VZCZCXYZ0001
OO RUEHWEB

DE RUEHSJ #0656/01 0942036
ZNY CCCCC ZZH
O 042036Z APR 07
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7707
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY

C O N F I D E N T I A L SAN JOSE 000656 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR WHA/CEN, WHA/EPSC AND EB; PASS TO USTR 
AMALITO 
 
E.O. 12958: DECL: 04/04/2017 
TAGS: PGOV ETRD PREL PINR CS
SUBJECT: CAFTA: REFERENDUM CONCERNS, BUT COALITION 
COOPERATING; LEGISLATION MOVING 
 
REF: A. A) SAN JOSE 625 
 
     ¶B. B) SAN JOSE 552 
 
Classified By: CDA Laurie Weitzenkorn per 1.4(d) 
 
 ¶1.  (C) SUMMARY:  Although optimistic that CAFTA can be 
ratified by August-September, the Arias administration is now 
concerned about the prospect of a CAFTA referendum. 
Responding to a petition filed by CAFTA opponent, renegade 
PLN member, former legislator and presidential candidate Jose 
Miguel Corrales, the Supreme Electoral Tribunal (TSE) is to 
rule on the issue by April 15.  GOCR officials believe the 
TSE may be inclined to agree to a referendum, but they are 
 
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reasonably confident of winning the referendum, if it comes 
to that.  The cost and time involved will be challenges, 
however; no such referendum has ever been held in Costa Rica. 
 Clothed as a benign way to resolve the CAFTA issue in 
public once and for all, the referendum could become one more 
delaying gambit by the opposition.  President Oscar Arias is 
reported to be adamantly opposed, but other cabinet members 
are contemplating strategy, if a referendum proves 
inevitable.  In the good news department, Arias,s coalition 
is cooperating again, and key CAFTA-related legislation 
continues to move ahead in the National Assembly.  END 
SUMMARY. 
 
---------------------- 
TEMPERED OPTIMISM. . . 
---------------------- 
 
¶2.  (C) On March 29, the Ambassador called on Minister of 
Government Rodrigo Arias, who was easing back into a work 
schedule after hip replacement surgery.  Looking fit and 
sounding confident, Arias was optimistic that the GOCR would 
be able to ratify CAFTA and approve implementing legislation 
as a package in August-September, the same prediction he 
has made recently in public.  (The next extraordinary 
legislative session begins in August, when the executive 
would have more control over the agenda.)  The Minister 
dismissed the jump-start proposal of ML party leader Otto 
Guevara ) to take CAFTA to a no-notice, simple yes or no 
plenary vote in mid-April ) as going too far, too soon. 
(NOTE: Guevara discussed this idea with Department 
interlocutors during his Washington visit last month.) 
Although technically constitutional, such a move would fly 
against years of legal tradition permitting legislative 
debate of interpretative clauses when considering 
international agreements.  The Supreme Court,s activist 
constitutional chamber (Sala IV) would probably object (Ref 
A). 
 
¶3.  (SBU) According to Arias, the GOCR will thus maintain its 
current course on CAFTA: 
 
-- Correct the procedural flaws in proposed fast track 
legislation by mid-April (as demanded by the Sala IV on March 
5), while moving ahead on key legislation in committee; 
 
-- Once fast track legislation is ready (probably in late-May 
or early-June, after one last Sala IV review, prompted by 
another likely opposition challenge), take CAFTA to the 
plenary for limited debate; and 
 
-- In the meantime, apply existing fast track rules to 
CAFTA-related legislation as required.  (NOTE: Existing fast 
track rules need no modification for use with regular 
legislation.  The modification is required to use fast track 
with treaties.) 
 
----------------------------- 
. . . BUT REFERENDUM CONCERNS 
----------------------------- 
 
¶4.  (C) However, Minister Arias said the GOCR has concerns, 
which it is keeping private, about a possible CAFTA 
referendum.  In a separate meeting with the Ambassador on 
March 30, First VP and Minister of Justice Laura Chinchilla 
echoed those concerns.  Chinchilla explained that Jose Miguel 
Corrales (former PLN legislator and presidential contender 
and strong CAFTA critic) had been pushing the referendum idea 
since 2006.  Because he helped Chinchilla draft the 
Referendum Law when they were both legislators, he is 
considered an expert on the subject.  (NOTE: In October 2006, 
the TSE rejected a petition by Corrales and others for a 
non-binding CAFTA referendum, arguing that non-binding polls 
were not permitting under the Referendum Law.  Corrales and 
company then pressed for a binding referendum.  Their 
petition reached the Sala IV, but was bounced back to the TSE 
 
for action on February 16.  END NOTE.)  According to 
Ministers Arias and Chinchilla, the TSE must issue a decision 
in this latest challenge within 60 days, i.e., by April 15. 
 
¶5.  (C) Chinchilla said President Arias was adamantly opposed 
to the referendum idea, but the GOCR would have to proceed 
very carefully if the TSE decided in favor.  She and Minister 
Arias both described the outcome as uncertain.  Of the three 
TSE members, two had some doubts that a referendum could 
 
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apply to any legislation with a fiscal aspect (such as a free 
trade agreement dealing with tariffs and duties), but they 
were leaning pro-referendum nonetheless.  The views of the 
third member ) currently a substitute ) were unknown. 
Minister Arias was confident that TSE president Luis Antonio 
Sobrado, whom he described as young and forceful, 
ultimately would make the right decision ) to reject a CAFTA 
referendum because of the restriction on referenda with 
fiscal implications.  Even if the TSE supported a CAFTA 
referendum, Arias believed that regular legislative work 
could continue while the referendum was prepared. 
 
