San José, Costa Rica, since 1956

Sound and Fury, but Few Results for CAFTA

IN 2005, Costa Rica’s foreign trade agenda was dominated – again – by the conflict over whether to approve the Central American Free-Trade Agreement with the United States (CAFTA), negotiated in 2003 and signed in early 2004. After nearly a year of polarizing social conflict over whether Costa Rica should be part of the agreement, President Abel Pacheco submitted it to the Legislative Assembly for discussion in late October, though a vote is not expected anytime soon.


As in previous years, business leaders led the pro-CAFTA camp and launched a media campaign touting the jobs and opportunities they say the agreement would surely bring. For the first time, they also took a page from the opposition’s playbook and took to the streets in two rallies in support of the agreement. They became more fervent in their pressures as each of the other Central American signatory countries (El Salvador, Guatemala, Honduras and Nicaragua), the Dominican Republic and the United States, one by one, ratified the agreement (see Nica Times).


The anti-CAFTA camp, under a newly formed network uniting the diverse social sectors protesting the agreement, continued to hold regular marches, sometimes in impressive numbers – as in their last protest of the year, estimated to have drawn close to 20,000 people – and sometimes with much, much lower attendance.


Throughout the year, Pacheco tried to maintain a neutral stance, showing tentative support for the agreement but saying he would not send CAFTA to the assembly until he felt that its potential benefits would be distributed equitably in Costa Rica. He continued to condition his sending of the pact on the assembly’s approval of his pet tax reform plan, which had been languishing in the Assembly for more than two years (see separate story). This brought more criticism from CAFTA supporters, who said opponents could use the tax plan to further hold up the trade agreement.


In April, Costa Rica received the largest U.S. congressional delegation ever to visit the country, which came to discuss and urge the approval of CAFTA. The following month, Pacheco went to the United States where he and the leaders of the other CAFTA countries met with President Bush, legislators and business leaders. The group toured 10 U.S. cities, attending events organized by the U.S. Chamber of Commerce and member companies, and met with U.S. Secretary of Defense Donald Rumsfeld about the  agreement’s importance for hemispheric security.


Less than 24 hours after Pacheco met with the congressional delegation in Costa Rica in April, he added a second condition to his sending of CAFTA: the agreement’s study by a hand-picked group of five men, dubbed the “council of notables,” who Pacheco said would be unbiased and unaligned with either business or union interests. Franklin Chang, a dual Costa Rican-U.S. citizen and an astronaut with NASA until his departure from the organization this year – was picked to head the council, which began its work in July and met the President’s 60-day deadline in September.


Their final analysis, a non-binding report that explained controversial points of the pact, emphasized the need for a much stronger and clearer national development strategy, with or without CAFTA, and underlined the importance of extensive legislation to go along with the agreement, known as the complementary agenda, that would prepare the country for the increased competition CAFTA would bring. Pacheco had introduced a complementary agenda in June, which was a package of bills and included $116.8 million in loans to go towards supporting small businesses, small farmers and education, but the council said it did not go far enough.


In the end, Pacheco only stuck to one of his guns, and submitted CAFTA to the assembly a little more than a month after he received the council’s report, while the tax plan remained bogged down with an uncertain fate. Much to the chagrin of the pro-CAFTA camp, bureaucratic processes continued to slow the trade agreement’s move towards the legislative floor, as mandatory waiting periods, the agreement’s publication in the government daily La Gaceta and legislators’ inability to get quorum on the first day of extraordinary session put off its discussion until late December, making it unlikely a final decision will be made while Pacheco is still President.


Pacheco did, however, oversee the approval and ratification of a free-trade agreement with the 12 countries of the Caribbean Community (CARICOM), which took effect in November between Costa Rica and Trinidad and Tobago. Barbados will join the party in January.


Regional free trade in the Americas looked doubtful after little progress was made on the proposed Free-Trade Agreement of the Americas (FTAA) at the Summit of the Americas in Mar de Plata, Argentina, in November.


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