This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 04 SAN JOSE 002020 
 
SIPDIS 
 
EAP/CM FOR KLEE 
WHA/PCP FOR JBISCHOFF 
WHA/EPSC FOR LGUMBINER 
 
E.O. 12958: DECL: 08/26/2025 
TAGS: ECON PREL ETRD ETTC EINV ENRG EAGR EFIN PHUM EMIN CH CS ESENV
SUBJECT: CHINESE ACTIVITIES IN COSTA RICA 
 
REF: A. SECSTATE 138041 
     ¶B. SAN JOSE 01940 
 
Classified By: Charge Russell Frisbie, reasons 1.4(b) and (d) 
 
¶1.  (C) Summary.  Costa Rica officially established 
diplomatic relations with Taiwan in 1959 and is one of only 
26 countries to officially recognize Taiwan.  Costa Rica has 
no official diplomatic ties with the People's Republic of 
China (China or PRC).  (Note:  Post will follow WTO naming 
conventions with respect to economic indicators, i.e., China 
refers to the PRC but not Hong Kong.)  Taiwan is actively 
involved in funding transportation and other development 
projects in Costa Rica.  Despite the long history of close 
ties with Taiwan, Chinese involvement in Costa Rica, 
primarily through trade, is growing.  Trade between Costa 
Rica and the PRC is ten times that with Taiwan.  This gap 
will only continue to widen as China's development advances. 
President Pacheco's recent trip to Asia in August 2005, which 
included stops in Taipei and Tokyo, have brought recent media 
focus on a variety of trade issues with Asian countries, 
including China (Ref B).  End Summary. 
 
--------------------------------------------- - 
INTERVIEW WITH THE MINISTER OF FOREIGN AFFAIRS 
--------------------------------------------- - 
 
¶2.  (C)  On August 1, 2005, the Costa Rican Minister of 
Foreign Affairs (MFA), Roberto Tovar told us that there have 
been no official government-to-government contacts with the 
PRC, probably because the PRC knows that the current 
administration is not interested.  Minister Tovar continued 
by saying that the Chinese are finding other ways to increase 
their presence in Costa Rica.  As an example, he stated that 
imports from the PRC have grown exponentially in recent 
years.  He believes the PRC is trying to cultivate certain 
Legislative Assembly members (deputies) and is behind 
creation of an unofficial "Friends of China Committee" in the 
Legislative Assembly.  Note: Based on conversations with 
Assembly staff members, a group of deputies is assigned to 
deal with China-related issues in an ad hoc manner and on an 
unofficial basis.  These deputies include Guido Vega (PLN), 
Jorge Alvarez (PUSC), and Francisco Sanchun (PUSC). 
 
¶3.  (C)  From Tovar's point of view, Chinese interlocutors 
appear to be concentrating on members of the National 
Liberation Party (PLN), due to the likelihood that Oscar 
Arias, the PLN presidential candidate, will win in the 
upcoming February 2006 elections.  An Arias win may also help 
sweep PLN deputies into the 57-member Assembly.  San Jose 
Mayor Johnny Araya, a PLN member, was recently a guest of the 
Chinese in Beijing.  Tovar said that PLN president Antonio 
Pacheco visited his office some time ago to ask for visas for 
high-level PRC officials.  (Tovar did not say if they 
received their visas.)  Finally, Tovar guessed that Arias 
might look favorably on establishing relations with the PRC, 
and the PRC may be working through PLN members to persuade 
him to do so.  Tovar stated that he thinks relations with 
China, after the Pacheco administration ends in May 2006, 
could develop in stages, as is occurring in Panama.  Tovar 
said that the PRC will most likely try to first establish a 
commercial office with some diplomatic status. 
 
------------------------------ 
TRADE WITH CHINA AND HONG KONG 
------------------------------ 
 
¶4.  (U) President Pacheco's recent visit to Taiwan and Japan 
in August 2005, focused the media on the economic aspect of 
Costa Rican-Asian relations, including with China (Ref B). 
An August 22, 2005, "La Nacion" article covered the rapid 
growth in both imports from and exports to China and Hong 
Kong.  Exports to China and Hong Kong reached approximately 
USD 300 million in 2004, up from USD 30 million in 2000. 
Over the same period imports from China and Hong Kong grew 
from USD 106 million to USD 330 million.  In 2004, Costa Rica 
ran a trade surplus of USD 79.1 million with Hong Kong and a 
deficit of USD 109 million with China.  It is clear that the 
PRC is emerging as an important trade partner for Costa Rica, 
particularly as a supplier of goods.  China has outpaced 
Taiwan and even Hong Kong during the last five years in terms 
of total trade with Costa Rica. 
 
