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DE RUEHSJ #0959/01 3451401
ZNY CCCCC ZZH
O 101401Z DEC 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0339
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE

C O N F I D E N T I A L SAN JOSE 000959 
 
SIPDIS 
 
DEPT FOR WHA, WHA/CEN, WHA/EPSC AND EEB; DEPT PLEASE PASS 
TO USTR AMALITO AND DOLIVER; DEPT PLEASE PASS TO TREAS 
SSENICH 
 
E.O. 12958: DECL: 12/09/2018 
TAGS: CS ECON ETRD KIPR PGOV PREL
SUBJECT: COSTA RICA: JANUARY 1 CAFTA EIF WITHIN REACH 
 
REF: A. SAN JOSE 823 
     ¶B. SAN JOSE 958 
 
Classified By: DCM Peter Brennan per 1.4(d) 
 
¶1. (SBU) The GOCR accepted USTR,s requirement to pass one 
more legislative bill on three IPR-related technical 
corrections which must be enacted for full CAFTA 
implementation.  The GOCR probably will introduce this 14th 
CAFTA bill before the December 19-January 5 recess, but not 
take action on it until January.  The GOCR understandably 
seeks to minimize the public and political attention drawn to 
the bill, to treat it as a &routine8 revision of 
already-enacted legislation, and to separate it as much as 
possible from actual CAFTA entry-into-force (EIF) on January 
¶1.  No matter when it launches, however, this last CAFTA 
bill, like the other 13, may not move quickly:  the 
Asamblea,s agenda is full and the 38-seat pro-CAFTA 
coalition is virtually spent.  (A 38-vote super-majority will 
be needed to invoke fast track authority and keep the new 
bill moving.  Otherwise, opponents may pile on motions to 
block it and delay full implementation.)  Costa Rica is thus 
likely to reach CAFTA EIF on January 1 with some work not 
quite finished, in exchange for a holdback of some trade 
preferences (likely candidate:  organic sugar).  This 
scenario concerns the Ministry of Foreign Trade (COMEX), 
because the selection of a holdback could affect pro-CAFTA 
economic or agricultural sectors.  In addition, a 
&partial,8  &provisional,8 or &technical 8 EIF might be 
vulnerable to a constitutional challenge.  Minister of the 
Presidency Rodrigo Arias may make one more plea against a 
holdback when he meets with USG officials on the margins of 
the Pathways to Prosperity Summit in Panama on December 10. 
With the leading opposition figure traveling the region 
calling for CAFTA &renegotiation,8 and the incoming US 
administration and Congress likely to hold a different view 
than their predecessors on free trade, the GOCR knows it must 
(finally) close the door on CAFTA.  The question is how best 
to do so.  END SUMMARY. 
 
---------------------- 
THE &FINAL8 FINAL Bill 
---------------------- 
 
¶2. (SBU) The status of the four technical issues has evolved 
over the last two months (Ref A).  COMEX now agrees with USTR 
that three should be included in legislation.  The fourth has 
already been corrected in legislation: 
 
IP Enforcement ) requires the addition of a phrase to 
qualify the type of phonographic recordings involved in an IP 
violation.  COMEX agrees this legislative change must be 
made, given the glaring nature of its omission.  COMEX also 
believes this should fix be amenable to a sufficient number 
of legislators, if the new bill is presented in the right way 
at the right time.  This fix would correct an omission in the 
IPR enforcement bill (No. 16.117) which became law in August. 
 
Publication of Recordings - requires the substitution of text 
which will re-insert a sentence that was deleted from bill No 
16.955 (the IPR &catch-all8 which became law in November) 
and replaced by a reference to the Rome Convention.  After 
USTR and COMEX debated how best to achieve the desired 
result, the parties agreed that a legislative solution was 
acceptable. 
 
Data Protection ) requires the addition of a word to qualify 
the type of products subject to data protection, also in bill 
No. 16.955.  The additional word specifies the type of new 
pharmaceutical product that will have data protection.  COMEX 
hoped that it could incorporate this correction into an 
agro-chemical bill under debate in the national assembly, but 
the deal to do so fell through at the last minute. 
 
