VZCZCXYZ0030
RR RUEHWEB

DE RUEHSJ #0204 0272238
ZNR UUUUU ZZH
R 272238Z JAN 06
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 4129
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS SAN JOSE 000204 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ECON EAID CS
SUBJECT: "COSTA RICA CONSENSUS:"  OSCAR ARIAS'S 
DEBT-FORGIVENESS INITIATIVE 
 
REF: A. SAN JOSE 159 
 
     ¶B. SAN JOSE 193 
 
¶1.  (SBU) Summary:  Oscar Arias, the likely next president of 
Costa Rica, appears poised to call for a "Costa Rica 
Consensus," a debt-relief initiative that would be a 
centerpiece of a promised "active and progressive" foreign 
policy.  He plans to convene an international summit in San 
Jose to persuade wealthy creditor nations that they have a 
moral and practical interest in forgiving the debt of 
well-behaved poor and middle-income countries so that these 
countries will spend less on arms and more on education, 
health, and housing.  Arias likely will seek U.S. support for 
this initiative.  End summary. 
 
¶2.  (SBU) If the polls are correct, Oscar Arias will be 
elected president of Costa Rica on February 5 and take office 
on May 8 (reftel B).  It is becoming increasingly clear that 
his administration will seek to obtain the agreement of the 
G-8, European Union, and OECD to forgive the debt of not only 
the poorest countries of the world (a la HIPC), but of 
developing countries like Costa Rica that invest in 
education, health, and housing, and not in arms, i.e. 
apparently incorporating Millennium Challenge Account 
(MCA)-like conditionality.  Arias told us on January 17 
(reftel A) that he plans to host an international summit on 
the issue.  He said that newly middle-income countries should 
not be "punished" (by which he apparently meant having to pay 
their foreign debt) for their "relative success" (in 
achieving middle-income status). 
 
¶3.  (SBU) On the campaign trail, Arias and his candidate for 
first vice president Laura Chinchilla have referred to this 
plan as the "Costa Rica Consensus" or, sometimes, the "San 
Jose Consensus."  In the National Liberation Party (PLN) 
Program of Government 2006-2010, one of the "principles" of 
Arias's "active and progressive" foreign policy is expressed 
as "the struggle to overcome the enormous asymmetries between 
rich countries and developing nations."  The program states: 
"The future administration of Dr. Oscar Arias, winner of the 
Nobel Prize for Peace, aspires to convert Costa Rica into a 
moral power, able to convoke the world in support of the best 
causes."  Arias sees his initiative as a natural follow-on to 
the September 2000 Millennium Summit whose goals was to 
reduce world poverty by half by 2015. 
 
¶4.  (U) Arias sometimes refers to his plan as a debt swap, 
the idea being that to qualify a developing country would 
have to demonstrate that the amount of debt forgiven was used 
for beneficial "social investment" and that at the same time 
military spending was reduced.  The increase in social 
spending and concomitant reduction of arms and soldiers is 
the "spirit of the Costa Rica Consensus."  The PLN program 
states:  "The arms race in the developing world is a crime 
against peoples, in the same way that the international arms 
trade is an evil that must be fought vigorously as a threat 
to humanity.  Ironically, about 80 percent of all transfers 
of conventional arms originate with the five permanent 
members of the UN Security Council. 
 
¶5.  (SBU) Comment:  Creating incentives for developing 
countries to spend more on education and less on their 
militaries is a worthwhile goal.  But proposing the creation 
of a HIPC-like program for middle-income countries, with no 
apparent link to debt sustainability, reflects a surprisingly 
unsophisticated view of the workings and importance of 
financial markets to Costa Rica and other middle-income 
counties.  Instead, Arias has told us that it is both a moral 
imperative for the USG and in our own interest to increase 
our foreign assistance.  In Arias's view, morality would 
appear to trump practicality. 
 
¶6.  (SBU) Arias's brother, Rodrigo, will be traveling to 
Washington February 13-16.  We anticipate that he will be 
making an appeal to USG interlocutors, including Millennium 
Challenge Corporation Chairman John Danilovich (former U.S. 
Ambassador to Costa Rica) for assistance.  Arias will argue 
that by providing generous but conditioned aid (whether in 
the form of grants, debt forgiveness, or swaps), the "rich 
countries" can stimulate transparent and honest government, 
sustainable development, and peace in the developing world. 
LANGDALE