THREE MORE FTAS FOR COSTA RICA BEFORE END OF ARIAS

UNCLAS SAN JOSE 000118 SIPDIS E.O. 12958: N/A TAGS: ETRD ECIN ECON XG CH SN CS SUBJECT: THREE MORE FTAS FOR COSTA RICA BEFORE END OF ARIAS ADMINISTRATION REF: 09 SAN JOSE 256; 09 SAN JOSE 985 ¶1. (U) SUMMARY: Costa Rica is on the verge of concluding free trade agreements (FTAs) with the European Union (EU),China, and Singapore. Combined with CAFTA-DR, these agreements will solidify the free trade legacy that President Arias, who completes his term of office on May 8, aimed to leave the country. With three new FTAs expected to come online this year, the GOCR needs to streamline its process to avoid backlash from exporters and overburdening its own employees. END SUMMARY. ¶2. (SBU) The EU has invited five Central American countries to sign an Association Agreement on May 18 in Madrid, at the EU-Latin America and Caribbean Summit. While originally intended as a bloc-to-bloc agreement, Foreign Ministry Political Director Alejandro Solano told us January 7 that the EU is now prepared to sign with whichever Central American countries are willing. He was confident that Honduras would be back at the table and intimated that Nicaragua would be the one left out if it continued its obstructionist tactics. The EU's willingness to sign with individual countries is striking, since the Charge of the European Commission's mission in San Jose had emphasized in December that one of the most important aspects of this agreement for the EU was that it would be its first bloc-to-bloc agreement. Also, earlier in 2009, the EU promised USD 34 million in development assistance to Costa Rica (in addition to assistance to the other Central American countries) in the areas of quality control, education, women-owned businesses, and community policing. (reftel A) Negotiations of this accord were suspended following the coup in Honduras in June 2009. The parties plan two last negotiation rounds, in February and April. Costa Rica is the principal Central American exporter to the EU, shipping bananas, pineapple, computer parts, coffee, juices, and ornamental plants to the 27-country bloc. ¶3. (U) Costa Rica and China expect to conclude negotiations of their FTA in a sixth round of talks in February. (reftel B) Currently, the two countries have agreed on 90 percent of their products. Negotiators for the two countries are aiming to present the agreement to the Costa Rican Legislative Assembly before President Arias leaves office. Many Costa Ricans have been resistant to the FTA because of the questionable quality of Chinese products, exacerbated by the GOCR's limited capacity to monitor product safety. Nonetheless, it appears that the GOCR has more in mind than just cheap goods. Chief Negotiator for the Costa Ricans Fernando Ocampo said, "We are aiming for Chinese advanced technology companies that will contract qualified Costa Rican employees." Costa Rica is still the only Central American country to have established official relations with China, and it hopes to expand from that foundation. Ocampo continued, "To be in good with China is the best recommendation letter we have when looking for future relationships in Asia." ¶4. (U) A case in point is Singapore. Costa Rica and Singapore held their fourth and final round of negotiations in San Jose the week of January 11. Singapore agreed to allow all Costa Rican agricultural products to enter the country under the free trade agreement, a first for Costa Rica. Singapore granted immediate access to 100 percent of Costa Rican products, and Costa Rica granted immediate access for 90 percent of Singapore's products. The remaining 10 percent will phase in over the next five or ten years (depending on the product). The two countries expect do a legal revision of the agreement in March and sign it in April. Free trade negotiations began with Singapore in April 2009. ¶5. (U) The Costa Rican Chamber of Exporters (CADEXCO) has repeatedly complained about the "chaos" in the government's administration of free trade agreements. Over 22 distinct government offices are involved in exporting under free trade agreements. CADEXCO stated that the lack of coordination among offices causes significant delay for exporters, not to mention occasional rejection of goods at the destination port due to incomplete paperwork. ¶6. (SBU) Comment: With three new FTAs expected to come online this year, the GOCR needs to streamline its process to avoid backlash from exporters and overburdening its own employees. We hope that ongoing USAID-supported trade capacity building projects, particularly in customs, can help bootstrap the process. Anna Sparks Economic Specialist U.S. Embassy San Jos????, Costa Rica (506) 2519-2269 ANDREW