VZCZCXYZ0000
OO RUEHWEB

DE RUEHSJ #1106/01 1592238
ZNY CCCCC ZZH
O 082238Z JUN 07
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8237
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0127
RUEHIN/AIT TAIPEI PRIORITY 0069
XMT USSOCOM WO WASHINGTON DC

C O N F I D E N T I A L SAN JOSE 001106 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA/CEN, EAP, P AND D; 
SOUTHCOM ALSO FOR FPA 
 
E.O. 12958: DECL: 06/07/2017 
TAGS: PREL PGOV TW XK CS
SUBJECT: COSTA RICA RECOGNIZES CHINA 
 
REF: TAIPEI 001283 AND PREVIOUS 
 
Classified By: ADCM Laurie Weitzenkorn per 1.4 (d). 
 
¶1.  (C)  SUMMARY: On June 6, Costa Rica announced normalized 
relations with China, ending ties with Taiwan dating back to 
¶1944.  President Arias said the decision was based on 
"fundamental realism," and he expressed hope that informal 
relations could be retained with Taipei.  The announcement 
capped months of secret negotiations, including a visit to 
Beijing by Foreign Minister Stagno and Treasury Minister 
Zuniga to sign an agreement on June 1.  The Taiwanese Embassy 
here responded swiftly and negatively, lodging a strong 
protest and ending all assistance.  Editorial and media 
coverage has emphasized the prospective trade benefits, 
recognized the long-term logic of improved ties with China, 
and defended the GOCR's "soverign"decision, but criticized 
Arias and Stagno for "lying" to the media about the 
negotiations.  Behind the scenes, GOC officials sympathetic 
to Taiwan or whose ministries depended on Taiwanese 
assistance, specially Minister of Public Security Berrocal, 
are very concerned about the short/no-notice (to them) 
decision and the way it was made.  In our view, Arias's 
decision is consistent with foreign policy he outlines in his 
inaugural address;  may help Costa Rica gain the UNSC seat it 
desperately wants for 2008-9, and was no doubt fueled by a 
large (USD 430 million) air package the GOCR could not 
refuse.  The fact that a very small circle of senior 
officials around Arias were involved underscores that on 
major foreign policy issues, he continues to call the shots. 
END SUMMARY. 
 
RUSH ANNOUNCEMENT CAPS SECRET NEGOTIATIONS 
========================================== 
 
¶2.  (U)  In a press conference on June 6, President Oscar 
Arias announced that the GOCR had normalized relations with 
China, effective June 1.  Arias said this "realignment" in 
diplomatic relations was not "ideological," but "an act of 
fundamental realism... (and) a wake-up call to the global 
context in which it is (Costa Rica's) turn to play a role." 
He added that "We have decided to normalize our ties with a 
country we can no longer ignore," joining the 168 other UN 
member nations which had already recognized China. 
 
¶3.  (U)  Arias explained that the opening of relations had 
been finalized during a secret visit to Beijing by Foreign 
Minister Bruno Stagno and Finance Minister Guillermo Zuniga. 
The secrecy, he said, was required by the "transcendence" of 
the decision.  The GOCR was as "transparent as the 
circumstances allowed," making public, for example, Stagno's 
meeting with counterpart Li Zhaoxing in Mexico City in May 
2006, and Arias's own meeting with Li on the margins of the 
UNGA in New York last September.  The President offered his 
"sincere" thanks to Taiwan for its generous assistance and 
support and noted that Costa Rica and Taiwan could maintain 
informal relations, despite the GOCR's decision.  According 
to press reports, the Chinese moved quickly, dispatching 
three diplomats to San Jose from their embassy in Mexico on 
June 7. 
 
¶4.  (C)  Originally set for June 7, the press conference was 
hastily moved up 24 hours in light of the briefing in Taipei 
which broke the news in public (Reftel).  According to media 
reports (and confirmed by GOCR sources), Stagno officially 
informed the Taiwanese MFA in a call just two hours before 
the press conference.  The media was quick to note that as 
recently as May 28 (just before his secret trip to Beijing), 
Stagno insisted to interviewers that he foresaw "no break" in 
relations with Taiwan. 
 
¶5.  (C)  On May 31, when asked about the GOCR's controversial 
May 17 procedural vote against Taiwan in the WHO, MFA Deputy 
Director for External Politics Alejandro Solano gave Pol/C 
and PolOff no indication of a pending shift in relations, 
dismissing media reports of a possible break as speculation 
and acknowledging the importance of Taiwanese assistance to 
the GOCR.  (Solano also told Poloffs that Stagno would miss 
the opening of the Panama OASGA because of his opening a new 
consulate in Rivas, Nicaragua.  Instead, Stagno was 
apparently on his way back from China that day.) 
 
MONEY AND TRADE TRUMP FRIENDSHIP 
================================ 
 
¶6.  (C)  The Taiwanese Embassy here responded swiftly and 
negatively.  In press releases on June 6 and 7, the Embassy 
blamed Chinese "instigation" and "threats" for Costa Rica's 
sudden and "deeply unfriendly" move, which set aside "over 60 
years of friendship" with Taiwan.  As a result, Taiwan 
immediately severed diplomatic relations and ended all 
bilateral cooperation.  (COMMENT: We understand that the GOT 
actually began freezing Costa Rican accounts two weeks ago, 
as the GOCR's intent to recognize China became more evident 
to Taiwan.  END COMMENT.)  Of note, the large PRC aid package 
(USD 430 million, as denounced by FM Huang in Taipei, Reftel) 
has not generated much media coverage and Arias did not 
highlight the Chinese assistance in his press conference.  On 
June 7, although pressed by the media, Stagno refused to 
"speculate" about rumored "astronomical sums" of Chinese 
assistance in exchange for recognition. 
 
