VZCZCXYZ0000
PP RUEHWEB

DE RUEHSJ #0540/01 1752246
ZNY CCCCC ZZH
P 232246Z JUN 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 9871
INFO RUEHGG/UN SECURITY COUNCIL COLLECTIVE PRIORITY
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0144
RUEHUB/USINT HAVANA 0041

C O N F I D E N T I A L SAN JOSE 000540 
 
SIPDIS 
 
DEPARTMENT FOR WHA/CEN, IO/UNP, EAP/CM; SOUTHCOM FOR FPA 
 
E.O. 12958: DECL: 06/23/2018 
TAGS: PREL PGOV PINR ETRD ENRG ENVI MASS XK CS CU
ZO, CH 
SUBJECT: HAPPY FIRST BIRTHDAY! COSTA RICA AND CHINA 
 
REF: A. SAN JOSE 133 
     ¶B. 07 SAN JOSE 1106 
     ¶C. 07 SAN JOSE 1488 
     ¶D. 07 SAN JOSE 1783 AND PREVIOUS 
     ¶E. SAN JOSE 129 
 
Classified By: ADCM David E. Henifin for reason 1.4 (d). 
 
------- 
SUMMARY 
------- 
 
¶1. (C) As Costa Rica's diplomatic relations with the People's 
Republic of China turn one year old, the 
David-and-Goliath-sized arrangement continues to work for the 
benefit of both nations.  While China's generous 
political and financial support to Costa Rica could be 
short-lived and Costa Rica's sense of self-importance as a 
regional, possibly hemispheric platform for China's trade in 
the region appears inflated, this is a serious and 
dynamic relationship with no signs of letting up.  During a 
May 7 visit to Costa Rica by Vice Premier Hui Liangya, 
China signed agreements for more than $50 million in 
assistance that included 200 police cars and huge grants to 
the Costa Rican Central Bank for several projects.  Though 
still over the horizon, a Costa Rican-Chinese free trade 
agreement remains on the agenda. 
 
¶2. (C) According to China watchers here: 
 
 -- dwindling U.S. donation flows could be filled by China in 
the short and long term; 
 
 -- China helped Costa Rica win a UNSC seat and increased 
UNSC cooperation; 
 
 -- Costa Rica could benefit with better access to a Chinese 
consumer market of 1.3 billion people; 
 
 -- China could use Costa Rica to springboard economically 
and politically into the rest of Central America; and 
 
 -- recognition of China could affect Costa Rica's vaunted 
defense of human rights around the world, including in Tibet, 
Cuba and Sudan. 
 
END SUMMARY. 
 
------------------------------------- 
A LUCRATIVE RECOGNITION PACKAGE . . . 
------------------------------------- 
 
¶3. (SBU) Returning the favor of President Arias' October 2007 
visit to China that helped yield more than $48 million 
worth of support to Costa Rica last fall (Ref A), Chinese 
Vice Premier Hui Liangya visited Costa Rica May 7, signing 
four new accords with the GOCR that brought goodies totaling 
more than $50 million.  The Costa Rican MFA's Deputy Director 
of Foreign Policy, Alejandro Solano, confirmed to us that the 
deals included:  200 new police cars (not yet delivered); $10 
million in discretionary funding to be used by the GOCR's 
Planning Ministry; $40 million from the Chinese Development 
Bank to the Costa Rican Central Bank, to be used for small 
business development grants; internships in China for five 
Central Bank personnel; an additional 20 scholarships for 
Costa Rican students to study in China; and a memorandum of 
understanding between the Costa Rican Ministry of the 
Environment and Energy and the Chinese Ministry of Hydraulic 
Resources regarding hydro-energy cooperation. 
 
¶4. (C) Zhou Chao, Chinese embassy attach, representing the 
International Department of the Central Committee of the 
Communist Party of China, told us their strategy was to 
"learn" from countries with which China had friendly 
relations, and "when a friend approaches us, we want to 
help."  Zhou explained that the large donations of grants, 
scholarships and material were simply "part of what China 
did" when it established relations with a country. Zhou 
maintained that China in turn could learn from Costa Rica's 
experience in the financial sector; in agriculture, 
especially in the production and export of fruits; and in 
managing the natural environment. 
 
