SECRETARY GUTIERREZ PROMOTES TRADE, HIGH TECH, AND PRODUCE

UNCLAS SAN JOSE 000835 SIPDIS COMMERCE FOR ITA, TDA AND SECRETARY'S OFFICE DEPT FOR WHA, WHA/CEN, WHA/EPSC AND EEB PLEASE PASS TO USTR AMALITO AND DOLIVER PLEASE PASS TO USDA PLEASE PASS TO OPIC PLEASE PASS TO EXIM PLEASE PASS TO TDA E.O. 12958: N/A TAGS: EAGR ECON ETRD OVIP PGOV PINR PREL CS SUBJECT: SECRETARY GUTIERREZ PROMOTES TRADE, HIGH TECH, AND PRODUCE IN COSTA RICA REF: A) SAN JOSE 823 (NOTAL),B) SAN JOSE 827 ¶1. SUMMARY: Commerce Secretary Carlos Gutierrez visited Costa Rica for two days of governmental and business meetings, September 30-October 1. The Secretary's business meetings focused on trade and business related to American enterprise in Costa Rica. In addition to offering encouraging words to key Costa Rican chambers on CAFTA implementation, the Secretary and senior officials from OPIC, Ex-Im, and the U.S. Trade & Development Agency (TDA) proposed to assist Costa Rica "to turn CAFTA into business" by aggressively pursuing ways to promote USG agency cooperation with the regions' businesses and chambers. The Secretary saw first-hand the tangible and intangible benefits of trade: at Intel, company officials, teachers, and students described Intel's commitment to technology education in Costa Rica; at Hortifruti (a subsidiary of Wal-Mart Central America),company officials discussed the merits of the Tierra Fertil program which raises the quality, marketing, and operating standards of small farmers through training and provides access to credit. The Secretary's governmental meetings are reported in Reftels. The Secretary's staff cleared this message. END SUMMARY. BUSINESS MEETINGS HIGHLIGHT IMPORTANCE OF FDI -------------- ¶2. The Secretary and key members of his delegation convened with CINDE, a private, not-for-profit foreign direct investment (FDI) promotion agency (supported by fundraising and a USAID endowment). CINDE Executive Director Gabriela Llobet presented CINDE's strategic approach to attracting FDI. By stressing Costa Rica's educated but cost-competitive work force, transparency (ranked third in LatAm, according to Transparency International's 2008 Corruption Perceptions Index),free trade zone program, and proximate location relative to North America, CINDE targets three types of FDI: (1) advanced manufacturing (from car parts to INTEL's microchip production),(2) medical equipment and supplies, and (3) professional services. Llobet highlighted recent results: FDI grew from just over USD 600 million in 2002 to USD 1.884 million in 2007, a threefold increase in five years. ¶3. The Secretary praised CINDE's strategic direction and commented that it is clear that FDI is used to establish a platform for export. When asked about Costa Rica's relatively low ranking in the World Bank's "Doing Business" survey (115th of 178),Llobet noted that the study does not favor Costa Rica, as the business environment suffers from red tape. Nonetheless, the GOCR's Free Trade Zone regime, she added, provides an expedited set of regulatory processes which is attractive to FDI investors. ¶4. President and CEO Robert Mosbacher, Jr., of OPIC, outlined his agency's commitment to providing access to credit and facilitating more investment. First Vice President and Vice Chair Linda Conlin of Ex-Im Bank targeted the strengthening of Costa Rica's renewable energy capacity as an area of Ex-Im involvement. AMCHAM BOARD AIRS CAFTA FRUSTRATION -------------- ¶5. Attending a special AmCham board meeting, the Secretary heard first hand from private sector representatives of their deep concern over Costa Rica's long-running CAFTA-DR saga. Led by board President Michael Borg, the Secretary heard a collective anxiety over the re-energized PAC opposition party. This framed a discussion largely colored by "CAFTA fatigue" as AmCham members described their efforts to push CAFTA to the finish line and requested help from the USG. The Secretary inquired about the status of implementing legislation and the GOCR's and AmCham's plan to push CAFTA to completion. He urged the Board and its members to continue the fight by talking to employees and helping them understand how the agreement is vital to Costa Rica. ¶6. When asked how to respond to charges that free trade agreements "only benefit the wealthy," the Secretary commented that the same argument was raised (and overcome) in the other CAFTA countries. It is a question of organizational and public relations strategy, he said; "There is nothing like grassroots pressure". If the worker becomes informed and realizes that his job depends on the agreement, then action will follow. The Secretary emphasized the need to tell CAFTA success stories and encouraged AmCham members to work together as a coalition of traders. Some members expressed reluctance to be "public" in their support of CAFTA, for fear of being targeted by the opposition. In response, the Secretary urged businesses "to get up and fight." PROPOSED COOPERATIVE