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07SANJOSE655 2007-04-04 20:36:00 CONFIDENTIAL Embassy San Jose
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DE RUEHSJ #0655/01 0942036
O 042036Z APR 07 ZFF4
					C O N F I D E N T I A L SAN JOSE 000655 




E.O. 12958: DECL: 04/04/2017


B. B) SAN JOSE 552

Classified By: CDA Laurie Weitzenkorn per 1.4(d)

1. (C) SUMMARY: Although optimistic that CAFTA can be
ratified by August-September, the Arias administration is now
concerned about the prospect of a CAFTA referendum.
Responding to a petition filed by CAFTA opponent, renegade
PLN member, former legislator and presidential candidate Jose
Miguel Corrales, the Supreme Electoral Tribunal (TSE) is to
rule on the issue by April 15. GOCR officials believe the
TSE may be inclined to agree to a referendum, but they are

reasonably confident of winning the referendum, if it comes
to that. The cost and time involved will be challenges,
however; no such referendum has ever been held in Costa Rica.
Clothed as a &benign8 way to resolve the CAFTA issue in
public once and for all, the referendum could become one more
delaying gambit by the opposition. President Oscar Arias is
reported to be adamantly opposed, but other cabinet members
are contemplating strategy, if a referendum proves
inevitable. In the good news department, Arias,s coalition
is cooperating again, and key CAFTA-related legislation
continues to move ahead in the National Assembly. END




2. (C) On March 29, the Ambassador called on Minister of
Government Rodrigo Arias, who was easing back into a work
schedule after hip replacement surgery. Looking fit and
sounding confident, Arias was optimistic that the GOCR would
be able to ratify CAFTA and approve implementing legislation
as &a package8 in August-September, the same prediction he
has made recently in public. (The next extraordinary
legislative session begins in August, when the executive
would have more control over the agenda.) The Minister
dismissed the &jump-start8 proposal of ML party leader Otto
Guevara ) to take CAFTA to a no-notice, simple yes or no
plenary vote in mid-April ) as going too far, too soon.
(NOTE: Guevara discussed this idea with Department
interlocutors during his Washington visit last month.)
Although technically constitutional, such a move would fly
against years of legal tradition permitting legislative
debate of interpretative clauses when considering
international agreements. The Supreme Court,s activist
constitutional chamber (Sala IV) would probably object (Ref

3. (SBU) According to Arias, the GOCR will thus maintain its
current course on CAFTA:

-- Correct the procedural flaws in proposed fast track
legislation by mid-April (as demanded by the Sala IV on March
5), while moving ahead on key legislation in committee;

-- Once fast track legislation is ready (probably in late-May
or early-June, after one last Sala IV review, prompted by
another likely opposition challenge), take CAFTA to the
plenary for limited debate; and

-- In the meantime, apply existing fast track rules to
CAFTA-related legislation as required. (NOTE: Existing fast
track rules need no modification for use with regular
legislation. The modification is required to use fast track
with treaties.)




4. (C) However, Minister Arias said the GOCR has concerns,
which it is keeping private, about a possible CAFTA
referendum. In a separate meeting with the Ambassador on
March 30, First VP and Minister of Justice Laura Chinchilla
echoed those concerns. Chinchilla explained that Jose Miguel
Corrales (former PLN legislator and presidential contender
and strong CAFTA critic) had been pushing the referendum idea
since 2006. Because he helped Chinchilla draft the
Referendum Law when they were both legislators, he is
considered an expert on the subject. (NOTE: In October 2006,
the TSE rejected a petition by Corrales and others for a
non-binding CAFTA referendum, arguing that non-binding polls
were not permitting under the Referendum Law. Corrales and
company then pressed for a binding referendum. Their
petition reached the Sala IV, but was bounced back to the TSE

for action on February 16. END NOTE.) According to
Ministers Arias and Chinchilla, the TSE must issue a decision
in this latest challenge within 60 days, i.e., by April 15.

5. (C) Chinchilla said President Arias was adamantly opposed
to the referendum idea, but the GOCR would have to proceed
very carefully if the TSE decided in favor. She and Minister
Arias both described the outcome as uncertain. Of the three
TSE members, two had some doubts that a referendum could

apply to any legislation with a fiscal aspect (such as a free
trade agreement dealing with tariffs and duties), but they
were leaning pro-referendum nonetheless. The views of the
third member ) currently a substitute ) were unknown.
Minister Arias was confident that TSE president Luis Antonio
Sobrado, whom he described as &young and forceful,8
ultimately would make the right decision ) to reject a CAFTA
referendum because of the restriction on referenda with
fiscal implications. Even if the TSE supported a CAFTA
referendum, Arias believed that regular legislative work
could continue while the referendum was prepared.