¶5.  (U)  In 2000, Costa Rican imports from China were USD 
78.4 million and exports were USD 12.7 million (this was 
equivalent to 1.4 percent of Costa Rica's total foreign trade 
that year).  Statistics related to Hong Kong for 2000 were 
USD 37.5 million in imports and USD 17.4 million in exports. 
By 2004, imports from  China had grown to USD 272.5 million 
and exports to USD 162.3 million (for Hong Kong, imports 
amounted to USD 57.7 million and exports were USD 136.8 
million).  This resulted in China accounting for 5.9 percent 
of Costa Rica's total trade in 2004.  In a short time, Hong 
Kong and China thus have positioned themselves among Costa 
Rica's top 10 trading partners. In the first seven months of 
2005, exports to China grew 185.5 percent with respect to the 
same period in 2004.  If current trends continue, the PRC 
will soon be Costa Rica's second largest trading partner 
after the U.S. 
 
¶6.  (U)  The majority of Costa Rican exports to China are 
high technology electronic devices such as microprocessors, 
modular circuits and semiconductors (Intel has a large 
operation in Costa Rica) and leather garments.  Demand for 
Costa Rican exports of ornamental plants, agro-industrial 
products, seafood and aqua-culture is increasing, especially 
in Hong Kong.  Imports from China include cotton textiles, 
radio-telephone reception devices, and video- and 
photo-recording and reproducing devices. 
 
¶7.  (U) TABLE ONE - COSTA RICAN EXPORTS* 
 
 
                  2000     2001     2002     2003     2004 
 
Total Exports  5,897.3  5,042.8  5,280.5  6,100.2  6,293.0 
(USD and %)   (100.0%) (100.0%) (100.0%) (100.0%)  100.0%) 
 
U.S.A          3,056.7  2,504.8  2,650.4  2,834.1  2,775.7 
               (51.8%)  (49.7%)  (50.2%)  (46.5%)  (44.1%) 
 
China             12.7     13.8     33.7     88.9    162.3 
                (0.2%)   (0.3%)   (0.6%)   (1.5%)   (2.6%) 
 
Hong Kong         17.4     27.3     51.6    132.8    136.8 
                (0.3%)   (0.5%)   (1.0%)   (2.2%)   (2.2%) 
 
PRC Total         30.1     41.1     85.3    221.7    299.1 
                (0.5%)   (0.8%)   (1.6%)   (3.7%)   (4.8%) 
 
Taiwan             9.9     11.3     22.9     38.4     34.8 
                (0.2%)   (0.2%)   (0.4%)   (0.6%)   (0.6%) 
 
 
¶8.  (U) TABLE TWO - COSTA RICAN IMPORTS* 
 
 
                 2000     2001     2002     2003     2004 
 
Total Imports 6,373.3  6,546.3  7,174.5  7,643.1  8,268.0 
(USD and %)  (100.0%) (100.0%) (100.0%) (100.0%)  100.0%) 
 
U.S.A         3,388.0  3,504.1  3,805.8  3,883.4  3,796.0 
              (53.2%)  (53.5%)  (53.0%)  (50.8%)  (45.9%) 
 
China            78.4    100.5    121.6    160.2    272.5 
               (1.2%)   (1.5%)   (1.7%)   (2.1%)   (3.3%) 
 
Hong Kong        37.5     41.8     45.0    49.9      57.7 
               (0.6%)   (0.6%)   (0.6%)   (0.7%)   (0.7%) 
 
PRC Total       115.9    142.3    166.6    210.1    330.2 
               (0.5%)   (0.8%)   (1.6%)   (3.7%)   (4.8%) 
 
Taiwan           65.4    68.3     66.2     66.4     71.1 
               (1.0%)   (1.0%)   (0.9%)   (0.9%)   (0.9%) 
 
 
*Data Sources:  Costa Rican Ministry of Foreign Trade 
(COMEX), The Foreign Trade Corporation of Costa Rica 
(PROCOMER), and the Costa Rican Central Bank (BCCR). 
 
¶9.  (U)  Environmental degradation related to Chinese energy 
or other natural resource demands is currently not a concern 
in Costa Rica.  Costa Rica has a long history of 
environmental stewardship, and all indications are that this 
policy will continue regardless of Chinese demand for 
resources.  However, China's growing energy needs and its 
effect on oil prices may have negative economic effects in 
Costa Rica, a country that imports all of its oil. 
¶10.  (U)  According to the BCCR, the PRC has directly 
invested approximately USD 1.7 million in Costa Rica over the 
last five years, primarily in business infrastructure.  This 
compares to FDI of USD 2.5 billion in Costa Rica by the U.S. 
 