PROGRAM WITH CHAMBERS -------------- ¶7. The Secretary plus OPIC's Mosbacher, Ex-Im's Conlin, TDA Director Larry Walther and Commerce DAS Walter Bastian met with representatives of several Costa Rican chambers on two different occasions. The first, chaired by Foreign Trade Minister Marco Vinicio Ruiz, worked to familiarize key Costa Rican chambers with the capabilities of Commerce, OPIC, Ex-Im, and TDA. The second focused on developing issues for cooperation between the USG and the Costa Rican chambers. Notable attendees included Oscar Cabada, President of Chamber of Commerce, and Rodolfo Molina, President of the Chamber of Textiles. ¶8. At the second meeting, Bastian summarized that "what we have on the US side around this table is people who can turn CAFTA into business." After dialogue on how the chambers supported CAFTA, the topic turned to next steps after CAFTA implementation. The participants agreed to aggressively pursue ways to promote USG agency cooperation with the region's businesses. A video conference was proposed for the near future and other steps will follow. CAFTA EQUALS PREDICTABILITY (AND INVESTMENT) -------------- ¶9. At a lunch hosted by AmCham, the Secretary delivered his keynote speech for the Costa Rican segment of the trip. The Secretary emphasized three themes: (1) CAFTA supporters should not let down, but continue the fight for the completion of CAFTA implementation in Costa Rica; (2) "capital is a coward" (particularly in the current unsettled financial environment) and will seek, in the form of FDI, destinations with predictable laws on market access, safeguards, rules of origin, remedies and arbitration, procurement, intellectual property, etc., as defined by USG trade agreements; and (3) a commitment to opportunity and prosperity depends on economic growth which is a direct result of flourishing trade (as NAFTA demonstrated). ¶10. A question from the audience regarding how the next USG administration "might give Costa Rica a better deal" was met with a straightforward observation by the Secretary: When an agreement is opened up, both sides can demand changes, and this might not result in the "better deal" envisioned by one side or the other. AN INTEL HIGH TECH MOMENT -------------- ¶11. Intel arrived in Costa Rica in 1998 to build what is still its only microchip manufacturing facility in Latin America, at a cost of USD 800 million, six times its initial commitment of USD 115 million. Intel accounts for 20 percent of the value of Costa Rican exports (Source: COMEX, Central Bank of Costa Rica). Site manager Mike Forrest welcomed the Secretary to Intel's plant outside of San Jose and provided a background briefing. The program then focused on Intel's efforts to provide a modern educational experience for Costa Rican students. ¶12. Intel provides training programs in technology for teachers and students, scholarships for graduate students in engineering, affordable PCs, and facilitates internet connectivity in schools. By using computers and the internet to research and create projects for the classroom, Intel's programs have increased the interest of local children in learning. Two fifth-grade students presented the results of their projects to the Secretary, illustrating how Intel's involvement in the classroom supports its broader strategy of creating a labor force that is prepared to work in the technology industry, while concurrently creating a more tech-savvy populace that would eventually buy the computers that incorporate Intel's products. AGRICULTURAL COOPERATIVES BENEFIT SMALL PRODUCERS -------------- -------------- ¶13. The Secretary then visited Hortifruti, a cooperative program devoted to agricultural development, storage, and marketing of fruits, vegetables, and grains. Wal-Mart of Central America operates a regional agro-industrial program which includes Hortifruti. Wal-Mart Vice Presidents Carlos Uribe and Jose Manuel Rodriguez greeted the Secretary and provided a presentation on key elements of the Central American agricultural sector, which included producer size (small, traditional subsistence farmers),market access (isolation and logistical problems),and credit (lack of access). ¶14. Through training on growing techniques and what to grow for retail marketing distribution, Hortifruti's Tierra Fertil program improves the lives of small farmers. The training links product quality to payment as the Hortifruti program guarantees to farmers on-time payment for produce that meets established quality standards. A regular payment allows farmers to re-invest in diversifying their crops and thus gradually improve farm operation efficiencies and quality standards. Through Hortifruti, 2,500 producers in Costa Rica now have access to markets throughout Central America and to some extent in Europe, as well. Tierra Fertil operates in five countries (Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica),produces more than 243 products, and involves more than 10,000 families.