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Viewing cable 09SANJOSE969, Costa Rica will request an extension of CAFTA-DR deadline

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Reference ID Created Released Classification Origin
09SANJOSE969 2009-11-24 16:04 2011-03-02 16:04 CONFIDENTIAL Embassy San Jose
Appears in these articles:
http://www.nacion.com/2011-03-02/Investigacion.aspx
VZCZCXYZ0022
OO RUEHWEB

DE RUEHSJ #0969/01 3281618
ZNY CCCCC ZZH
O R 241618Z NOV 09
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0057
INFO WHA CENTRAL AMERICAN COLLECTIVE
C O N F I D E N T I A L SAN JOSE 000969 
 
SIPDIS 
DEPARTMENT FOR WHA/CEN 
WHA/EPSC:SGARRO 
EEB/TPP/BTA:RMANOGUE AND DGROUT 
EEB/TPP/IPE:JURBAN 
PLEASE PASS TO USTR:EEISSENSTAT, AMALITO AND DOLIVER 
PLEASE PASS TO TREASURY:SSENICH 
 
E.O. 12958: DECL: 2012/11/25 
TAGS: ETRD ECON KIPR PREL PGOV CS
SUBJECT: Costa Rica will request an extension of CAFTA-DR deadline 
 
CLASSIFIED BY: Schechter Torres, Julie, Counselor for Political and 
Economic Affairs, State, POL-ECON; REASON: 1.4(B), (D) 
 
1.  (C) INTRODUCTION AND SUMMARY.  Costa Rica's Foreign Trade 
Ministry (COMEX) has informed Embassy that the GOCR most likely 
will not meet the December 31 deadline for the passage of the 14th 
CAFTA-DR bill and finalization of intellectual property rights 
(IPR) regulations.  On November 16, COMEX Director Esteban Aguero 
stated that COMEX Minister Marco Vinicio Ruiz and Foreign Minster 
Bruno Stagno planned to contact their USG counterparts to request 
an "extension" from the USG.  USTR-COMEX negotiations on IPR 
regulations (the parties differ on text), the legislative calendar, 
the lack of legislator support, and the 2010 Costa Rican 
presidential and legislative elections, all make it likely that the 
bill will not pass until April or even later in the year.  Embassy 
recommends that the USG formulate its strategy now on the 
consequences, if any, Costa Rica should face for missing its third 
CAFTA-DR deadline.  We recommend that the USG should not agree to 
an "extension" request by the GOCR.  Furthermore, the USG should 
continue with the legal mechanism put into effect last year which 
will halt market access for a product category of USTR's choice 
until the GOCR meets all CAFTA-DR obligations. End Introduction and 
Summary. 
 
 
 
------------------------------------ 
 
WHY SKATE BY ANOTHER DEADLINE AGAIN? 
 
------------------------------------ 
 
 
 
2.  (U) Costa Rica once again finds itself at odds with an 
 
important CAFTA-DR deadline.  This now makes for the third 
 
deadline drama created by the GOCR.  By agreement with 
 
USTR, the GOCR achieved CAFTA-DR entry-into-force on 
 
January 1, 2009.  However, the GOCR did not fully meet all 
 
of USTR's requirements -- specifically in intellectual 
 
property rights (reftel).  USTR granted the GOCR a one year 
 
"grace period" as Costa Rica entered the agreement.  A side 
 
letter required the GOCR to meet the three lingering IPR 
 
requirements by December 31, 2009.  The consequence of 
 
missing the deadline was the possibility of a preferential 
 
access holdback (likely to be sugar).  Despite this 
 
extension, the GOCR made little progress during 2008 on 
 
what became known as the 14th bill. 
 
 
 
--------------------------------- 
 
SO WHAT REALLY ARE THE PROSPECTS? 
 
--------------------------------- 
 
 
 
3.  (SBU) There are four factors that shape the prospects of 
 
the GOCR meeting USTR's legislative and regulatory 
 
requirements: 
 
 
 
-- Legislative Calendar:  The Arias Administration controls 
 
the legislative calendar from December 2009 until April 
 
2010.  However, the Legislative Assembly will close for 
 
 
 
business most likely on December 17 and not reopen until 
 
after the February 7 elections.  Thereafter, the next time 
 
the executive branch controls the legislative calendar will 
 
be August.  To become law, the bill must receive two 
 
Legislative Assembly votes, possibly a constitutional 
 
review (if requested by ten legislators), presidential 
 
signature, and publication. 
 
 
 
-- Legislative Support:  The Arias administration, 
 
according to COMEX's Aguero, lacks the 38 votes (of a total 
 
of 57) that it needs in the Legislative Assembly to approve 
 
the 14th bill.  Also, what Aguero did not mention is that 
 
COMEX has virtually no gravitas with legislators and thus 
 
very little influence after the bruising implementation 
 
process of passing the previous thirteen laws from 2007 to 
 
2008. 
 