----------------------------------- 
. . . BUT IT IS MOSTLY ABOUT THE UN 
----------------------------------- 
 
¶5. (C) The MFA's Solano, former MFA Vice Minister (1998-2002) 
Elaine White, and Constantino Urcuyo of the think-tank 
"Center for Political Administration Research and Training" 
(CIAPA, Spanish acronym), all told us that the GOCR's 
recognition of China was calculated to help Costa Rica win a 
seat on the UN Security Council in October 2007 (as 
speculated Ref B).  Solano told us that from the beginning of 
the Arias administration, President Arias and FM Bruno Stagno 
were concerned about the GOCR's "non-compliance" with the 
UNSC resolution recognizing the People's Republic of China as 
the sole representative of China in the UN.  Costa Rica's 
continued recognition of Taiwan, Solano candidly noted, would 
have been a problem since the GOCR wanted a UNSC seat. 
Urcuyo and Solano both pointed out that China helped arrange 
FM Stagno's tour of 16 African countries in 14 days before 
the UNSC election to garner votes for Costa Rica.  Urcuyo 
added that Stagno initiated contact with China while in New 
York as UN Ambassador during the Pacheco Administration 
(2002-2006). 
 
¶6. (SBU) According to Solano, White and Urcuyo, Taiwan had 
lost prestige in Costa Rica due to various scandals 
involving alleged Taiwanese payments to government officials, 
including to ex-President Miguel Angel Rodriguez (1998-2002) 
and questionable direct funding of some of the MFA's 
operations.  These scandals generated the image domestically 
that Costa Rica was in a trade-off, selling its support to 
Taiwan. 
 
--------------------------------------------- 
VISIBILITY, EGO (AND US RELATIONS) PLAY A ROLE 
--------------------------------------------- 
 
¶7. (C) White told us the UNSC seat was a means by which Arias 
sought to regain visibility on the world stage, alluding to 
his 1986-1990 first term as President when he won the Nobel 
Peace Prize for his work to end the wars in Nicaragua and El 
Salvador.  She said this Arias Administration had followed a 
foreign policy based on systematically removing what it 
viewed as the GOCR's international "handicaps," which 
included winning a UNSC seat, recognizing Palestinian 
statehood (Ref E), and shifting allegiance from Taiwan to 
China.  Additionally, White said that when Arias took 
office, he wanted to "restore dignity" to Costa Rica's 
international image and foreign policy.  Opening up to China 
reflected Arias' "multilateralist" interests; in his second 
presidential term, White noted, Arias seemed far more 
interested in the UN and global issues than engagement in 
Central American politics. 
 
¶8. (C) White suggested that Costa Rica's historic "close 
relationship" with the U.S. had weakened over the past few 
years and was a contributing factor in the decision to 
establish ties with China. She speculated that reaching out 
to China could have represented a "realpolitik" move to 
garner support and assistance from another great power. 
Noting that Costa Rica had been a "favorite son" of the U.S. 
in the past, White said El Salvador had replaced Costa 
Rica as the "favored one" in the region with its political 
and military support of the U.S. in the war in Iraq. 
Furthermore, El Salvador's eventual leading role in CAFTA 
negotiations far outshined Costa Rica's plodding and painful 
path to ratification and implementation. 
 
¶9. (C) Urcuyo (a well-known critic of the president) believed 
that Arias' larger-than-life ego played a major role in the 
decision to recognize China in two ways.  First, Urcuyo 
described Arias using a metaphor proffered by a local 
journalist:  "If he goes to a christening, he wants to be the 
baby; if he goes to a wedding, he wants to be the bride; and 
if he goes to a funeral, he wants to be the deceased." 
Urcuyo commented that Arias liked to do what is modern and 
fashionable, and therefore, "if China appeared on the cover 
of 'The Economist' twice" and the newest wave was that China 
was where the action was, then Arias had to jump on that 
wave. 
 
