COSTA RICA AND CHINA: IS TRADE THE TIE THAT BINDS?

1. (C) SUMMARY: Sino-Costa Rican relations have gotten off
to a splashy start, with trade as the centerpiece. The new
Chinese Embassy in San Jose opened on August 24, in
conjunction with a trade fair which reportedly netted USD 12
million in sales or commitments for the Chinese and USD 140
million for the Costa Ricans. The two countries also created
a commercial forum, and the GOCR eased visa restrictions for
Chinese businessmen and travelers. Minister of Foreign
Commerce Ruiz participated in an investment and trade fair in
China September 8-11. President Arias will visit China
October 22-28, as part of a broader trip including some
Middle East states (to burnish newly-established relations),
Singapore (to open a new embassy) and Chile (for the
Ibero-American Summit). Costa Rica views China as its
gateway to Asia and an important ally for its UNSC
aspirations. China is using Costa Rica primarily as a "base"
to expand relations throughout Central America. Both sides
seem satisfied with that arrangement at this point. END
SUMMARY

NEW HOME, NICE NEIGHBORHOOD
==========================



2. (SBU) A heavy rain did not dampen spirits for the opening
of the Chinese Embassy, which featured three GOCR ministers
(2nd VP Kevin Casas, FM Bruno Stagno and FinMin Guillermo
Zuniga); PRC Assistant FM He Yafei, VM of Commerce Ma Xiuhong
and other senior officials; the 120-plus members of the
visiting Chinese trade delegation; a wall-to-wall crowd of
other guests; and heavy media coverage. The tight security
(including blocked streets, a rarity for San Jose) and the
prime location of the chancery (a large house a short walk
from President Arias,s residence) generated comment. But,
Ambassador Wang Xiaoyuan was quick to explain to PolCouns
that he had selected the site simply because it was available
and (more or less) affordable. Wang added that the Chinese
consulate was located in another house nearby while he and
his wife were still searching for a suitable residence. (PRC
Emboffs confirmed this to us on September 26.) He expressed
the hope that other countries in the region would make the
same "correct decision" as had Arias (to recognize China).
(COMMENT: Not only are the PRC consulate and embassy close to
Arias's house, but the consulate is directly across the
street, with the PRC flag in full view from his residence.
END COMMENT.)

SHOW US THE MONEY
===============



3. (SBU) The three-day Chinese trade exposition that ran
concurrently with the embassy opening featured a broad range
of products, from industrial, to telecommunications to
cosmetic jewelry. The expo was sponsored by the Chinese
Council for Promotion of International Commerce (CCPIT) and
the Chinese Chamber of International Commerce (CCOIC). The
breadth of products spanned 32 vendor displays, prompting one
Costa Rican visitor to remark, "There is everything here!"
Econoff also observed Wang Jinzhen, CCPIT Executive Vice
President, guide the GOCR,s Zuniga on a personal tour of the
expo. The Chinese clearly "came to play." Wang told
PolCouns that the CCPIT had been planning for this trade fair
and new ties with Costa Rica for over a year.



4. (U) Chinese vendors signed contracts worth USD two
million and secured letters of intent valued at over USD 10
million for the sale and distribution of Chinese products.
On the Costa Rican side, growers from the Terrazu region were
especially pleased by the Chinese purchase of 37,000 lbs of
high-end coffee beans, and by the visit of some Chinese
businessmen to tour Terrazu first hand. The GOCR hopes that
gourmet coffee will be a major export to China. Some 30,000
visitors toured the show, according to media reports, as
Chinese VM Ma optimistically predicted that two-way trade
could total USD 3 billion by the end of 2007. (According to
figures released by the Casa Presidencial, two-way trade
between Costa Rica and China totaled USD 1.7 billion in 2006,
with nearly USD 870 million alone in microprocessing chips
exported by Intel to China.) Separate from the San Jose
exhibit, the PRC and GOCR launched a bilateral Economic and
Commercial Forum, which facilitated the commitment to
purchase USD 140 million of Costa Rican products, led by
coffee.

OF VISAS AND VISITS
==============



5. (SBU) The commercial opening with China was accompanied
(as expected) by easier visa restrictions (Ref C). On
September 19, Immigration officials privately reconfirmed to
us what Director Mario Zamora had announced publicly last
month. Chinese travelers technically remain in Class 4, the
toughest category which requires a visa and special approval
(from the MFA and Immigration) before entering the country.
But, bonafide business travelers from China no longer need
special approval, and can enter the country on visas issued
by the new Costa Rican embassy in Beijing, being treated in
effect as Class 3 travelers, permitted to stay in country 30
days. In addition, any Chinese traveler with a valid EU or
US visa would be placed in the lighter Class 2, permitting
them to enter Costa Rica, visa-free, and remain up to 90
days.



