE
LANGDALE