Establishment of IP Rights ) required the deletion of the 
Spanish word for &previously8 from a section of bill No. 
16.955 for two reasons:  to eliminate a time threshold for 
the establishment of rights and to make the text of the 
relevant article consistent.  COMEX successfully (and rather 
skillfully) made this change before bill No. 16.955 was 
approved by the legislature on November 11 by indirect means; 
using linguists to &correct8 the legislative language. 
This avoided drawing attention to the change. 
 
-------------------- 
LEGISLATIVE STRATEGY 
-------------------- 
¶3. (SBU) COMEX initially recommended to Casa Presidencial to 
proceed forward with a &clean-up8 bill immediately and not 
wait until December 1 (which is when the GOCR controls the 
legislative agenda).  That did not happen.  However, with the 
text of the bill now under discussion with USTR, COMEX 
Minister Marco Vincio Ruiz shared with us that the bill could 
be introduced as early as the week of December 8.  Regardless 
of timetables, COMEX does not foresee super-majority (38 
votes) support for the bill even with executive control of 
the legislative agenda in the December-April session.  Given 
the political exhaustion of the fragile, pro-CAFTA coalition, 
the GOCR cannot count on the 38 votes for fast track 
authority.  Without fast track authority, there is no 
mechanism for cloture or to limit debate.  Without such a 
mechanism, debate on the final CAFTA bill could drag on for 
weeks, as took place frequently during the debate over other 
items of implementation legislation.  If the new bill is 
handled carefully, however, COMEX is reasonably confident it 
could be approved &within 90 days,8 according to Minister 
Ruiz.  Approval in the new year should gain added political 
impetus from CAFTA having already entered into force. 
 
¶4. (SBU) Since the &clean-up8 bill has yet to appear on the 
legislative docket, the media (and most political leaders and 
legislators) are unaware of this lingering CAFTA business. 
Leading daily La Nacion quoted Minister Ruiz on 2 December as 
saying CAFTA will enter into force on January 1 and the only 
remaining action is for the publication of regulations. 
Hence, the expected media storm questioning the credibility 
of COMEX (for not making these corrections sooner) and 
attacking the USG (for levying &last second demands8) has 
yet to occur.  The GOCR apparently will forestall the 
anticipated media storm by delaying as long as possible the 
introduction of the bill -- ideally, from the GOCR,s point 
of view ) as close to the holiday recess as possible. 
 
¶5.  (C) PUSC party faction chief (and pro-CAFTA stalwart) 
Lorena Vasquez, one of the few legislators aware of the 14th 
law gambit, agrees it should be handled as carefully and as 
low key as possible.  She prefers that the new law be 
&dropped in8 to the agenda during the holiday recess (which 
is technically possible), or better, not launched until after 
January 1 to maximize the separation from EIF.  Vasquez 
believes that the new law can be sold as simply completing 
Costa Rica,s compliance with CAFTA obligations, and also 
with standing WTO and TRIPS requirements.  The more the new 
law can be defended as not asking more of Costa Rica than of 
any other CAFTA partner, the better.  Vasquez noted that the 
new bill could be approved by a simply majority (29 votes), 
but she acknowledged that amassing the 38 votes required for 
fast track would be difficult. 
 
------------------------- 
FAST FORWARD TO JANUARY 1 
------------------------- 
 
¶6. (SBU) COMEX Director Gabriela Castro outlined to Econoff 
COMEX,s strategy for convincing legislators of the need to 
pass the bill.  She explained why the GOCR finalized 
regulations now for the &clean-up8 bill even before 
introducing it.  This would allow the GOCR: 
 
-- to claim (correctly) that the last bill meets the full 
provisions of CAFTA; and 
 
-- to urge skeptical legislators that a signed CAFTA treaty 
with regulations but no corresponding law is legally 
incomplete. 
 
