US embassy cable - 05SANJOSE2104

UNCLAS SECTION 01 OF 02 SAN JOSE 002104 
 
SIPDIS 
 
WHA/CEN 
EB FOR WCRAFT, BMANOGUE 
EB/CIP FOR WAYALA 
E FOR DEDWARDS 
WHA FOR WMIELE 
WHA/EPSC FOR KURS, LGUMBINER 
H FOR JHAGAN 
STATE PASS TO USTR FOR RVARGO, NMOORJANI, AMALITO 
 
E.O. 12958: N/A 
TAGS: ETRD, ECPS, ECON, PREL, PGOV, SOCI, CS 
SUBJECT: STATUS OF THE PROPOSED LAW TO STRENGTHEN AND 
MODERNIZE ICE 
 
REF: SAN JOSE 01828 
 
1.  (SBU) Summary.  The Legislative Assembly,s Special Mixed 
Commission to review the Law to Strengthen and Modernize the 
Costa Rican Institute of Electricity (ICE) ended its 28-month 
tenure without coming to agreement on how to proceed with the 
proposed telecommunications reform law.  The contentious 
legislative project is now essentially at a standstill. 
Assembly members (deputies) could not agree on extending the 
Commission,s charter due to profound differences between 
those deputies that lean towards giving the venerated 
state-owned institution unprecedented autonomy and special 
treatment and those who want to encourage increased 
competition that would result from implementation of the 
United States-Central American-Dominican Republic Free Trade 
Agreement (CAFTA-DR).  Despite not moving forward on this 
proposed law, the Administration states that it is ready to 
submit proposed legislation in the areas on which the 
Commission could not agree.  End Summary. 
 
2.  (U) The stated reason for proposing the Law to Strengthen 
and Modernize ICE was to give the organization the financial 
autonomy and resources to be able to compete against 
potential competitors in an open telecommunications market. 
The Costa Rican negotiators felt that the strengthening and 
modernization of ICE was so important that they inserted this 
into the text of the United States-Central America-Dominican 
Republic Free Trade Agreement (CAFTA-DR).  (Note:  The text 
of CAFTA-DR actually states that this law was to be passed by 
December 31, 2004.) 
 
3.  (U) The Special Mixed Commission on ICE was chaired by 
Gloria Valerin, a deputy from President Pacheco,s Social 
Christian Unity Party (PUSC).  Other deputy members included 
Federico Malavassi from the Libertarian Movement Party (ML), 
Ricardo Toledo, the PUSC presidential candidate in the 
upcoming February 2006 election, German Rojas (PUSC), Alvaro 
Gonzalez (PLN), Carlos Benevides (PLN), Luis Gerardo 
Villanueva (PLN), Rodrigo Carazo from the Citizens, Action 
Party (PAC), Ruth Montoya (PAC), Emilia Rodriguez from the 
Patriotic Bloc (BP), and Carlos Avendano from the Costa Rican 
Renovation Party (PRC). 
 
4.  (U) The Commission also consisted of eight 
representatives from several interested and knowledgeable 
organizations, including ICE, the Union of Chambers of 
Private Enterprises (UCAAEP), the Chamber of Information 
Technology, the labor union representing ICE workers, the 
non-governmental Free Consumers Association, National Council 
of University Rectors, the Costa Rican Federation for 
Environmental Conservation, and the Ministry of Science and 
Technology.  (Note: Only the deputy members of the Commission 
actually had a vote in official proceedings.)  This broad 
representation is reflective of the importance of ICE in the 
minds of many Costa Ricans. 
 
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COMMENT 
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5.  (SBU)  Several options exist including: (1) sending the 
issue straight to the Assembly floor for a vote, (2) create 
an ad hoc deputies-only Commission to review the bill, or (3) 
do nothing.  Realistically, creation of a new deputies-only 
Commission is the most likely option, but the issue will not 
be any less contentious. 
 
6.  (SBU)  Given the current political situation, it is 
unlikely this bill will pass in its current form prior to 
CAFTA-DR ratification.  Gilberto Barrantes, Minister of 
Economy and Chair of the President,s Economic Council said 
that the Administration is ready to submit proposed 
legislation in the areas in which the Commission could not 
agree.  He offered no more details than that. 
 
7.  (SBU)  ICE needs more financial autonomy to compete in an 
open market; for instance, it should not be bound by some of 
the inflexible and arduous government processes with which it 
must currently comply, e.g., the cumbersome procedures for 
taking on new debt.  However, the proposed law to strengthen 
and modernize ICE, if passed in its current form, almost 
certainly would have caused problems complying with CAFTA-DR 
commitments (reftel).  The Administration and the Legislative 
Assembly will eventually need to agree on how ICE will 
function in the open telecommunications market created by 
CAFTA-DR. 
FRISBIE