---------------------- 
ATTITUDES TOWARD CHINA 
---------------------- 
 
¶11.  (C)  Popular attitudes toward China vary.  On the one 
hand, Chinese imports offer relatively low-priced goods to 
consumers.  On the other hand, Costa Rica is running a trade 
deficit with the PRC, and China is seen as a threat to some 
Costa Rican industries.    However, issues surrounding the 
rapid growth of the Chinese economy are covered regularly in 
the press, and it is acknowledged that China will be an 
economic force to be reckoned with.  There is no evidence of 
widespread negative attitudes toward the PRC.  COMMENT: 
Attitudes toward Taiwan also vary.  Because of Taiwan's 
funding of many development projects, Taiwan is generally 
viewed positively.  However, Taiwanese officials have been 
implicated in several high-profile scandals involving illegal 
campaign contributions and funding the MFA, and this has 
resulted in a degree of skepticism of Taiwanese government 
motives in Costa Rica.  END COMMENT. 
 
¶12.  (C)  With respect to trade issues, many Costa Ricans 
look upon the Chinese as fierce competitors and, in some 
industries, an imminent threat.  Anecdotal evidence may lead 
to the conclusion that some jobs, especially in the textile 
and apparel industries, have moved from Costa Rica to China 
due to lower wages.  Textile industry experts in Costa Rica 
have told Econoff that it is getting more difficult to 
compete against the Chinese, and the United States-Central 
American-Dominican Republic Free Trade Agreement (CAFTA-DR), 
which will make permanent tariff-free textile exports to the 
U.S. market, is seen as the industry's only hope to survive 
in Costa Rica.  (Note: For reasons unrelated to the subject 
of this correspondence, Costa Rica has not yet ratified 
CAFTA-DR.) 
 
¶13.  (C)  Econoff attended a textile industry sourcing 
seminar held in Costa Rica in July 2005 in which U.S., 
Central, and South American manufacturers were urged not only 
to study the successful nature of the Chinese textile 
industry in order to learn about their competition, but also 
to seek Chinese companies with which they could partner in an 
attempt to leverage the efficiencies of the Central and South 
American manufacturers. 
 
--------------------- 
CHINESE IN COSTA RICA 
--------------------- 
 
¶14.  (C)  Based on a June 2000 census, the Costa Rican 
National Institute of Statistics and Census (INEC) states 
that there were approximately 8,000 respondents who 
identified themselves as Chinese out of an estimated 4 
million Costa Ricans.  (Note:  There was no differentiation 
drawn between Taiwanese and persons from China or Hong Kong.) 
 This number, however, is probably far lower than the actual 
number of Chinese who reside in Costa Rica and does not 
include Costa Ricans of Chinese ethnicity.  Anecdotal 
evidence revealed that there are probably more Chinese who 
have immigrated to Costa Rica than Taiwanese over the last 
several years.  According to Costa Rican immigration sources, 
approximately 4,400 Chinese and 2,300 Taiwanese currently 
have resident status in Costa Rica.  Also, the annual number 
of PRC tourists in Costa Rica has ranged from 2,500 to 5,000. 
 The numbers from Taiwan are about 3,000 per year. 
Non-immigrant visa applicants at the U.S. consulate in San 
Jose average about 400 Chinese per year and 200 Taiwanese per 
year. 
 
--------------------------- 
NO MILITARY TIES TO THE PRC 
--------------------------- 
 
¶15.  (C)  Costa Rica's military forces were disbanded by the 
Constitution that was ratified in 1949.  There are no 
military forces per se, although a Coast Guard force does 
exist under the auspices of the Ministry of Public Security. 
Post maintains close contact with this Ministry, and there 
are no indications of any interactions with the PRC. 
 
----------------------- 
PRC PRESS IN COSTA RICA 
----------------------- 
 
¶16.  (C)  The Xinhua News Agency, the official PRC state-run 
information organization, has an office in San Jose and 
maintains a Spanish-language website 
(www.spanish.xinhaunet.com).  This organization covers news 
of interest to China as well as Central American current 
events.  This agency also offers information about all 
aspects of Chinese culture including economics, history, 
politics, etc.  The local television cable system carries one 
Beijing-based, Chinese-language station. 
 
------- 
COMMENT 
------- 
 
¶17.  (C)  China has no official ties with Costa Rica. 
However, due to the burgeoning Chinese economy and 
accelerating pace of development, trade between the two 
countries will grow and may result in closer ties.  Although 
still running a trade deficit with China, Costa Rican exports 
to the PRC jumped ten-fold from 2000 to 2004.  These numbers 
will only increase and result in closer economic ties between 
the two countries.  However, it may be difficult to establish 
official relations with China considering the long history of 
diplomatic and financial ties between Costa Rica and Taiwan. 
President Pacheco's recent trip to Taipei has reinforced 
those diplomatic ties, but it will be difficult to ignore the 
ever-growing economic presence of a developing China.  A new 
administration will take office in May 2006, which may bring 
gradual changes to the relationship with the PRC. 
FRISBIE