Cablegate: Scenesetter for Secretary Clinton's March 4-5 Visit to Costa

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SUBJECT: Scenesetter for Secretary Clinton's March 4-5 Visit to Costa
Rica

1. (SBU) Summary: Embassy San Jose warmly welcomes your visit to
Costa Rica for the Pathways to Prosperity Ministerial meeting. We
encourage you to use your visit here to reinforce constructive
efforts by Costa Ricans on climate change and energy security.
President Oscar Arias has set a good course on these issues, and
President-elect Laura Chinchilla has promised to give them high
priority in her administration. The United States also
collaborates successfully with Costa Rica on citizen security and
job-producing trade and investment. Your visit provides an
opportunity to underscore the United States government's desire to
continue working in partnership with Costa Rica to make further
progress in these areas, and our appreciation and expectation of
Costa Rica's commitment - in money and other resources - to
initiatives of common interest to our countries. End Summary.

With Chinchilla, Costa Ricans Choose Continuity

2. (SBU) Laura Chinchilla handily won Costa Rica's February 7
presidential election with just under 47 percent of the vote,
beating by more than 20 points her nearest rivals. In electing
Chinchilla, Costa Ricans voted for continuity and consolidation of
President Arias' agenda. Arias has been criticized for setting
lofty goals without putting in place all of the mechanics to reach
them. Politically astute, Chinchilla is carefully straddling the
Arias era with a forward-thinking agenda and an ability to put in
place the building blocks necessary to achieve shared goals.

3. (U) Chinchilla's major policy goals of promoting job creation,
citizen security, energy security, and sound environmental
stewardship are consistent with U.S. foreign policy interests in
Costa Rica and Central America. Chinchilla knows that, to create
jobs, her administration must reduce the hyper-legalistic
bureaucracy that impedes investment. She has committed to a clean
energy agenda and to keeping Costa Rica on its path toward carbon
neutrality by 2021. She told the embassy during the campaign that
she would seek U.S. assistance in her efforts to strengthen citizen
security, particularly in improving the recruitment and training of
uniformed police officers.

4. (U) Chinchilla brings to the office experience in citizen
security issues and a significant career in public service,
including stints as Legislative Assemblywoman, Minister of Public
Security, and President Oscar Arias' former Justice Minister and
Vice President (she resigned upon declaring herself a candidate for
the presidency). She has strong personal ties to the U.S., having
earned a Masters in Public Policy at Georgetown on a USAID
scholarship and worked on judicial reform in Latin America as a
USAID contractor in the late 1990s. She will be Costa Rica's first
female president.

Arias' legacy

5. (SBU) President Arias considers Chinchilla's decisive victory
to be the Costa Rican people's endorsement of his - at times
controversial - agenda. One of his greatest legacies is the
U.S.-Central American-Dominican Republic Free Trade Agreement
(CAFTA-DR). Ratified in a national referendum, it opened Costa
Rica's economy to free trade and ended state monopolies in key
sectors. (Costa Rica's legislature still must pass the final bill
required to bring its legislation into compliance with CAFTA-DR,
and the government must also reach agreement with USTR on related
to intellectual property rights.) On the international front,
Arias feels disappointed by the international community's failure
to get Micheletti to comply with the Tegucigalpa-San Jose Accords.
He remains critical of his Latin American counterparts for
continuing to exclude Honduras from the fold (while at times
including Cuba). At home, the Arias administration also has
supported social welfare programs, including a successful program
of cash payments to poor mothers who keep their children in
secondary school. Arias' government almost doubled the public
security budget of the past two years; however, his
administration's statements suggesting that crime is not a serious
problem earned the ire of citizens deeply affected by crime.

U.S. PRIORITIES IN COSTA RICA

Our Work Advances Economic Growth in the U.S. and Costa Rica

6. (U) A key area of common interest is job creation. U.S.
exports to Costa Rica create jobs at home, as do Costa Rican
purchases of U.S. goods. The Foreign Commercial Service actively
promotes both of these activities by facilitating trade missions of
U.S. businesses to Costa Rica and vice versa. In 2007, the most
recent year for which statistics are available, 8,084 U.S.
exporters - of which 83 percent were small and medium sized
enterprises - shipped products valued at $4.1 billion to Costa
Rica. In the past year, U.S. businesses exported $4.7 billion
worth of goods and service to Costa Rica, while imports from Costa
Rica totaled $5.6 billion. The U.S. Food and Drug 7.
Administration (FDA) is working to get Costa Rican authorities to
recognize FDA's approvals of medical devices, so Costa Ricans can
purchase U.S.-made devices without having to obtain additional
approvals here.

