VZCZCXYZ0000
PP RUEHWEB

DE RUEHSJ #0217/01 0821605
ZNR UUUUU ZZH
P 231605Z MAR 09 ZDK
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 0623
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
INFO RHEHNSC/NSC WASHDC PRIORITY
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SAN JOSE 000217 
 
SENSITIVE 
SIPDIS 
 
WH FOR OVP; DEPT FOR WHA/CEN, WHA/PPC, WHA/EPSC, OES, AND INL/LP 
 
E.O. 12958: N/A 
TAGS: CS ECON ETRD OTRA OVIP PREL PGOV SNAR SOCI
SUBJECT: SCENESETTER FOR THE VICE PRESIDENT'S VISIT TO 
         COSTA RICA 
 
-------- 
SUMMARY: 
-------- 
 
¶1. (SBU) Embassy San Jose warmly welcomes Vice President and Dr. 
Biden and their delegation, and provides this broad overview as 
requested by the OVP.  The Arias administration has made progress on 
key elements of its 2006-2010 agenda, most notably entering the 
U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA) 
into force on January 1.  The GOCR should now be freer to address 
other priorities, such as rising domestic security problems; 
decrepit national infrastructure, including the education and health 
care systems; and the global financial crisis.  The protracted fight 
to complete CAFTA has taken its political toll, however, and with 
pre-campaigning already under way for the 2010 national elections, 
President Arias and his team still face many challenges. 
 
 
¶2. (SBU) On foreign relations, the GOCR (like Costa Ricans in 
general) hopes the new U.S. administration will bring more 
understanding, positive attention and perhaps assistance to Latin 
America.  The GOCR welcomes Merida Initiative security assistance, 
but worries that USG focus on Mexico and Colombia will push 
traffickers into Central America.  True to form, Arias has remained 
active on the global stage, pursuing disarmament, environmental and 
reform initiatives in the UNSC, recognizing China and most recently, 
upgrading relations with Cuba.  END SUMMARY. 
 
-------------------------------------- 
HOPES FOR THE NEW U.S. ADMINISTRATION, 
-------------------------------------- 
 
¶3. (SBU) Despite differences on some issues (e.g., Iraq and 
Guantanamo), Costa Rican-U.S. relations remain very good. Costa 
Ricans like Americans and America, but they believe recent 
administrations have given short shrift to relations with Latin 
America.  They hope to see a shift in policy in the Obama 
administration, including more understanding, more (positive) 
attention and perhaps more assistance from the U.S. government. 
However, there may be inflated public (and perhaps governmental) 
expectations about the speed and depth of the "change" the U.S. 
administration will bring to policy in this region. 
 
¶4. (U) President Arias and his administration are thrilled to be 
hosting your visit.  Arias wants the region, and especially Costa 
Rica, to be "taken seriously" by the United States, as he noted in a 
February speech to the Brookings Institute.  In the same remarks, he 
called for a "nuanced (U.S.) engagement" with Latin America, as the 
core of a new "good friend" policy in the hemisphere, focused on 
"mutual benefit, mutual understanding and mutual respect."  Arias 
described the nations of the hemisphere as "sisters" that "have not 
yet learned how to be neighbors."  In the words of OAS 
 Secretary-General Jose Miguel Insulza, the Arias government hopes 
for a new USG commitment to develop policy WITH the region and not 
just FOR the region. 
 
--------------------------- 
INCLUDING ON CLIMATE CHANGE 
--------------------------- 
 
¶5. (SBU) Enthused by the Obama Administration's early signals on 
climate change, Central American leaders, including Arias, hope the 
U.S. will agree to launch a regional environmental initiative 
focused on climate change, possibly including the Caribbean 
countries.  At the behest of his environment minister and the 
chairwoman of the Costa Rican national legislature's Environment 
Committee, President Arias reportedly hopes to include this as an 
agenda item for the Vice President's March 30 encounter with 
regional leaders.  (COMMENT: Central Americans are increasingly 
anxious for stronger U.S engagement in the region on climate change, 
particularly on adaptation.  In their view, a meaningful USG 
response could help counter growing European efforts to shape the 
region's outlook in the run-up to the December 2009 climate change 
negotiations in Copenhagen.  END COMMENT.) 
 
