P 050033Z JUN 08
FM AMEMBASSY SAN JOSE
TO SECSTATE WASHDC PRIORITY 9810
INFO WHA CENTRAL AMERICAN COLLECTIVE PRIORITY

UNCLAS SAN JOSE 000475 
 
SIPDIS 
 
DEPT FOR EEB/TPP/ABT AWINTON, EEB/TPP/ABT/ATP JSPECK, 
EBB/TPP/MLURIE, EBB/IFD/ODF MSIEMER, PLEASE PASS TO 
FAS/OCRA BZANIN, PLEASE PASS TO USDA, PLEASE PASS TO 
TREASURY/SGRAY 
 
E.O. 12958: N/A 
TAGS: CS EAGR ECON ETRD PREL TBIO
SUBJECT: REQUEST TO END FOOD STAPLE EXPORT RESTRICTIONS: 
COSTA RICA 
 
REF: A. STATE 53353 B. SAN JOSE 347 
 
 
¶1.  SUMMARY:  Costa Rica,s rising food prices have had 
minimal political impact to date.  From 2006 to 2007, wage 
increases kept pace with food price increases.  Over the past 
year, that relationship changed with food price increases 
easily eclipsing wage increases (Ref B).  Although domestic 
food security concerns are gaining strength, most 
recommendations focus on increasing domestic production and 
productivity.  Costa Rica proposed a National Food Plan on 
May 7, 2008 which aims to increase local grains production 
and provide direct cash transfers to the most vulnerable 
members of Costa Rican society.  There have been virtually no 
calls for export restrictions as a means of dealing with 
rising food prices. END SUMMARY 
 
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IS THERE A PLAN? 
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¶2.  On Thursday, May 7, 2008, the GOCR presented a National 
Food Plan that aims to ensure the availability of basic 
staples to the population and support the Costa Rican farm 
sector.  There are different estimates of the cost of the 
government,s plan, ranging from USD 60 million to USD 88 
million.  The GOCR intends to reallocate existing government 
resources and to send an &extraordinary8 budget to the 
national assembly (Asamblea) to obtain funding for the 
National Food Plan. 
 
¶3.  The government,s strategy establishes short, medium and 
long term actions.  The main goal is to secure the 
availability of basic food staples such as corn, beans and 
rice.  The goal for rice, as an example, is to expand 
production to a total of 73,627 hectares by 2010, in order to 
cover 80 percent of domestic rice consumption (up from the 
current 50 percent). 
 
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ARE THERE OTHER BENEFITS? 
------------------------- 
 
¶4.  To increase local grains production, the National Food 
Plan calls for an increase in crop insurance coverage by 
allocating an additional USD 8 million through the National 
Insurance Institute (INS).  In addition, the GOCR will 
instruct the national banking system to increase credit 
allocations to small- and medium-size producers for 
agricultural equipment and machinery.  The resources 
available through these programs will be approximately USD 16 
million.  The plan also incorporates support to producers for 
joint seed and fertilizer purchases at lower prices. 
 
¶5.  According to Casa Presidencial, the GOCR,s main concern 
is to provide a safeguard to the poorest segments of the 
population.  The plan intends to increase the number of 
scholarship beneficiaries by 42,292 through the National 
Scholarship Fund (FONABE).  Six million dollars will be made 
available for this program through a budget modification. 
The plan will also allocate direct cash transfers of USD 100 
per month to 16,000 families in extreme poverty for a total 
of USD 9.6 million. In addition, the plan will reinforce the 
&Let,s Advance8 and CEN-CINAI (Centers for Children,s 
Education and Nutrition) programs with up to an additional 
USD 20 million.  Both programs target the poorest segment of 
the Costa Rican population. 
 
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IS THE PLAN AFFORDABLE? 
----------------------- 
 
¶6.  The GOCR will fund the National Food Plan through a 
combination of reallocating currently budgeted but unspent 
funds and borrowing.  Also, the GOCR plans to take advantage 
of the savings in debt service that it has achieved over the 
past two years.  Just this week, after a CenAm, Panama, and 
Dominican Republic ministerial meeting with the 
Inter-American Development Bank (IDB), GOCR,s Minister of 
Finance, Guillermo Zuniga stated that Costa Rica will not 
participate in the IDB,s USD 500 million program for 
mitigating the impact of the rising food process.  Minister 
Zuniga will work with the Ministry of Agriculture to make the 
most of existing or internal sources of financing.  The IDB 
noted two possibilities for Costa Rica: 
 
(1) identifying funds for the Plan in an existing IDB rural 
development project; and 
 
(2) determining if Banco de Nacional de Costa Rica has the 
ability to provide additional financing for small and medium 
enterprises (PYME) from its existing PYME portfolio. 
 
In addition, the GOCR seeks an IDB assessment of the fiscal 
impact of the proposed insurance program on the budgets of 
the GOCR and INS. 
 
¶7.  Based on consultations with Treasury,s Office of 
Technical Assistance (OTA) in Costa Rica, Post believes that 
the National Food Plan will have limited fiscal impact.  The 
OTA confirms that government revenues have exceeded 
expectations and that spending remains under control.  Given 
the current fiscal situation, and assuming that revenues and 
expenditures continue their recent positive trends, the GOCR 
estimates that it will maintain a balanced or near-balanced 
budget for 2008. 
 
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THE FISCAL CONTEXT 
------------------ 
 
¶8.  To help put the proposed cost of the National Food Plan 
into context, the maximum estimate of USD 88 million 
represents only 0.3 percent of Costa Rica,s 2007 GDP. 
According to the OTA, the GOCR finished 2007 with a budget 
surplus of approximately USD 173 million, almost double the 
National Food Plan,s highest estimated cost.  By some 
measures of the 2008 budget, the GOCR will finish the year 
with over USD 4.5 billion in total revenue.  If the 
government reaches this target in 2008, the USD 88 million 
figure would represent less than 2 percent of total fiscal 
revenues. 
 
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COMMENT 
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¶9.  We consider the National Food Plan to be a moderate and 
reasonable reaction on the part of the GOCR to the recent 
increase in food prices.  The GOCR is attempting to increase 
domestic food production, which is exactly the recommendation 
of the USG (Refs A and B).  Whether the effort will achieve 
its ambitious goals remains to be seen, as producers will 
need to be convinced to shift land from crops that have been 
quite profitable in recent years (e.g. pineapples, melons, 
oranges) to crops that historically generated poor returns. 
The GOCR is also attempting to mitigate the effects of 
increases in food prices on the most vulnerable members of 
Costa Rican society.  Based on current projections, the 
government can afford its National Food Plan with minimal 
fiscal consequences.  Both financially and substantively, the 
plan seems appropriate given Costa Rica,s current needs and 
resources.  Most importantly, there are currently no plans to 
implement any sort of food export restrictions (Ref A).  END 
COMMENT. 
 
¶10.  FAS at Post provided the analysis of the GOCR,s 
National Food Plan (see paras 2-5). 
 
CIANCHETTE