DAS MADISON URGES CAFTA IMPLEMENTATION, DISCUSSES

C O N F I D E N T I A L SAN JOSE 000288 SIPDIS SIPDIS DEPT FOR WHA DAS MADISON, WHA/CEN, WHA/PPC AND EEB PLEASE PASS TO USTR AMALITO/DOLIVER E.O. 12958: DECL: 04/04/2018 TAGS: ECON ETRD PGOV PREL SNAR CS SUBJECT: DAS MADISON URGES CAFTA IMPLEMENTATION, DISCUSSES SECURITY REFORM REF: A. SAN JOSE 238 ¶B. STATE 26799 ¶C. STATE 30767 ¶D. SAN JOSE 263 Classified By: CDA Peter M. Brennan for reason 1.4 (d). ¶1. (SBU) SUMMARY. WHA DAS Kirsten Madison visited Costa Rica March 31-April 3 to urge the GOCR to quickly pass CAFTA implementation laws and address growing domestic security problems. President Oscar Arias said he expected the CAFTA legislation would be passed in the next three months and he pledged to continue to push CAFTA as a top priority. In meetings with pro-CAFTA legislators and the Ministry of Foreign Trade (COMEX),Madison said the U.S. appreciated the hard work done thus far, but the extended October 1 entry-in-force deadline was solid and represented "one last opportunity" for Costa Rica. In her meeting with Vice Minister for Public Security Gerardo Lascarez, Madison praised the outstanding USG-GOCR counternarcotics cooperation. She also briefed Lascarez on the Merida Initiative and underscored the need to confront narcotraffickers, terrorists and transnational criminals at every opportunity. DAS Madison completed the visit with a visit to Sardimar, a seafood processing and canning company which currently enjoys CBTPA preferences and would benefit from CAFTA's permanent preferences, and a stop at the future site of the new Costa Rican Coast Guard station (DoD-funded) in Caldera. END SUMMARY. ========================================== MEETING WITH PRESIDENT ARIAS AND FM STAGNO ========================================== ¶2. (C) With President Arias and FonMin Bruno Stagno on April 1, DAS Madison discussed CAFTA, security including the Merida Initiative, Cuban migrant resettlement (Refs. A & C),the FARC, Public Security Minister Berrocal's resignation (Ref D),and Costa Rica's relationship with the region. Arias underscored that: -- CAFTA implementation laws should be passed in the next three months and that the leading opposition party, PAC, had shown a new attitude to move the agenda along; -- security was the "number one concern" of the Costa Rican people; Stagno asked that Costa Rica not be "left out" of the Merida Initiative; -- there was no list of Costa Rican politicians associated �0A;with the FARC, despite ex-Minister of Public Security Berrocal's assertions; and -- regarding any connections between the FARC and Costa Rica, he was sending VP Laura Chinchilla, Stagno, and Attorney General Francisco Dall'anese to Bogota to consult with authorities there. (NOTE: The three visited Bogota on April 4-5.) ¶3. (C) Stagno told Madison that he was concerned about the possible membership of Cuba in the Rio Group, which he believed could diminish the importance of the OAS. According to Stagno, during the March 17 OAS meeting that addressed the FARC crisis between Ecuador and Colombia, Brazil had expressed an interest to engage with Caribbean countries. Stagno emphasized that this could only mean that Brazil and other countries had expressed support for Cuba to join the Rio Group, including Panama and Chile. Opening the Rio Group to Cuba, Stagno said, could marginalize OAS solidarity on Cuba. ¶4. (C) On security issues, Stagno said Central America suffered the terrible consequences of being wedged between Mexican and Colombian drug trafficking. Stagno said Costa Rica would be grateful if Merida could become a reality. He added that security in Costa Rica continued to be affected by the aftermath of the 1980s-era Nicaraguan conflict due to the large number of weapons in the country. He said the GOCR was also concerned about the huge resettlement of Colombian refugees around 2000-2002. Finally, Stagno said the possibility of Maras migrating south to Nicaragua and Costa Rica was a great cause for concern. ======================================= TRADE: THE DEVILISH DETAILS OF CAFTA ======================================= ¶5. (SBU) DAS Madison met with Vice Minister Amparo Pacheco of the Ministry of Foreign Trade (COMEX) on the status of CAFTA implementation. While praising COMEX's hard work on ratifying CAFTA and its ongoing work with USTR and the National Assembly, Madison underscored to COMEX the necessity of finishing CAFTA implementation before the October 1 deadline. Pacheco and COMEX Director Gabriela Castro highlighted the challenges of working with the National Assembly on CAFTA, specifically the acute sensitivity of some legislators to "CAFTA plus," that is, any bill which permits greater latitude than what is required by CAFTA. ¶6. (SBU) On the USTR-COMEX dialogue, Pacheco and Castro noted that intellectual property (IP) continued to be a controversial issue. However, the April 9 and 11 meetings with USTR in Washington could provide an opportunity for progress. On insurance, the GOCR,s support remained firm for a government guarantee for state insurance entity INS, but both officials reasoned that the execution of such a guarantee was highly unlikely. Also, COMEX was uncertain about the concept of a private guarantee fund as an offset to the government guarantee of INS. On the topic of regulations, COMEX was cautiously confident about timely completion. ¶7. (SBU) COMMENT: Three days after