¶6. (C) VP Chinchilla did not sound as confident on either 
issue. She told the Ambassador that the rectors of the four 
leading state universities may turn the heat up after Holy 
Week by calling in public for the referendum, in exchange for 
a pledge to tone down CAFTA opposition on campus and in the 
streets. For Costa Ricans in and out of politics, (as well as 
the TSE members), this eminently Tico call to consensus 
might be too powerful to ignore, in Chinchilla,s opinion. 
 
¶7.  (C) If the TSE ruled in favor of the referendum, the GOCR 
could still take the initiative, according to Chinchilla.  To 
enact the referendum, the executive could submit appropriate 
legislation to the Assembly.  Because the referendum 
procedure calls for an up or down, simple majority vote in 
the plenary, without Sala IV review (as is the case with 
normal legislation), Chinchilla said the GOCR might bundle 
some CAFTA-related legislation with the referendum bill.  The 
opposition would then face a dilemma: either oppose the 
referendum to block the CAFTA-related bills, or support the 
referendum, but approve the CAFTA legislation at the same 
time.  The Assembly itself could also call for a referendum, 
Chinchilla explained, but 38 votes would be required to pass 
the relevant legislation. The Arias administration,s working 
majority would block this route, if the opposition tried it. 
 
¶8.  (C) Chinchilla was more concerned about the third route 
to a referendum: a public petition.  Only five percent of the 
national voter registry would be needed, approximately 
150,000 signatures.  The opposition could collect those, and 
delay long enough to submit their petition so as to 
jeopardize the CAFTA timetable.  Ministers Arias and 
Chinchilla both believe the GOCR could win a CAFTA 
referendum, but the VP acknowledged that cost and campaigning 
would be challenges.  The GOCR would not be permitted to 
campaign, for example, relying on the private sector to carry 
the day against an already well-organized and well-funded 
CAFTA opposition.  The first test of the Costa Rican 
referendum law and the only such vote on CAFTA no doubt would 
attract support from international anti-globalization 
organizations and from Venezuela, as well.  Meeting the 
minimal 40 percent turnout rate for the referendum to be 
considered valid is another challenge, Chinchilla added. 
 
------------------------------- 
COALITION IS COOPERATING, AGAIN 
------------------------------- 
 
¶9.  (C) Meanwhile, despite some mid-March turbulence, the 
GOCR,s pro-CAFTA coalition seems to be working smoothly 
again.  Problematic ML legislator Mario Quiros (Ref B) is not 
only supporting the GOCR,s position on correcting the 
procedural flaws in the fast track legislation, but he is 
writing the majority committee report, according to ML 
president Otto Guevara.  Energized from his Washington visit, 
Guevara agreed with the Ambassador in a meeting on March 27 
that President Arias should designate one minister to run the 
CAFTA effort full-time.  Minister of Foreign Trade Marco 
Vinicio Ruiz is fully occupied with CAFTA substance and 
negotiations with USTR.  Minister w/o Portfolio Marco Vargas 
thus would be a logical selection, Guevara said. 
 
-------------------------- 
LEGISLATION MOVING FORWARD 
-------------------------- 
 
¶10.  (SBU) In the legislature, three of 13 bills necessary to 
harmonize national law with CAFTA have reached the floor and 
 
are pending plenary action: dealership regulation, 
ratification of the Budapest IPR treaty and ratification of 
the trademark treaty.  Committee deliberations on six more 
bills are to be completed by the last week in April: opening 
the telecom market, strengthening public sector entities, 
opening the insurance market, a bill dealing with 
miscellaneous patent and trademark issues, a bill dealing 
with IPR enforcement issues, and legislation dealing with the 
protection of new plant species.  Before the Holy Week 
recess, key pro-CAFTA legislators were stressing in public 
the need to keep moving and the urgency of mounting a 
pro-CAFTA offensive with the private sector after Easter. 
 
-------- 
COMMENT: 
-------- 
 
¶11.  (SBU) A referendum would further cloud an already messy 
CAFTA picture, and would mean more delays in a much-delayed 
timetable.  It would also be a tempting solution for tired 
legislators, looking for a way to share (or pass off) the 
CAFTA burden.  We hope the GOCR,s concerns are fueled more 
by prudence than alarm.  From our reading of related 
jurisprudence (such as the Procuraduria,s decision of April 
¶24. 2006), it appears that a free trade agreement which 
regulates tariffs cannot be approved by a referendum, but we 
are not the local experts.  The details of referendum 
procedures are not clear to us, either, nor is the Sala IV,s 
potential role, e.g., could referendum results or procedures 
be challenged in the Supreme Court?  Even without a 
referendum, the CAFTA end-game here will not be elegant, and 
the timetable continues to slip.  Instead of a clean 
ratification-implementation sequence, we can expect to see 
motion at varying speeds and times on both tracks, using a 
complex, multi-layered strategy including special and normal 
legislative committees, as well as fast track and normal 
legislative rules.  As one long-time political observer and 
pollster told us, in politics or in soccer, Ticos play their 
best when they are under the most pressure, when their 
noses are almost under water. 
 
WEITZENKORN