¶10. (C) Second, Arias' relentless struggle to get CAFTA 
approved domestically, Urcuyo said, alienated Arias' former 
intellectual leftist comrades, who saw his pro-CAFTA stance 
as "abandoning" his socialist roots. By establishing 
relations with "communist" China (a country that has little 
in common with Costa Rica in terms of its human rights 
record, its one-party structure, and its repression of 
freedom of expression), Arias could return to the good graces 
of the leftist Costa Rican elites. 
--------------------------------------------- --- 
THE BUSINESS OF CHINA AND COSTA RICA IS BUSINESS 
--------------------------------------------- --- 
 
¶11. (C) Driving the Costa Rican business sector to support 
Chinese recognition, White said, was the realization that 
Costa Rica was losing economic ground by its lack of ties 
with China.  CIAPA's Urcuyo noted that Arias' appointment of 
Antonio Burgues, a prominent banker and investor, as 
Ambassador to Beijing, evidenced the economic and business 
aspects of the recognition.  (COMMENT:  Burgues' closeness to 
Arias, and his past record as treasurer for the President's 
PLN party didn't hurt, either.  END COMMENT.) 
 
¶12. (SBU) According to Solano, China is Costa Rica's second 
largest market for exports, primarily in microchips (from 
INTEL) and agricultural products.  Costa Rica also plans to 
"culturally" develop a market for Costa Rican coffee in 
China and hopes that access to the 1.3 billion-person market 
will help Costa Rica develop other industries.  Solano 
hoped that ties to China could serve as a platform for Costa 
Rica to gain entry into APEC someday. 
 
¶13. (SBU) As for benefits to Beijing, Solano said that China 
could use Costa Rica as a base against Taiwan in Central 
America and to build bridges to other countries in the 
region.  Though not in Central America, Solano pointed to 
Paraguay as a country that was about to follow Costa Rica's 
lead in switching allegiance from Taiwan to the PRC.  Marco 
Vinicio Ruiz, Minister of Foreign Trade (COMEX) and Emmanuel 
Hess, manager of PROCOMER, a Costa Rican export 
assistance agency, commented in a May 13 newspaper article in 
"La Republica" that they saw Costa Rica well-positioned 
as a platform for Chinese business operations in North and 
South America -- a "center of operations from which China 
could tend to markets in other latitudes of the continent." 
Hess went so far as to claim that Costa Rica "offers access 
to markets, which benefits China, a country that does not yet 
have a FTA with the U.S. which we are going to have; China 
needs to confer origin through a country that has an FTA with 
the U.S. and with which China already has commercial 
relations." 
 
¶14. (SBU) However, Chinese Embassy attach, Zhou downplayed 
that analysis and told us that China already has good trade 
relations with the U.S., Mexico, and many other countries in 
South America, including Brazil and Argentina.  He added 
that China had an FTA with Chile and was negotiating one with 
Peru.  In terms of trade for China in the region, Zhou 
noted, Costa Rica was about 9th or 10th place (COMMENT.  UN 
data for 2007 ranked Costa Rica as China's thirteenth largest 
export market (USD 567 million) in Latin America.  END 
COMMENT.) 
 
------------------- 
FTA AND APEC DREAMS 
------------------- 
 
¶15. (SBU) A China-Costa Rica free trade agreement (FTA) 
remains on the horizon.  While Vice Premier Hui Liangya was 
in Costa Rica in May, Costa Rican COMEX officials were in 
Beijing for the second round of talks on developing a FTA. 
Attach, Zhou said several "technical matters" were being 
discussed.  COMEX Minister Marco Vinicio Ruiz traveled to 
China the week of May 5 and discussed the upcoming July 
conclusion of a feasibility study on the mechanics of 
launching formal FTA negotiations.  The study began in 
January and has been a joint Costa Rican-Chinese effort, with 
participants exchanging views on how to proceed with a formal 
agreement. 
 
¶16. (C) According to COMEX Director General Gabriela Castro, 
Ruiz's Chinese trip in May included a stop-over in Singapore 
to meet with the Secretariat of APEC.  Castro told us the 
GOCR was keen on joining APEC and learned that it was "first 
on the list" to join in 2010 (Ref C). 
 
-------------------------- 
WHAT ELSE MIGHT LIE AHEAD? 
-------------------------- 
 
¶17. (C) White supported the decision, and its timing, to 
recognize China.  However, it remained unclear to her and 
others what China wants from Costa Rica and if the Chinese 
largesse which flowed freely during the last year is a 
one-time deal. White and Urcuyo believed China's major 
interests in establishing formal ties with Costa Rica were to 
advance de-legitimization of Taiwan (and reunification of 
China), followed closely by the ability to use Costa Rica as 
a political and business base to gain entry into other 
Central American countries.  Chinese Ambassador Wang 
Xiaoyuan discussed these motives freely in a May 20 "La 
Prensa Libre" newspaper article. 
 