¶7.  (U)  The media has been quick to emphasize Taiwan's 
considerable past assistance to Costa Rica, totaling USD 8 
million during the Arias administration alone for items such 
outboard motors for the Coast Guard;  uniforms, ballistic 
vests and equipment for the tourist police; and a fleet of 
new pick-ups and motorcycles for the regular police.  Media 
also noted large-scale infrastructure projects, such as the 
USD 27 million Friendship Bridge spanning the Tempisque River 
in Guanacaste.  During the Pacheco administration (and into 
the first months of the Arias administration), Taiwan even 
paid salary stipends to some MFA employees (a practice 
stopped in 2006 by Stagno). 
 
¶8.  (U)  Local media also reported that nearly USD 70 million 
in future or on-going assistance projects were now at risk, 
including for the San Carlos-Naranjo highway, the Calderon 
Guardia Hospital and another USD 3 million in aid for the 
police, unless Beijing or other donors take Taiwan's place. 
On the other hand, political and media commentators noted the 
huge Chinese market, stressing that China is already Costa 
Rica's second  largest trading partner after the U.S., and 
predicting that normalized relations should increase these 
commercial ties.  President Arias told AFP that he hopes to 
visit China after the October CAFTA referendum.  (COMMENT: 
China is Costa Rica's second largest trading partner, thanks 
to Intel's computer chips exports to Hong Kong.  Some of 
these, ironically, are bound ultimately for Taiwan.  END 
COMMENT.) 
 
DECISION-MAKING STYLE DRAWS CRITICISM 
===================================== 
 
¶9.  (SBU)  Editorial and media coverage has recognized the 
long-term logic of improved ties with China and defended 
Costa Rica's "sovereign" and "visionary" decision, but also 
criticized Arias and Stagno for "lying" about the 
negotiations.  In response, Stagno insists that the two 
meetings with Li in 2006 were "clear signals" of an impending 
change in relationship.  Diplomatic contacts here have been 
critical of how the decision and announcement were handled, 
reminiscent of the sudden and clumsy way the GOCR announced 
in August 2006 that its embassy in Israel would be moved from 
Jerusalem to Tel Aviv. Conservative politicians, such as ML 
party's Otto Guevara, the PUSC party's Lorena Vasquez and the 
PUN party's Jose Manuel Echandi have all made comments or 
issued statements deploring Arias's decision to cut ties with 
a "democracy" in favor of "despots."  Ironically, Arias 
critics Otton Solis (PAC Party) and Jose merino (AF Party) 
found themselves applauding the decision. 
 
¶10.  (C)  Behind the scenes, we understand that GOCR 
officials sympathetic to Taiwan or whose ministries depended 
on Taiwanese assistance are very concerned about the 
short/no-notice (to them) decision and the way it was made. 
Minister of Public Security Fernando Berrocal, ex-Minister of 
Production Alfredo Volio and Intelligence Service Director 
Roberto Solorzano have been the most vocal, in private. 
Berrocal was completely blind-sided, and worries now about 
the lost security assistance from Taiwan.  Even the 
President's brother, Minister of Government Rodrigo Arias, 
seemed to have been uncharacteristically out-of-the-loop 
regarding the Taiwan-China decision. 
 
¶11.  (C)  A wider circle of political players was apparently 
aware of the decision, even if key ministers were not.  PLN 
General Secretary Rene Castro told us of a "heated" debate 
within the party leadership on when to announce the China 
decision.  The goal, he said, was to let any political 
fallout dissipate well before the referendum is launched. 
(COMMENT: Thanks to the Electoral Tribunal's decision to 
postpone the referendum and its official launch by a few 
weeks, the GOCR and PLN seem to have achieved this objective. 
 END COMMENT.)  The fact that leftists critics like Merino 
and Solis would have to support the GOCR's decision was an 
added political benefit, Castro said. 
 
COMMENT 
======= 
 
¶12.  (C)  We attribute Arias's decision to recognize China to 
three ingredients.  First, it is wholly consistent with his 
"politically-correct" and somewhat legalistic world view.  It 
is also consistent with the foreign policy he outlined in his 
2006 inaugural address, based on the "founding principles" of 
the UN Charter (which translated in this case, means not 
going against the majority UN view on China).  Arias may have 
also taken some pride in making Costa Rica the first country 
in Central America to recognize China.  Second, also 
UN-related, is the Arias's administration's almost obsession 
with gaining a rotational UNSC seat for 2008-9.  (According 
to the MFA Solano, Costa Rica has support from "all the 
major" UN members in Asia, implying that a deal may have been 
struck already).  Third, the USD 430 million aid package was 
no doubt and offer the GOCR could not refuse, not to mention 
improved trade with and investment from one of the world's 
largest economies.  According to a former PUSC party 
legislator with close ties to the GOCR, Taiwan's reluctance 
to shift to more direct investment instead of grants was the 
deciding factor which moved Arias to his decision.  The fact 
that a very small circle of senior officials around Arias 
were involved underscores that on  major foreign policy 
issues, Arias continues to call the shots, and that he 
continues to envision Costa Rica playing a much 
larger-than-life role on the world stage. 
 
LANGDALE 
LANGDALE