VZCZCXYZ0000
PP RUEHWEB

DE RUEHSJ #0593/01 1932225
ZNR UUUUU ZZH
P 112225Z JUL 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 9931
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

UNCLAS SAN JOSE 000593 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA, WHA/CEN, WHA/EPSC AND EEB; PLEASE PASS TO 
USTR:AMALITO/DOLIVER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR PGOV PREL CS
SUBJECT: COSTA RICA - AUSTR VISIT CLEARLY LAYS OUT REMAINING CAFTA 
IMPLEMENTATION REQUIREMENTS 
 
REFS: A) SAN JOSE 541 
      B) SAN JOSE 508 
 
------- 
SUMMARY 
------- 
 
¶1. (SBU) Visiting Costa Rica June 24-26 at GOCR request, AUSTR 
Everett Eissenstat told GOCR officials that legislative solutions 
are required to resolve the state guarantee (insurance) and 
biodiversity issues.  GOCR officials, including President Arias, 
made equally clear that new legislation at this late date in the 
implementation process would be, in their view, politically 
impossible, although the GOCR is willing to explore creative 
non-legislative solutions.  In frank but friendly discussions, both 
sides agreed to set the insurance issue aside for now, and made 
progress on biodiversity.  Tanuja Garde (USTR Director of 
Intellectual Property) and George York (USTR General Counsel's 
Office) accompanied AUSTR. 
 
¶2. (U) The GOCR remains optimistic that all legislation will be 
completed by August-September, and hopeful that USTR will not 
continue to insist on a legislative remedy for the insurance issue. 
If a new bill is absolutely required, the GOCR needs to know ASAP. 
Since the AUSTR visit, the existing insurance law and the revised 
IPR enforcement bill were approved in second reading, becoming the 
ninth and tenth CAFTA bills to be completed by the legislature.  At 
this point, only three bills remain. SEE ACTION REQUEST, Para 16. 
END SUMMARY. 
 
------------- 
TIGHT AGENDA 
------------- 
 
¶3. (U) Repeated airline delays complicated the visit, which was 
originally scheduled for June 23-25.  A reception at the 
Ambassador's residence on June 24, which had been meant to be the 
culmination of a long day of political meetings, instead became the 
first formal event.  June 25 was devoted to political meetings in 
the morning with GOCR officials and key pro-CAFTA legislators, 
followed by technical meetings and a session with the private sector 
in the afternoon.  Events on June 26 were limited to an IPR 
technical meeting and a final wrap-up with Minister of Foreign Trade 
(COMEX) Marco Vinicio Ruiz and his team. 
 
--------------- 
FIRST, OPTIMISM 
--------------- 
 
¶4.  (SBU) The primary purposes of the AUSTR visit were 1) to help 
motivate legislators and members of the executive branch to conclude 
the necessary CAFTA-DR implementation legislation on time and 2) to 
advance IPR technical discussions.  The GOCR had requested the 
visit, believing the time was ripe to push the pro-CAFTA G-38 
coalition to complete remaining legislation.  NOTE:  We had prepared 
for a similar session with legislators during AUSTR's April visit 
(Ref B), but the GOCR demurred, arguing that the timing was too 
sensitive then to meet face-to-face with legislators with May 1 
leadership elections looming. 
 
¶5.  (SBU) GOCR Ambassador Duenas, visiting from Washington, sketched 
an optimistic pre-visit picture for Ambassador Cianchette on June 
¶24.  He had just come from a meeting with key pro-CAFTA legislators 
and senior GOCR officials.  AUSTR's delayed arrival, in fact, had 
given the Costa Rican side time for this important preparatory 
session.  Visibly elated, Duenas described an executive-legislature 
team at last ready to complete CAFTA.  Although the G-38 coalition 
was tired and "paper-thin," the members recognized that work needed 
to be done on a few outstanding issues (insurance, IPR and 
biodiversity) and were prepared to consider "creative" solutions. 
Duenas hoped both the USG and GOCR sides would have "open minds." 
 
------------------------------- 
THEN, A POLITICAL REALITY CHECK 
------------------------------- 
 
¶6. (SBU) The opening session on June 25, hosted at the Presidential 
office building, at first seemed to confirm Duenas' optimism. 
Minister of the Presidency Rodrigo Arias, COMEX Minister Ruiz, 
Legislature President Francisco Pacheco (PLN), PLN Faction Chief 
Oscar Nunez, PUSC Faction Chief Lorena Vasquez and leading PLN 
legislators Mayi Antillon (International Relations Committee Chair) 
and Maureen Ballesteros (Environmental Committee Chair) all 
reiterated their willingness and flexibility to resolve the 
remaining insurance (state guarantee), biodiversity and 
pharmaceutical issues using existing legislation, regulations, side 
 
letters or executive decrees - anything but new legislation. 
Recounting the "unique" Costa Rican political environment, all 
recounted the CAFTA difficulties and "historic" progress to date, 
but evinced optimism that the remaining implementation legislation 
would be done by September.  Vasquez and Ballesteros, in particular, 
warned of changes that might affect Costa Rica's existing 
biodiversity law, which had been a sensitive issue during and since 
the CAFTA referendum in October. 
 
