US embassy cable - 05SANJOSE1904

UNCLAS SECTION 01 OF 02 SAN JOSE 001904 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT FOR H, JCOOPER; CARACAS FOR JSPEAKS 
 
E.O. 12958: N/A 
TAGS: ASEC, CS, ECON, OVIP, PGOV, PREL, VE 
SUBJECT: COSTA RICA SCENESETTER FOR SENATOR ARLEN SPECTOR 
 
1. (SBU) SUMMARY:  Embassy San Jose warmly welcomes Senator 
Arlen Spector.  Your trip comes in the heat of the campaign 
for the February 2006 general election.  The political 
establishment is still struggling to recover from large 
scandals that resulted in two ex-Presidents awaiting trial 
under house arrest, and contributed to the fragmentation of 
Costa Rica's two traditional political parties.  The 
executive and legislative branches are both widely viewed as 
inept and unable to do their jobs. To many observers, 
President Pacheco lacks the vision and political clout to 
govern effectively.  He has so far refused to send the 
U.S.-Central American-Dominican Republic Free Trade Agreement 
(CAFTA-DR) to the legislature for ratification, despite 
explicit calls from the legislature for CAFTA-DR's submission 
issued in the wake of U.S. congressional approval of the 
treaty.  Bilateral relations between the U.S. and Costa Rica 
are friendly.  The GOCR is a close ally on U.N. cloning and 
human rights issues.  End Summary. 
 
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Friendly Bilateral Relationship 
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2. (U) The U.S. and Costa Rica enjoy a productive 
relationship based on shared values in the areas of democracy 
and human rights.  President Pacheco, defying public opinion, 
gave moral support to the U.S.-led coalition on Iraq.  In 
September 2004, however, the Constitutional Court ruled that 
Costa's Rica participation in the Iraq Coalition was 
unconstitutional (on the grounds that it was against the 
country's traditional neutrality), forcing the GOCR to ask to 
be removed from the list of Coalition countries.  This was a 
purely symbolic move; Costa Rica abolished its military in 
1949 and did not contribute any resources to the Coalition. 
 
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Corruption Scandals Discredit Political Establishment 
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3. (U) Last year's unprecedented corruption scandals have 
contributed to a feeling of crisis and political malaise in 
the country.  Ex-president Miguel Angel Rodriguez (1998-2002) 
faces charges of corruption related to a major 
telecommunications contract negotiated during his 
administration.  Another ex-President, Rafael Angel Calderon 
(1990-1994), is awaiting trial on corruption charges related 
to his role in a healthcare equipment deal that allegedly 
included several million dollars in bribes.  A third 
ex-President, Jose Maria Figueres (1994-1998), has come under 
fire for failing to disclose earnings of $900,000 in 
"consulting fees" received from a French telecom company. 
Figueres refuses to return to Costa Rica to testify before 
the Legislature.  As of mid-August, Calderon and Rodriguez 
(who both belong to the ruling Social Christian Unity Party 
(PUSC)) remain under house arrest. 
 
4.  (U) Additional scandals erupted following the 
catastrophic fire of July 13, which killed 19 people and 
destroyed a large portion of the Calderon Guardia Hospital. 
Subsequent investigations show that the hospital failed 
numerous fire safety inspections, but failed to modernize 
their fire control systems.  Considering that the health 
ministry has been at the center of many recent scandals, this 
further embarrassment only served to further reduce public 
faith in the system. 
 
5.  (U) A number of new parties have formed in response to 
the public's mistrust and dissatisfaction with the 
traditional political options.  Dozens of new political 
parties are now officially registered as the country prepares 
for February 2006 general election.  Former President Oscar 
Arias is the clear front-runner in early polls.  Arias has 
built his platform on free trade, though polls also suggest 
that average Costa Ricans are more concerned about crime than 
economic issues. 
 
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Executive Branch Muddling Through Till 2006 
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6. (SBU) The current president, Abel Pacheco, was elected in 
the country's first-ever run-off election in April 2002.  His 
approval rating, however, has fallen steadily since 2002. 
Nearly 20 ministerial-level officials have resigned or have 
been dismissed from Pacheco's cabinet since he took office. 
Pacheco's government has weathered strikes by public school 
teachers, telecommunications workers, dockworkers, and air 
traffic controllers, but the President has been criticized 
for caving in too easily to demands from powerful public 
sector unions.  The President is widely viewed as lacking the 
necessary vision and political clout to govern effectively 
and shape the future direction of the country.  Pacheco has 
also been subjected to close scrutiny for alleged campaign 
finance irregularities and various minor ethical violations 
which, coming on the heels of so many presidential scandals, 
have further deteriorated his public standing. 
 
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Legislative Branch: Paralyzed 
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7.  (U)  Deputies representing five parties were elected to 
the Legislative Assembly in 2002.  Eleven of the 57 
Legislative Assembly Deputies have since broken away and 
either formed new parties or declared themselves independent. 
There are now at least nine parties and three independent 
legislators struggling to function within a legislative 
structure that traditionally has had only two parties. 
Political analysts widely refer to these splits as the 
"atomization" of the Legislative Assembly and the traditional 
two-party system.  The Legislative Assembly is widely viewed 
as unable to get anything done. While some of the problem is 
institutional (poorly designed rules that procedurally savvy 
minority parties exploit fully), political analysts opine 
that the Assembly's main problem is a lack of leadership that 
can forge consensus. Currently, in their opinion, the 
Assembly is an assortment of at least a dozen different 
groups that are unaccountable to any party or electorate and 
that are mainly focused on 
posturing for the upcoming 2006 general election. 
 
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CAFTA-DR Ratification Delayed 
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8.  (SBU) The Costa Rican Ministry of Foreign Trade was 
expected to submit CAFTA-DR to the Costa Rican legislature 
shortly after its signing, but, citing the inability of the 
legislature to pass a fiscal reform package, President 
Pacheco has not yet introduced the bill to the Legislative 
Assembly for approval.  Most observers believe the real 
reason for Pacheco's reluctance to present CAFTA-DR to the 
legislature is his fear of threatened labor strikes and 
public unrest.  Pacheco recently convoked a "Commission of 
Eminent Persons" to review CAFTA-DR and render their opinion 
on its potential for benefit or harm.  The five-person panel 
is expected to submit its report in mid-September.  Pacheco's 
commitment to delay has spawned havoc within the trade 
ministry, with several high-ranking officials resigning or 
being fired for disagreeing with the president's stance. 
Recent polls show strong public support for CAFTA-DR. 
 
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GOCR Saddled With Large Public Sector Debt 
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9. (U) One of Costa Rica's most serious macroeconomic 
problems is the fiscal deficit.  More than 90 percent of the 
GOCR's income is used to pay government salaries, pensions, 
and interest payments on the national debt.  The government's 
fiscal deficit in 2004 was equal to 2.5 percent of GDP, a 
decrease from 3.0 percent from the previous year.  At the end 
of 2004, Costa Rica's public sector debt topped USD 10.5 
billion.  The GOCR's deficit is largely financed by 
government borrowing and the surpluses generated by some 
state-owned monopolies (which include telecommunications, 
electrical power, insurance, and petroleum distribution).  In 
late 2004, the GOCR, unable to attract investors on the open 
market, resorted to forcing parastatal service providers to 
take on government debt to allow the GOCR to meet its 
end-of-year payment obligations. 
FRISBIE