8. (U) We also help create jobs at home through programs that help
reduce costs for U.S. exporters. For example, since entry into
force of CAFTA-DR, USAID has conducted numerous training sessions
for working level officials on matters such as rules of origin.
This training has helped the officials improve the speed and
efficiency of customs processing.

9. (SBU) We are currently encouraging the Costa Rican government
to purchase U.S.-made container scanners for placement at its land
and sea points of entry. This equipment would increase vastly the
speed and thoroughness of Costa Rica's checks of cargo entering the
country, a boon to business and security. The sale of the
equipment itself would be a multi-million dollar deal for a U.S.
company. Meanwhile, in a joint project, U.S. Department of
Treasury and Chilean government experts are advising the Costa
Rican government on financing infrastructure projects through
public-private partnerships, thereby helping develop $3 billion in
concessions.

10. (SBU) Reducing cumbersome bureaucracy is a priority for U.S.
investors, who account for 60% of Costa Rica's foreign direct
investment. The World Bank's 2009 "Doing Business" index ranks
Costa Rica 117th out of 181 countries overall, and 24th out of 31
in the region. Costa Rica earns particularly low ranks in the
areas of ease of starting a business and protecting investors.

Advancing our Shared Agenda on Climate Change and Energy Security

11. (U) Climate change and clean energy are other areas where the
actions of Costa Rica and its neighbors impact U.S. citizens.
President Oscar Arias committed Costa Rica to becoming Carbon
Neutral by 2021. This has sparked a new generation of activists
and entrepreneurs in Costa Rica to push for changes aimed at
enhancing Costa Rica's investment climate for clean energy. If
Costa Rica can achieve such a dramatic reduction of emissions, it
will have a small impact in addressing the global problem and a
large impact in setting an example for other countries. In
addition, Costa Rica's investment in clean energy almost certainly
will create "green" jobs both in Costa Rica and the U.S.

12. (SBU) So far the Arias administration has failed to turn much
of its rhetoric on the environment into action, and President-elect
Chinchilla recognizes that it falls to her administration to
implement concrete measures to achieve such goals. An early
challenge will be the passage through the Legislative Assembly of a
long-overdue energy bill, which her administration could use to
reform the energy sector to effectively promote clean energy.

13. (SBU) Despite having perhaps the world's greatest renewable
energy potential, Latin America and the Caribbean capture less than
3% of global investments in clean energy. Costa Rica has done well
on energy security to date, but it will face serious challenges in
the next ten years unless it increases efficiency and improves the
market incentives for renewable energy. 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 lower oil and energy costs since, and some
Costa Rican concerns about the potential "political price"
associated with joining, this initiative has languished.

14. (U) The State Department's regional environmental hub has
proposed projects that will demonstrate ways to cut barriers to
investments in clean energy and show the advantages of instituting
"smart grids" now. Funding may be available this year to implement
pilot projects that demonstrate these advantages and to engage
regulators and legislators in expert exchanges. Also the U.S.
Department of Energy is funding the establishment of an Energy
Efficiency Center here in Costa Rica that will serve as a knowledge
platform for other countries in the region. The U.S. government
currently supports programs to assist Costa Rica in addressing
other environmental issues, for example by providing technical
expertise to a laboratory that monitors water quality and clean
production training for the private sector through the
environmental component of CAFTA-DR.

15. (SBU) In stark contrast to some other Latin American
countries, Costa Rica was a constructive participant in the climate
change negotiations at Copenhagen, and it is one of the few from
the region that put forward commitments in associating itself with
the Copenhagen Accord. In contrast to President Arias,
President-elect Chinchilla until now has focused primarily on
domestic issues. We intend to emphasize to her the importance of
continuing Costa Rica's leadership on climate change, and we
encourage you to deliver the same message.

Strengthening Citizen Security Helps Costa Rica, the Region, and
the U.S.

16. (U) Due in large part to a rise in drug trafficking through
Costa Rica, crime has increased dramatically here in recent years.
Although there was a small drop in some crime statistics from 2008
to 2009, in one out of every four homes there is at least one
person who has been a victim of crime in the last four months.