--------------------------------------------- --------- 
ARIAS ADMINISTRATION: CHALLENGES MET; CHALLENGES AHEAD 
--------------------------------------------- --------- 
 
¶6.  (U) CAFTA has been the Arias administration's toughest political 
challenge (and biggest victory) to date, pushing aside most of 
Arias' other initiatives during its protracted and difficult 
approval process.  In October 2007, CAFTA was narrowly ratified in 
the country's first-ever national referendum (52% yes, 49% no).  The 
national legislature then wrestled for over a year to enact 13 
implementing bills, with the 14th to be approved in 2009.  After two 
extensions granted by its CAFTA partners, Costa Rica entered into 
 
force on January 1, 2009.  The major political opposition leader and 
anti-CAFTA advocate has not given up, however.  He is leading a 
regional campaign to "renegotiate" CAFTA, and has contacted 
like-minded Members of Congress to enlist support. 
 
¶7.  (SBU) With CAFTA in force, the Arias administration is turning 
to other priorities such as improving domestic security and law 
enforcement, rebuilding national infrastructure, repairing the 
broken education and health care systems, and improving the business 
climate.  With 15 months years remaining in his administration; 
considerable political capital expended in the bruising CAFTA fight; 
controversies lingering about the use of Taiwanese aid, the terms of 
a subsequent bond deal with China and other issues; three cabinet 
ministers resigning over different controversies and maneuvering 
underway for the 2010 elections, Arias may find it increasingly 
difficult to complete the rest of his agenda. 
 
¶8. (U) Arias' public support remains strong, however.  The January 
2009 CID-Gallup poll showed 52% of those surveyed rating his 
performance as good or very good, a high water mark for governments 
this deep into its term.  Analysts attribute this primarily to his 
highly-visible efforts to respond quickly to the damage cause by the 
January 8 6.2 magnitude Cinchona earthquake near San Jose, which 
killed 25, injured 100 and left hundreds homeless. 
 
------------------------------ 
COSTA RICA: STUDY IN CONTRASTS 
------------------------------ 
 
¶9. (U) The Arias administration's policy goals have remained 
consistent with the four pillars of USG policy in the hemisphere: 
prosperity, security, opportunity and democracy.  The link between 
stable democracy and economic opportunity for the average citizen 
continues to make Costa Rica an example for the region.  However, 
the country remains a study in contrasts. 
 
¶10. (U) Costa Rica's historical investment in education and health 
care rather than in national defense, coupled with economic policies 
that have generally favored free enterprise and globalization, have 
helped create a lower level of poverty (approximately 18% in 2007) 
than the norm for Latin America.  Costa Rica still has the most 
prosperous economy in Central America, with a 2008 gross domestic 
product per capita of $7000 (compared to $3300 for the region), but 
Panama is almost at the same level and regional leaders Chile and 
Mexico are some distance ahead. 
 
¶11.  (U) On the other hand, the World Bank's 2009 "Doing Business" 
index ranks Costa Rica 117th out of 181 countries overall (down from 
99th in 2006), and 24th out of 31 in the region.  Costa Rica ranks 
123rd for ease of starting a business, 164th for protecting 
investors, and 152nd for paying taxes.  In general, Costa Rica's 
cumbersome and hyper-legalistic bureaucracy impedes business 
development and investment. 
 
¶12.  (U) The average pupil tenure in the public system is only 7.3 
years.  Highway accidents on the nation's decrepit road system are a 
leading cause of violent death (only 24 percent of the national road 
system is classified as in "good" condition).  Costa Rica is indeed 
green, but it is not entirely clean.  Managing waste stream issues 
is increasingly a challenge as tourism sites and communities develop 
and expand.  On a national basis in 2007, less than four percent of 
the country's sewage output was treated under operator control. 
 
¶13.  (U) Costa Rica may not be highly dangerous, but it is no longer 
safe.  Crime has been steadily increasing in recent years, becoming 
a major concern (along with the state of the economy) as measured in 
opinion polls.   Crime rates are lower in Costa Rica (homicide of 
10/100,000) than elsewhere in the region (36/100,000), but higher 
than in the United States, and rising at double-digit rates. 
 
¶14.  (U) The judicial system is broken.  In 1995, the national 
conviction rate for robbery cases was 25 percent.  By 2007, there 
were six times as many robberies, but only a two percent conviction 
rate.  On average from 1997-2007, only 10 percent of all court cases 
were resolved at all.  Over the last three years, Embassy San Jose 
has annually replaced more stolen passports than any other U.S. 
diplomatic mission around the world.  This is an indication of the 
rising theft problem, especially in tourist areas and the 
well-populated central valley around San Jose. 
 