this meeting, the Supreme Court's Constitutional Chamber returned one of the CAFTA-related IP bills to the National Assembly for modification. The Chamber argued that proposed IPR violation penalties were "an infringement of the principles of reasonable and proportional penalties" while the proposed confiscation of counterfeit products from purchasers was a violation of private property rights. The ruling may complicate the COMEX-USTR dialogue. END COMMENT. ================= TRADE: EU STATUS ================= ¶8. (SBU) DAS Madison asked about the status of the Central American trade negotiations with the EU and what effects, if any, those had on COMEX's complicated and sometimes delicate CAFTA-related work. Pacheco made clear that CAFTA was the number priority for COMEX. She explained that EU talks were focused on political, cooperative, and trade relations and thus were different in character from the CAFTA discussions. ======================================== TRADE IN PRACTICE AND CAFTA CONSEQUENCES ======================================== ¶9. (U) The seafood processing and packing company Sardimar hosted DAS Madison for a presentation and factory tour at its facility near Caldera on April 2. With a primary business of tuna processing and canning, Sardimar employs 1400 people (and 6000 indirectly) in a modern facility that was constructed in 2002 at a cost of USD 80 million. The Sardimar product is marketed in 26 countries (primarily in the Americas and Europe) under multiple brand names which serve distinct market segments at varying price points. ¶10. (U) In the presence of local media and one of the Diputadas from the Puntarenas region, Company President Tomas Gilmore presented a compelling story of innovation in plant operations, market strategy, and corporate responsibility, stressing that the successes of this Costa Rican owned company and its business strategy are directly linked to trade preferences granted under CBTPA. Though enthusiastic about the firm's accomplishments in Costa Rica, Gilmore had no doubts that he would have to move a significant proportion of the company's operations to El Salvador in the event that CAFTA is not implemented and CBTPA is not renewed. In such a scenario, the local economy of Caldera and nearby Puntarenas would suffer a major employment and economic setback. Gilmore estimated that Sardimar's current tariff of 4.6 percent would jump to over 30 percent if CAFTA were not implemented by October 1. ================================= SECURITY: THE PRIVATE SECTOR VIEW ================================= ¶11. (U) During DAS Madison's breakfast with AmCham members, she thanked the organization for its active support of CAFTA during the 2007 referendum and its continuing CAFTA support during the implementation process. Security issues weighed heavier on AmCham's mind, however. The members expressed concern about the deteriorating domestic security situation in general for Costa Rica, and in particular for their employees. They questioned on what the Merida Initiative would mean for Costa Rica and what, if anything, AmCham could do. DAS Madison noted that U.S. companies might have some valuable insights for the U.S. Congress on the consequences that security realities in Central America have for U.S. investors. ¶12. (U) Michael Borg, AmCham president, said the unrest over security was "just the beginning," and that the threat of transnational crime in Costa Rica could scare away future investors. Carlos Denton of CID-Gallup told us that the Maras were beginning to infiltrate Nicaragua and were trying to recruit in Costa Rica, with their main goal in Costa Rica being linkages with local gangs. Borg and the AmCham team agreed that the best way to approach the GOCR on their security concerns would be to frame it in terms of caring for their employees and their families. ============================================= =========== SECURITY: THE VIEW FROM THE MINISTRY (AND IN THE FIELD) ============================================= =========== ¶13. (SBU) Due to former Minister of Public Security Fernando Berrocal's resignation the day before her arrival, DAS Madison met with Vice Minister Gerardo Lascarez, whose portfolio includes counternarcotics. Madison briefed Lascarez on the Merida Initiative (Ref B) and thanked him for GOCR's record-breaking year of drug seizures for 2007. Madison emphasized Merida's regional approach and that all of Central America needed to work together to deny narcotraffickers and criminals easy transit through the zone. Lascarez appreciated the briefing and any assistance the U.S. could provide. ¶14. (U) With media in tow, DAS Madison also visited the site of the future Costa Rican Coast Guard (SNGC) station in Caldera, approximately 20 miles from the current station in Puntarenas on the Pacific Coast. Martin Arias, SNGC Director, showed Madison the blueprints for the new station, to be funded largely by $1.25 million in DoD/SOUTHCOM Section 1004 funds. (Announcement of the USG contribution was reported in the media and circulated in a SNGC press release.) The new station will include an operations center and barracks, maintenance facility, dry dock, expanded pier, and classrooms for the new coast guard academy. The Caldera facility will eventually house at least four of the six main patrol boats the SNGC operates, including their 105-foot vessel. ¶15. (U) DAS Madison has cleared this cable. HENIFIN