¶18. (C) Though some Costa Ricans boast that Costa Rica was 
the first country in Central America to establish 
diplomatic relations with China, Chinese attach, Zhou 
reminded us that Daniel Ortega, in his first presidential 
term in Nicaragua, established relations with the PRC in 
¶1985.  However, Violeta Chamorro severed those ties when she 
took office in 1990.  Zhou confirmed that there "had been 
talks" with Nicaragua and that "the door was open" to 
resume relations.  (COMMENT: Not being trumped by Ortega's 
re-recognition of China in this administration may have 
colored the accelerated timing of the GOCR's recognition, see 
Ref B.) 
 
¶19. (C) During Vice Premier Hui Liangya's May visit to San 
Jose, Solano said, talks covered future cooperation on 
environmental protection.  He noted that representatives from 
INBIO (Costa Rican Institute for Biodiversity) would visit 
China soon to discuss the use of fossil and other types of 
fuels, research on natural medicinal substances, management 
of caves and rivers, forestry development, and protection of 
species.  Additionally, Costa Rica would symbolically donate 
back some of the blankets and tents provided by China for 
victims of last year's flooding in Costa Rica, part of the 
$20 million of assistance (Ref D), to victims of China's 
recent earthquake. 
 
----------------------------- 
WHAT ELSE IS IN IT FOR CHINA? 
----------------------------- 
 
¶20. (C) Urcuyo described the GOCR's recognition of China as a 
"symbolic reward" for China, which now had support from a 
global leader on human rights, Costa Rica. He speculated that 
Costa Rica would have to "pay back" China in some fashion for 
help with the UNSC seat, but he did not believe that China 
would try to dictate the GOCR's votes in the UN.  (NOTE: 
However, twice in delivering recent demarches on Burma, MFA 
staff asked PolOff what China's position was on the issue). 
 
¶21. (C) The MFA's Solano himself stated that although there 
are divergences between the two countries on human rights 
matters, they do have common ground to discuss political and 
economic strategy.  Solano noted an air of "cooperation 
and exchange" with China in the UNSC and said that that the 
dialogue between the two is even more "fluid" in New York 
than in San Jose. 
 
----------------------- 
IF CHINA, WHY NOT CUBA? 
----------------------- 
 
¶22. (C) On Cuba and human rights in general, White pondered 
what the GOCR's recognition of China could mean for its 
relations with Cuba.  She noted that Costa Rica could not now 
easily differentiate between Cuba and China, adding "if both 
have the same problem with human rights, what is the excuse 
for establishing relations with China and not with Cuba?" 
Though White doubted the GOCR's Cuba policy would change 
soon, due to Arias' personal strong antipathy for Castro and 
the regime, establishing relations with China could pave the 
way for further changes in GOCR foreign policy.  (NOTE: PLN 
Legislator Federico Tinoco told us on June 6 that increased 
overtures from the Arias Administration towards Cuba were a 
possibility.) 
 
------- 
COMMENT 
------- 
 
¶23. (C) Costa Rica's relationship with China seems to be 
paying off, both domestically and internationally, for the 
Arias Administration.  China's assistance packages totaling 
nearly $100 million the first year (which includes disaster 
and humanitarian assistance, a new national stadium, and a 
financial shot in the arm to the Central Bank) have certainly 
helped fill some gaps in U.S. assistance, including in law 
enforcement (the patrol cars) and traditional USAID 
development areas. 
 
¶24. (C) What remains to be seen for Costa Rica is the price 
that China could expect for its support in the UNSC and aid 
packages.  Although we have not seen any overt pressure from 
the Chinese, there has been no official outcry in Costa Rica 
to address China's poor human rights record, recently 
highlighted by extensive coverage of Tibetan separatism. 
Additionally, there has been no fuss over China's limited 
military assistance to Sudan.  Given the GOCR's unusually 
vocal support for the Palestinians (on the basis of human 
rights, among other issues), the Arias administration's 
silence over these two issues has been notable. 
 
¶25. (C) Practically speaking, China has now become one of 
Costa Rica's major donors and we intend to include the 
Chinese on future "Mini-Dublin" meetings that we host at 
least once a year.  Although we do not see China's "entry" 
into Costa Rica as an end of U.S. influence in the region, it 
does highlight that we are not the only (nor the most 
generous) player in town. 
CIANCHETTE