¶7. (SBU) All ruled out new legislation as politically impossible, 
citing the still active CAFTA opposition and the frayed, tired G38 
coalition.   There was stunned silence, therefore, when AUSTR 
stressed, as the USG had consistently made clear in discussions with 
COMEX, that legislative solutions were required for the remaining 
issues, or USTR may not be able to certify Costa Rica for CAFTA 
entry into force. 
 
--------------------- 
THE VIEW FROM THE TOP 
--------------------- 
 
¶8. (SBU) Underscoring the GOCR's concerns, President Oscar Arias 
then made a brief (surprise) appearance to appeal for USG 
flexibility.  Arias stressed that the U.S. "had no better friend" 
than Costa Rica, a "consolidated democracy" which shared U.S. values 
and which was fighting for democracy in the region.  Citing the just 
concluded Six-Party Agreement with the DPRK, Arias asked "if the USG 
can be flexible with its enemies," why not even more so with its 
"friends"?  Arias added that he had gambled all his political 
capital on CAFTA, and the Costa Rican people wouldn't understand if 
after all this effort Costa Rica were left out because of "very 
little things that frankly aren't worth the trouble."  Arias said he 
could not go to the legislature for a new bill (i.e., to resolve the 
insurance issue), and concluded, "It would be a very big blow to 
Costa Rica to be left out (of CAFTA)". 
 
---------------------------- 
MORE VIEWS FROM THE COALITION 
---------------------------- 
 
¶9. (SBU) A follow-on meeting was intended to focus on the 
problematic Libertarian Party (whose legislators did not attend), as 
well as helpful independents.  Participants in that session 
underscored the fragility of the pro-CAFTA coalition and the 
political impossibility of completing new legislation in time for an 
October 1 EIF.  AUSTR Eissenstat responded that it was precisely 
because the GOCR had come so far "in this marathon" that it should 
not give up with "one last hill to climb."  Eissenstat also 
described the more complex political environment in Washington, 
given the pending FTAs with Colombia and Panama.  He explained that 
USTR therefore had to handle CAFTA very carefully and correctly; the 
discussion is not just about Costa Rica's EIF, but about "the entire 
USG trade agenda."  As discussion continued, independent Evita 
Arguedes (ex-Libertarian) posed a hypothetical question:  Would the 
USG consider a limited, focused EIF extension to accommodate 
resolution of 1-2 final issues (such as completion of a new 
insurance bill)? 
¶10.  (U) Other Costa Rica participants in the June 25 morning 
meetings included legislator Jose Manuel Echandi (IND), Ambassador 
Duenas, VM of the Presidency Roberto Thompson, GOCR advisors Carlos 
Arguedas (a former Supreme Court magistrate) and Allan Thompson, and 
COMEX staff Fernando Ocampo, Suzanna Vazquez, Jose Carlos Quirce 
(from the Embassy in Washington) and Gabriella Castro (COMEX).  U.S. 
Embassy participants included Ambassador Cianchette, ADCM Henifin 
and Kevin Ludeke and Hellen Sanou (Pol/Econ Section staff). 
 
-------------------------------- 
THE VIEW FROM THE PRIVATE SECTOR 
-------------------------------- 
 
¶11. (SBU) In an afternoon session with the private sector, Michael 
Borg, President of AmCham, and other business leaders pressed AUSTR 
on the urgency and importance of finding a non-legislative solution 
to the insurance issue.   Borg and others argued that introducing 
any new legislation at this time would revitalize the CAFTA 
opposition, who would portray even a technical correction limiting 
the state guarantee on insurance as "American interests plundering 
Costa Rica while the GOCR stands by."  With some hyperbole, Borg 
predicted that an invigorated opposition would then not only be able 
to block CAFTA, but perhaps to ensure PAC leader Otton Solis' 
election as president in 2010.  AUSTR Eissenstat reiterated USG 
political and legal constraints, and suggested that the private 
sector continue to work with the GOCR, COMEX and the legislature to 
complete the implementing legislation and regulations. 
 
--------------------------------------------- ------ 
 
TECHNICAL DISCUSSIONS MAKE PROGRESS ON BIODIVERSITY 
--------------------------------------------- ------- 
 
¶12. (SBU) Throughout the meetings with the USTR team, GOCR officials 
and legislators maintained that domestic political sensitivities on 
environmental and biodiversity issues made changes to Costa Rica's 
Biodiversity Law political dynamite.  The COMEX team was thus under 
instruction to press for non-legislative solutions to make the 
Biodiversity Law CAFTA-compliant.  The technical teams made 
progress, but a combination of legislative fixes (in the catch-all 
IPR bill under discussion in the legislature) and regulations will 
be required.  (Note: other IP aspects of CAFTA were understood by 
Tanuja Garde to have been resolved, and were only briefly mentioned 
during the summary sessions.) 
 