¶7. (SBU) Quick to point out, &this is not a way to avoid 
passing the last bill,8 Castro stressed, &we are committed 
to that.8  Although primarily intended to result in an 
agreed EIF on January 1, this ®ulations first8 strategy 
is also to protect the GOCR, specifically COMEX, since 
anything technically short of full EIF could be challenged as 
unconstitutional under Costa Rican law, possibly holding the 
responsible officials (Minister Ruiz and his team) criminally 
liable.  Although the legal vulnerabilities of this scenario 
are unclear (and are under examination by COMEX lawyers) 
COMEX is eager to pursue a strategy to minimize 
constitutional or criminal exposure. 
 
------------------------- 
A SWEET BUT SOUR HOLDBACK 
------------------------- 
 
¶8. (C) We understand that USTR and COMEX are discussing 
holdbacks, principally focused on sugar, but there is no 
final agreement on this issue yet.  Minister Ruiz told the 
Ambassador last month that USTR has been referring to the 
example of El Salvador as a possible model for EIF with a 
holdback.  USTR chose sugar in that case but COMEX believes 
the situation is much different in Costa Rica (with a 
collection of smaller, cooperative sugar producers) than in 
El Salvador (where the industry is dominated by three 
producers).  Choosing sugar as the holdback in Costa Rica 
would affect the entire LAICA cooperative, according to 
COMEX, which poses two challenges.  First, the holdback would 
be seen as penalizing the small and medium businesses that 
comprise LAICA and actively supported CAFTA, as LAICA itself 
did.  Second, the GOCR,s efforts to scramble and pass a 
&clean-up8 bill which was holding up TRQs for sugar might 
be seen as simply helping the Arias brothers (whose family 
has interests in the sugar industry).  An elegant sidestep 
would be to select organic sugar which is subject to 
relatively more friendly TRQs, and which involves a very 
limited number of growers in Costa Rica.   The GOCR may make 
one more push against a holdback on any kind, however.  In a 
late-breaking development (Ref B), Minister Rodrigo Arias 
decided to attend the Pathways to Prosperity Summit in Panama 
on December 10 in order to discuss the final CAFTA EIF issues 
with DUSTR Veroneau and perhaps with the Secretary. 
 
----------- 
NEXT STEPS? 
----------- 
 
¶9. (C) The following is our understanding of the current 
state of play on EIF elements: 
 
-- AGREEMENT LETTER/HOLD BACK:  COMEX and Casa Presidencial 
are reviewing USTR,s agreement letter proposal which would 
permit an EIF on January 1, but with a specified holdback if 
the 14th law has not been completed; 
 
--  LAST LAW:  The law itself should be introduced before the 
Asamblea goes to recess on December 19; 
 
--  MEDIA POINTS:  COMEX and the Embassy will work together 
on a media strategy to handle inquiries generated by the 
introduction of the last bill; and 
 
--  REGULATIONS:  COMEX has effectively finished its work on 
IP and telecommunications regulations which will be published 
by December 8, just prior to USTR,s deadline of December 10. 
 However, a subset of biodiversity regulations (related to 
how CAFTA-related changes in the existing biodiversity law 
could affect indigenous communities) must wait for the public 
comment period to end on December 10.  After that, COMEX has 
from December 10 to December 15 (USTR,s deadline on this 
issue) to obtain Ministerial approvals, the President's 
approval, and officially publish the biodiversity 
regulations. 
 
COMMENT 
 
¶10. (C) COMEX has managed to pull the outstanding CAFTA 
elements together and is focused on finishing.  A key aspect 
of the political theater is how and when the last bill is 
introduced.  By delaying this far (the need to introduce 
legislation has been known since October),  the GOCR seems to 
be counting on the end-year Asamblea recess and national 
holidays to mute media coverage and public reaction to this 
last &CAFTA problem.8  COMEX needs to end the CAFTA saga 
due to &battle-fatigue8 on multiple fronts: with the 
national assembly, within the GOCR, and with USTR.  COMEX 
will have little time to rest,  however, as January 2009 
ushers in a busy month with the GOCR undertaking formal FTA 
negotiations with China, participating in a preliminary EU 
meeting with its Central American partners, and taking part 
in the sixth round of CenAm-EU trade negotiations in Brussels. 
CIANCHETTE