 
 
-- Regulatory Text:  COMEX (and other parts of the GOCR) 
 
and USTR need to agree on language for agro-chemical 
 
regulations.  Originally, this issue was one of the three 
 
technical corrections in the 14th bill.  COMEX and USTR 
 
agreed that addressing the agro-chemical issue through 
 
regulations would work.  The two parties discussed agrochemical 
 
language from April to July.  However, it became 
 
apparent that COMEX had not gained full support of the 
 
Ministries of Health and Industry-Economy-Trade on 
 
fundamental aspects of the agro-chemical issue.  Due to the 
 
lack of progress, discussions on the issue stalled in July. 
 
In October, the USTR-COMEX dialogue re-started but an 
 
agreement on text has yet to be reached. 
 
 
 
-- Elections:  During January, all Costa Rican political 
 
hands will focus on the presidential and legislative 
 
elections on February 7.  If PLN candidate Laura Chinchilla 
 
wins, then the possibility of legislative action in the 
 
February-April "lame-duck" period exists, but is unlikely. 
 
After April, the 14th bill becomes the business of the new 
 
president.  (Note:  Director Aguero mentioned that PLN 
 
presidential candidate Chinchilla and advisor Fernando 
 
Sanchez are "aware" of the issues associated with the 14th 
 
bill and are "worried." End note.) 
 
 
 
4.  (SBU) When asked about legislator awareness of an endof- 
 
year deadline for the 14th bill, Director Aguero 
 
answered that COMEX has explained the importance of the 
 
bill's schedule to the legislators.  The legislators have 
 
chosen to ignore or discount the explanation.  In contrast, 
 
a key legislative staffer told us that COMEX has not even 
 
been trying to draw this issue to legislators' attention, 
 
focusing instead on upcoming trade agreements with Europe 
 
and Singapore.  The bill currently ranks 120th on the 
 
Legislative Assembly's bill roster. 
 
 
 
5.  (SBU) With this assessment, the odds of passing the 
 
14th bill in 2009 rate less than 5 percent.  Only one month 
 
ago COMEX officials, including Minister Ruiz and Director 
 
Aguero, espoused a much sunnier prognostication to Charge 
 
Peter Brennan and Econoff by assuming that the GOCR would 
 
overcome the first three factors listed above, plus clear 
 
the GOCR's legislative process by the December 31 deadline. 
 
 
 
6.  (U) Looking ahead, the nature of the bill's legislative 
 
support will change when the new legislators arrive in 
 
office on May 1, 2010.  Legislators cannot serve 
 
consecutively, which means a new set of legislators could 
 
very well review the 14th law in mid-2010.  However, 
 
whether this is positive or negative largely depends on the 
 
party affiliation and the size of the mandate of the new 
 
president. 
 
 
 
----------------------- 
 
ARE THERE CONSEQUENCES? 
 
----------------------- 
 
 
 
7.  (SBU) With the news of the GOCR's interest in an 
 
"extension," the USG must now weigh how to handle such a 
 
request.  According to Costa Rica's CAFTA-DR obligations, 
 
if the GOCR does not meet the December 31 deadline, then 
 
the holdback on market access can go into effect. 
 
Evidently, the GOCR wants to re-focus the CAFTA-DR 
 
discussion with the USG away from the consequences of not 
 
meeting the deadline by proposing an "extension." A third 
 
 
 
"extension" sharply contrasts with the spirit of the signed 
 
documents from the entry-into-force process of December 
 
2008.  When sharing the news of the "extension" request, 
 
Aguero never mentioned the side letter or preferential 
 
access holdback.  Moreover, an "extension," in whatever 
 
form it could take, will likely bridge two administrations. 
 
 
 
------- 
 
COMMENT 
 
------- 
 
 
 
8.  (C) Post recommends that the USG institute the 
 
holdback on market access as a consequence of the GOCR not 
 
meeting the December 31 deadline.  After two deadline 
 
extensions and a one year grace period, Post doubts that 
 
another "extension" will spur the GOCR into action.  In 
 
2010, GOCR action depends on the elections combined with an 
 
unhelpful legislative calendar.  These two factors will 
 
likely complicate -- not ease -- completing the 14th bill 
 
and the lingering IPR regulations. 
 
 
 
9.  (C) As for a new administration, if the new president 
 
is friendly to the 14th bill, the bill may still not 
 
receive action until August, the first time the new 
 
administration will control the legislative calendar.  And 
 
even then, the bill could be buried on the priority list as 
 
the new administration attempts to score some quick 
 
legislative victories on high profile projects (for example 
 
in security, education, or infrastructure).  This means 
 
that the bill could miss the August "window" and the USG 
 
could repeat this very same discussion twelve months from 
 
now, looking ahead to still another deadline in December 
 
2010. 
 
 
 
BRENNAN