¶13.  (SBU) The following is a summary of the technical-level 
discussion on how to make the Biodiversity Law CAFTA-compliant: 
 
-- Article 7: USTR believes that the definition of a micro organism 
raises doubt concerning the non-patentability of plants and tissues. 
 USTR thus asked to re-define microorganisms.  The GOCR believes 
such a redefinition is not CAFTA language and shouldn't be required 
by USTR.  The GOCR team (Suzanna Vazquez and Fernando Ocampo) agreed 
to accept a clarification via regulation but not in the law. 
 
-- Article 78: Very clearly states that IP protection won't be 
extended to certain things [non-genetically-modified organisms and 
plants are notably on the list].  The law therefore must be changed 
to eliminate those exceptions.  COMEX agreed. 
 
-- Article 80: Gives effective veto power over IP applications to 
the Technical Commission formed under the Biodiversity Law.  This is 
unacceptable to USTR.  USTR proposed that the Biodiversity Law 
requirements run on a separate track from IP protection, with weekly 
or daily fines levied on companies that obtain patent protection 
without having completed the Biodiversity Law requirements.  COMEX 
had argued earlier that such a fine would be criticized for "putting 
a price on biodiversity," but appears to have agreed with the basic 
concept. 
 
-- Article 81: Gives the GOCR the power to require obligatory IP 
licenses in the case of a declared national emergency "without the 
need to pay".  USTR insists that this provision cannot stand. COMEX 
agrees. 
 
CONCLUSIONS: Articles 78 and 81 of the Biodiversity Law will be 
modified by law.  Articles 7 and 80 will probably be modified by 
regulation (otherwise by law). 
 
--------------------------------------------- 
REGULATIONS MOVING IN PARALLEL TO LEGISLATION 
--------------------------------------------- 
 
¶14.  (SBU) In a separate meeting with AUSTR (chaired by Minister 
Ruiz), GOCR officials reported that CAFTA regulations were moving in 
parallel to the remaining legislation, to speed the implementation 
process.  Their goal was to go final with regulations as soon as the 
relevant laws were completed.  Representatives from ARESEP and 
CONASSIF (GOCR regulatory bodies) described the internal/public 
review and gazetting process, and predicted that telecom and 
insurance regulations should be completed by August.  According to 
COMEX officials, SPS and other regulations would be complete "in the 
next few weeks."  Eissenstat urged the GOCR to share the text of the 
draft regulations before they went to public review.  He also 
reminded the GOCR officials that a special IPR prosecution unit 
needed to be established before CAFTA EIF, as agreed to in earlier 
discussions on IPR penalties. 
 
--------------------- 
OFFICIALS OPTIMISTIC 
--------------------- 
 
¶15.  (SBU) GOCR officials have been optimistic, even buoyant, in the 
wake of CAFTA progress following AUSTR's visit.  The existing 
insurance law was approved in second reading on July 1, and the 
revised IPR enforcement bill on July 7.  These two become the ninth 
and tenth CAFTA bills completed by the legislature (of thirteen). 
Of the three remaining, the telecommunications bill is due back from 
the Constitutional Court in mid-month, and could be approved by the 
end of July, assuming the Court finds no problems.  The catch-all 
IPR bill ("No. 12") is due out of committee in mid-month, and should 
be approved in first vote in August.  The GOCR hopes the amendments 
bill, already out of committee, will be approved in first vote by 
the end of July.  Both of those bills are likely to require 
Constitutional Court review before becoming law. 
 
---------------------------------------- 
COMMENT:  AN ESSENTIAL, WELL-TIMED VISIT 
---------------------------------------- 
 
¶16. (SBU) Although it took a while to gel, the timing was right for 
this visit.  Both sides came away with a very clear picture of the 
others' interests and limitations.  The need for a legislative fix 
on insurance should not have been such a shock to the GOCR; the USG 
side has been explicitly pressing for this since January. Despite 
the clarity of AUSTR's message, the GOCR side still appears to be 
hoping that a new insurance law will not/not be required.  Minister 
Ruiz plans to be in Geneva July 19 and is willing to discuss the 
issue further there with USTR Schwab, if necessary.  If a new 
insurance law is absolutely required, the GOCR needs to know ASAP. 
Also, the media and the GOCR are assuming that Costa Rica has until 
September 30 to complete the CAFTA legislation.  ACTION REQUEST:  To 
debunk this myth, please advise the realistic deadline to complete 
the legislation. 
 
¶17. (U) This cable was cleared by AUSTR Eissenstat.