--------------------------------------------- -- 
THE ECONOMY: GOOD BASICS, BUT 2009 MAY BE TOUGH 
--------------------------------------------- -- 
 
¶15.  (U) Economic growth has slowed due to the world fuel price and 
financial crises.  Real GDP growth for 2008 will be approximately 
 
4.0 percent, less than half of the 8.8 percent rate in 2007. 
Unemployment has inched upwards to 6.0 percent in 2009, but 
inflation reached 13.9 percent at the end of 2008, well above the 
9.4 percent rate in 2006.  Exports continue to push growth, with 
traditional agricultural products (coffee, pineapple, sugar cane and 
bananas) doing fairly well.  Value added goods and services are also 
doing well, including microchips from Intel (which generates 20 
percent of Costa Rica's export earnings alone), and regional 
back-office operations by Western Union, Proctor and Gamble and HP. 
Costa Rica attracted the second largest amount of FDI in the 
Caribbean basin region in 2007, after Mexico: $1.8 million (per UN 
statistics).  The U.S. is Costa Rica's largest trading partner; 
two-way trade totaled $8.5 billion in 2007. 
 
¶16. (U) However, the government and private sector worry about the 
impact of the U.S. and global financial crisis, especially on the 
tourism sector (still a major earnings generator and job creator), 
the real estate industry (which depends heavily on U.S. and Canadian 
investors and retirees), and the related construction industry.  All 
three are turning down.  Increased trade ties (eventually) may help 
Costa Rica ride out the crisis.  In addition to CAFTA, the Arias 
administration is has comleted six of seven negotiation rounds for 
the  Cntral American regional trade/association negotiatons with 
the EU, has started trade negotiations wth China and Singapore in 
early 2009, and is a mmber of the regional Pathways to Prosperity 
grou established during the UN General Assembly in Sepember 2008. 
 
 
---------------------------------- 
SECURITY: DOING A LOT WITH A LITTLE 
---------------------------------- 
 
¶17. (U) Despite limite security resources, Costa Rica continues to 
be  reliable partner against transnational drug traffcking, 
seizing nearly 22 metric tons of cocaine,4.8 tons of processed 
marijuana and significant qantities of other drugs, as well as 
millions in eized assets in 2008. Under a bilateral maritimeagreement signed in 1999 (the first in the region)U.S.-Costa Rican 
joint narcotics operations seizd most of the total cocaine 
interdicted in. 
 
18 (SBU) Unfortunately, these record seizures reflec the 
tremendous narcotics flow through the regio.  The USG estimates 
that approximately 60-75 pecent of the drug flow from South America 
to Mexio and the United States runs through Costa Rican teritory 
or national waters.  At any one time, mosly Mexican and Colombian 
traffickers may stockpie as much as 15-20 metric tons of cocaine in 
Cosa Rica, using the country as an "intermodal hub" fr onward drug 
shipments north.  Illegal migrants,especially from China, are also 
smuggled via lan or sea through Costa Rican territory. 
 
---------------------------- 
BUT MORE ASSISTANCE IS NEEDD 
----------------------------- 
 
¶19. (U) Althogh Costa Rica is economically-developed enough to hve 
"graduated" from most forms of USG assistance it still needs help. 
From 2004 to 2007, overallUSG assistance, including regional 
programs suchas CAFTA trade capacity building and a large 
deb-for-nature swap under the Tropical Forest Conservation Act, 
fluctuated annually from $27 million (FY 2004) to $5.9 million (FY 
2007). 
 
¶20.  (SBU) U.S. security assistance is vital to strengthen Costa 
Rica's ability to fight domestic and regional threats, especially as 
the nexus between drug trafficking and domestic crime becomes 
clearer.  The Costa Rican coast guard told us that a four-ton 
maritime seizure of cocaine in July 2008 would not have been 
possible without new, USG-provided radios and navigation aids. 
Marking a significant departure from his past attitude, President 
Arias himself asked the Embassy for help in early 2008, but security 
funding (until the Merida Initiative) has been problematic.  With 
the right assistance and training, Costa Rica can serve as a 
regional model for combating drug trafficking, money laundering and 
violent domestic crime without a military. 
 