17. (SBU) Chinchilla has promised to add an additional $100
million per year for police funding. (She hopes to obtain this
funding through a two percent tax on casinos.) These resources are
definitely needed, as the police here generally are underpaid,
understaffed, and poorly trained and equipped. In comparison with
the rest of the region, corruption in Costa Rica's security forces
is relatively low. That said, the uniformed police in particular
continues to struggle with criminal elements in its ranks.

18. (U) Efforts to stem crime in Costa Rica benefit not only more
than 50,000 Americans living here and close to one million U.S.
citizens who visit the country each year but also those who live in
the U.S. The U.S. government estimates that approximately 60-75
percent of the drug flow from South America to Mexico and the
United States runs through Costa Rican territory or national
waters. Costa Rica seized nearly 20.6 metric tons of cocaine in
2009, keeping it from reaching the streets in the United States.
(U.S.-Costa Rican joint narcotics operations made possible by a
bilateral maritime agreement contributed to this result.)

19. (U) The U.S. will be able to assist with police
professionalization thanks to resources provided through the Merida
Initiative. U.S. government agencies are helping strengthen
citizen security in this region in a number of other ways.
* In February, Costa Rican police discovered drugs in a
hidden compartment using equipment and training provided by the
U.S. Drug Enforcement Agency in January.
* U.S. Customs and Border Protection officials just
completed assessments of Costa Rica's land borders, which are key
choke points for contraband heading north or south. They have
conducted similar assessments throughout the region.
* U.S. Treasury officials are looking at the possibility
of helping the Government of Costa Rica design a means of paying
for the upgrades required at the most significant border crossing
on the Inter-American Highway.
* This year a U.S. Treasury official based at the Costa
Rican Finance Ministry will advise the host government on ways to
improve enforcement of laws against money laundering and other
financial crimes.
* U.S. Southern Command is funding a communications node
that will enable Costa Rican maritime and land law enforcement
officials to share information in real time with each other and
with U.S. Joint Inter-Agency Task Force - South, which monitors
movements of suspect vessels throughout the region.
* The State Department is providing radios and bullet-proof
vests to the poorly equipped uniformed police.
* Two advanced interceptor boats will be donated this
summer.
By helping Costa Rica and the region in these ways, we help protect
our own borders from transnational crime.

BACKGROUND ON COSTA RICA'S ECONOMY

20. (U) The impact of the economic crisis on Costa Rica was shorter
and less severe than in many other countries. Costa Rica posted
real GDP growth of +2.6 per in 2008 which was well below the +8.8
percent rate of 2007. First quarter 2009 was the low point of the
global crisis for Costa Rica when economic activity posted a
decrease of -4.5 percent. However, by fourth quarter 2009, the
economy grew by +1.9 percent. For all of 2009, the economy
contracted by -1.3 percent. The telecom, services and insurance
sectors, together with parts of the manufacturing sector, are
expected to lead the recovery into 2010. The anticipated telecom
and insurance sectors activity is directly related to the entry
into force of CAFTA-DR, which opened both sectors to competition.

21. (U) Inflation reached 13.9 percent at the end of 2008, but
dropped during 2009 to 4.0 percent by end-year due to the Central
Bank's tight monetary policy, sagging commodity prices, and lower
consumer demand. The Central Bank targets inflation within the
range of 4 to 6 percent for 2010 with private forecasters pegging
the rate somewhat higher at 7 percent.

22. (U) Toward the end of 2009, forecasters estimated the
unemployment rate at just less than 7 percent, a significant
increase from the 2008 end-year figure of 4.9 percent. Exports
continue to lead 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). Intel's Costa Rican manufacturing site
benefitted from Intel's 2009 decision to shutter three plants in
East Asia. Costa Rica exports worldwide tallied $8.2 billion in
2008.

23. (U) U.S. business presence includes many blue chip companies
that have chosen Costa Rica as a regional back-office operations
site. Sykes, Western Union, Proctor and Gamble, and
Hewlett-Packard are several of the key firms that operate human
resources, accounting, finance, and technical support services in
Costa Rica. The medical device sector has grown steadily over the
past twenty years as Baxter (initially), Hospira, and Boston
Scientific all expanded operations in Costa Rica.
ANDREW

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