6. (C) VP Chinchilla did not sound as confident on either
issue. She told the Ambassador that the rectors of the four
leading state universities may turn the heat up after Holy
Week by calling in public for the referendum, in exchange for
a pledge to tone down CAFTA opposition on campus and in the
streets. For Costa Ricans in and out of politics, (as well as
the TSE members), this eminently &Tico8 call to consensus
might be too powerful to ignore, in Chinchilla,s opinion.

7. (C) If the TSE ruled in favor of the referendum, the GOCR
could still take the initiative, according to Chinchilla. To
enact the referendum, the executive could submit appropriate
legislation to the Assembly. Because the referendum
procedure calls for an up or down, simple majority vote in
the plenary, without Sala IV review (as is the case with
normal legislation), Chinchilla said the GOCR might bundle
some CAFTA-related legislation with the referendum bill. The
opposition would then face a dilemma: either oppose the
referendum to block the CAFTA-related bills, or support the
referendum, but approve the CAFTA legislation at the same
time. The Assembly itself could also call for a referendum,
Chinchilla explained, but 38 votes would be required to pass
the relevant legislation. The Arias administration,s working
majority would block this route, if the opposition tried it.

8. (C) Chinchilla was more concerned about the third route
to a referendum: a public petition. Only five percent of the
national voter registry would be needed, approximately
150,000 signatures. The opposition could collect those, and
delay long enough to submit their petition so as to
jeopardize the CAFTA timetable. Ministers Arias and
Chinchilla both believe the GOCR could win a CAFTA
referendum, but the VP acknowledged that cost and campaigning
would be challenges. The GOCR would not be permitted to
campaign, for example, relying on the private sector to carry
the day against an already well-organized and well-funded
CAFTA opposition. The first test of the Costa Rican
referendum law and the only such vote on CAFTA no doubt would
attract support from international anti-globalization
organizations and from Venezuela, as well. Meeting the
minimal 40 percent turnout rate for the referendum to be
considered valid is another challenge, Chinchilla added.




9. (C) Meanwhile, despite some mid-March turbulence, the
GOCR,s pro-CAFTA coalition seems to be working smoothly
again. Problematic ML legislator Mario Quiros (Ref B) is not
only supporting the GOCR,s position on correcting the
procedural flaws in the fast track legislation, but he is
writing the majority committee report, according to ML
president Otto Guevara. Energized from his Washington visit,
Guevara agreed with the Ambassador in a meeting on March 27
that President Arias should designate one minister to run the
CAFTA effort full-time. Minister of Foreign Trade Marco
Vinicio Ruiz is fully occupied with CAFTA substance and
negotiations with USTR. Minister w/o Portfolio Marco Vargas
thus would be a logical selection, Guevara said.




10. (SBU) In the legislature, three of 13 bills necessary to
harmonize national law with CAFTA have reached the floor and

are pending plenary action: dealership regulation,
ratification of the Budapest IPR treaty and ratification of
the trademark treaty. Committee deliberations on six more
bills are to be completed by the last week in April: opening
the telecom market, strengthening public sector entities,
opening the insurance market, a bill dealing with
miscellaneous patent and trademark issues, a bill dealing
with IPR enforcement issues, and legislation dealing with the
protection of new plant species. Before the Holy Week
recess, key pro-CAFTA legislators were stressing in public
the need to keep moving and the urgency of mounting a
pro-CAFTA offensive with the private sector after Easter.




11. (SBU) A referendum would further cloud an already messy
CAFTA picture, and would mean more delays in a much-delayed
timetable. It would also be a tempting solution for tired
legislators, looking for a way to share (or pass off) the
CAFTA burden. We hope the GOCR,s concerns are fueled more
by prudence than alarm. From our reading of related
jurisprudence (such as the Procuraduria,s decision of April

24. 2006), it appears that a free trade agreement which
regulates tariffs cannot be approved by a referendum, but we
are not the local experts. The details of referendum
procedures are not clear to us, either, nor is the Sala IV,s
potential role, e.g., could referendum results or procedures
be challenged in the Supreme Court? Even without a
referendum, the CAFTA end-game here will not be elegant, and
the timetable continues to slip. Instead of a clean
ratification-implementation sequence, we can expect to see
motion at varying speeds and times on both tracks, using a
complex, multi-layered strategy including special and normal
legislative committees, as well as fast track and normal
legislative rules. As one long-time political observer and
pollster told us, in politics or in soccer, Ticos play their
best when they are under the most pressure, &when their
noses are almost under water.8