6. (C) While more Chinese may be headed for Costa Rica,
more GOCR officials are visiting China. Minister of Foreign
Commerce Marco Vinicio Ruiz participated in an investment and
trade fair in Xiamen September 8-11 and also reportedly met
with Ministers Bo Xi Lai (Trade) and Yang Jie Chi (Foreign
Relations), as well as CCPIT VP Gao Yan. President Oscar
Arias will depart Costa Rica on October 21, in order to visit
China October 22-28, a schedule changed from earlier
proposals partly because of the president,s lingering
tendonitis. According to Antonio Alarcon, FM Stagno,s COS,
the Arias trip will still be a grueling zig-zag, proceeding
from China to Saudi Arabia and the Gulf States, for brief
stops to shore up newly-established relations, and to
follow-up Stagno,s globetrotting tour in pursuit of UNSC
votes for Costa Rica. From the Middle East, Arias will
proceed to Singapore (to open a new embassy), with a brief
stop in Jakarta (again, UN-related). Arias will round out
his trip in Santiago, for the Ibero-American Summit in early
November. According to PRC Emboffs in charge of coordinating
the visit, Arias will visit Beijing and two other cities,
with a larger delegation than had been planned originally.
Twenty-five officials, including Ministers Stagno, Ruiz and
Zuniga (probably) will accompany the president. The Chinese
here say that a reciprocal visit by President Hu, including a
number of stops in Central America, is contemplated for 2008.
The Chinese diplomats in San Jose explain that they have
been given the bilateral lead in arranging Arias's visit,
given the small size and inexperience of the Costa Rican
embassy in Beijing.

INSIDERS' VIEW (AND CONSULS IN HANDCUFFS)
============================



7. (C) Alarcon, who was dispatched to Beijing to set up the
Costa Rican embassy, acknowledged to Pol/C on September 12
that trade clearly dominates the bilateral agenda with China.
The Arias administration, he added, accepts the fact that
the PRC may already have as much as it wants commercially
from Costa Rica and is really using its new ties with San
Jose as a platform to expand relations around Central
America. Alarcon explained that the GOCR wanted a "clean
divorce" from Taiwan, which rules out informal ties for the
time being, even if offered by Taiwan. The PRC has begun
picking up the slack from Taiwan, meanwhile, accepting the
fist batch of Costa Rican university students for Mandarin
language training which had previously been conducted in
Taipei.



8. (C) Separately, PRC diplomats candidly told us September
26 that the regional political significance of the new ties
with Costa Rica far outweighs any trade benefits for China.
Lan Hu, Second Secretary and head of the Political/Press
Section of the new embassy added that, in the end, it was the
GOCR's concerns which dictated the normalization timetable.
Although private (and in some cases, backchannel) discussions
had taken place for months with Costa Rica, the final
announcement came so suddenly that Lan was dispatched from
his previous posting in Madrid with just two day's notice.
Lan also predicted that Panama would be the next Central
American country to recognize China, with El Salvador being
the last. He made it clear the PRC was taking a (typically)
long-term view to expanding dilomatic relations around the
hemisphere.



9. (SBU) Of the GOCR Embassy opening in Beijing, Alarcon
described a hectic rush to locate, equip and staff a suitable
office, carefully monitored by the Chinese in the process.
To avoid even the appearance of impropriety, Alarcon was
extremely careful to spend only official GOCR funds and to
decline any special treatment by the PRC. The Embassy will
be staffed by the Ambassador (Antonio Burgues), a DCM (TBD),
two trade officers, two consuls and one or two administrative
staff. The two consuls, the only Mandarin speakers in the
Costa Rican foreign service according to Alarcon, were
stopped by confused and overzealous airport police personnel
while transiting Los Angeles on September 11. Alarcon
advised that the GOCR would protest the treatment of the two
diplomats, who were even handcuffed until their situation was
clarified. (NOTE: The Ambassador was summoned to the MFA on
September 17 to receive the protest note, which we emailed to
WHA/CEN on September 18, septel.)

COMMENT
=========



10. (C) Costa Rica views China as its gateway to Asia and an
important ally for its UNSC aspirations. China is using
Costa Rica as its gateway into Central America. Both sides
seem satisfied with this arrangement, for now, but there have
not been many tangible deliverables for the GOCR. The China
card will not help Costa Rica gain access to APEC, an Arias
administration goal, until the membership moratorium is
lifted in 2010. New ties to China are no guarantee that
Costa Rica will win its much-sought after UNSC seat in
elections next month, either. Recognizing China should bring
needed investment, especially for infrastructure, but the
money has not begun to flow in large quantities. On the
commercial side, although the trade shows and talk of new
opportunities in Asia are welcome, Tico commentators and
private citizens alike have expressed concerns about being
overwhelmed some day by the Chinese juggernaut. This is one
important new relationship the GOCR will have to manage
intelligently and carefully.
BRENNAN