---------------------------------- 
THE MERIDA INITIATIVE IS IMPORTANT 
---------------------------------- 
 
¶21. (SBU) Under the multi-year Merida Initiative, Costa Rica will 
receive $4.3 million in security- and law enforcement-related 
funding in FY08 funds, plus a share of $14.9 million in regional 
programs.  In FY 2009, Costa Rica should receive another $9.4 
million in bilateral assistance.  The majority of the FY 2008 Merida 
package for Costa Rica will help modernize and refurbish the coast 
 
 
guard, with healthy amounts of assistance also going for the 
national police, improved border inspection equipment and training, 
a regional fingerprint system, a regional center for drug crime 
intelligence, firearms destruction and improved prison management. 
The Arias administration says it needs still more U.S. and 
international help, however, and worries that the U.S. focus on 
Mexico in the north and Colombia in the south will increasingly 
squeeze traffickers into Central America. 
 
----------------------------------- 
NEW OPENNESS TO MILITARY ASSISTANCE 
----------------------------------- 
 
¶22.  (U) The Merida assistance will complement FY 2008-2010 DOD- and 
SOUTHCOM-funded programs providing training to, and constructing 
facilities for, Costa Rican police and security personnel.  In fact, 
the Arias administration has shown a new (and welcome) receptiveness 
to U.S. military assistance overall.  Since December 2007, U.S. 
personnel deploying from Joint Task Force Bravo (JTF-B) in Honduras 
have worked with Costa Rican civilian counterparts to provide 
significant medical and construction help to isolated indigenous 
communities in the Talamanca area in December 2007 and near the 
Panama border in September 2008, as well as major disaster relief 
after heavy flooding near Limon in November 2008.  Over 1600 
patients were treated in two Medical Readiness Training Exercises. 
Additionally, JTF-B helicopters deployed to Costa Rica to help it 
recover from its localized but devastating January 8 earthquake. 
 
 
 
--------------------------------------------- ----- 
FOREIGN POLICY: THE UN, NEW FRIENDS AND OLD RIVALS 
--------------------------------------------- ----- 
 
¶23. (SBU) Costa Rica is serving its third term (2008-2009) as a 
non-permanent member of the UN Security Council (UNSC).  The Arias 
administration is using this position to further its primary 
international goals, including conventional disarmament, 
environmental protection, foreign aid reform (with more assistance 
directed to "responsible" middle income countries like Costa Rica), 
and improved UN operations.  Aiming for better ties with around the 
Pacific Rim, Costa Rica was the first government in Central America 
to recognize China (in June 2007).  President Hu came to Costa Rica 
in October 2008, making first-ever visit by a Chinese president to 
Central America. 
 
¶24. (SBU) President Arias had been one of the very few Latin 
American leaders to speak out for self determination in Cuba and to 
openly worry about loss of democratic institutions in Venezuela. 
His tone softened in 2008, however, as he called more frequently for 
the U.S. to close Guantanamo and to ease the embargo.  Arias 
believes these steps will help open the island politically and 
economically, and he hopes the new U.S. administration will consider 
his advice seriously.  Going one step further, Arias re-established 
full diplomatic relations with Cuba in March 2009, citing the need 
for a "direct and open" dialogue with the regime. 
 
¶25. (SBU) With Venezuela, the Arias administration asked to join 
Petrocaribe in 2008, in a move it defended at the time as "economic 
pragmatism" given high fuel prices and Venezuela's role as Costa 
Rica's major supplier (87 percent) of crude oil.  Given the much 
lower oil and energy costs since, and some Costa Rican concerns 
about the potential "political price" associated with joining, this 
initiative has languished. 
 
¶26. (SBU) Closer to home, Costa Rica-Nicaragua relations remain 
delicate.  The government has been reluctant to criticize President 
Ortega openly or directly for the highly-suspect results of the 
November 2008 municipal elections, preferring instead to express 
concerns in multilateral fora such as the UN and the OAS.  In 
contrast, Costa Rica sees more "affinities" with Panama, and has 
quietly improved relations with its southern neighbor.  Relations 
with Colombia, which Costa Rica views as a mentor and ally, 
especially on law enforcement and security issues, are also close 
and improving. The Colombian Air Force dispatched one helicopter to 
assist with the January 2009 earthquake recovery, for example. 
 
CIANCHETTE