San José, Costa Rica, since 1956

Officials: CAFTA Delay May Benefit Country

NEWS of the postponed launch date for the Central American Free-Trade Agreement with the United States (CAFTA) between the signatory countries that have ratified the pact – a group Costa Rica, the lone holdout on ratification, has not yet joined – may be good news for this country’s businesses, officials said this week. Business leaders, however, had varied responses.


At President Abel Pacheco’s weekly Cabinet meeting Tuesday, Foreign Trade Vice-Minister Doris Osterlof said the postponement “decelerates a little, not much, the pressure on the Costa Rican productive sectors.” Business leaders here have often expressed fear that when CAFTA takes effect among the United States, Guatemala, El Salvador, Honduras, Nicaragua and the Dominican Republic – which was originally scheduled to take place Jan. 1 – Costa Rica will lose ground fast.


Now that the United States has pushed back the start date for the agreement for at least a month because, according to the U.S. Trade Representative, the other signatory countries have not yet made the necessary reforms in their legislation to prepare for CAFTA (an exact date has not been set – see The Nica Times for more details), Costa Rica has a little more time to play catch-up. Osterlof and Pacheco said the Executive Branch is moving ahead at full speed to complete its CAFTA-related obligations well before Pacheco’s term ends in May.


“We are working intensely,” Pacheco said. According to Osterlof, Costa Rica has been “participating actively” in a legislative review process that began among all signatory countries shortly after the United States ratified CAFTA in (TT, July 29, 2005). Each country reviewed the reforms it would need to make in order to be eligible for CAFTA. In Costa Rica’s case, the laundry list of changes includes legislation for the gradual opening of the state monopolies on telecommunications, through the Costa Rican Electricity Institute (ICE), and insurance, through the National Insurance Institute (INS).


Costa Rica must also strengthen ICE to prepare it for such competition and tighten its laws governing intellectual property rights, among other changes.


Osterlof said all of these required reforms should be in the hands of the Legislative Assembly by the end of the month. Drafts of the laws to open ICE and INS to competition are ready and “in the process of review,” she said. The law to strengthen ICE is already in the assembly, though little progress has been made. The Foreign Trade Ministry and the Justice Ministry are working on intellectual property rights reforms and plan to submit them to Pacheco soon, so he can send them to the assembly.


Pacheco submitted the pact to the Legislative Assembly last year (TT, Oct. 21, 2005), and the Foreign Affairs Committee began discussing it in December. This process is on hold because legislators are on vacation until February.


However, as usual, Pacheco said he is not worried about the country taking its time. “Always in my personal life, when I’ve rushed to make a decision, it’s gone badly. When I’ve taken my time, it’s gone well. I believe the lives of countries are similar,” he said.


The officials’ comments received mixed reviews from the business community. Lynda Solar, executive director of the Costa Rican-American Chamber of Commerce (AmCham), strongly disagreed with the idea that CAFTA delays elsewhere will help businesses here.


“There’s too much work to be done before thinking that this relieves the pressure,” she said. “It appears El Salvador will be logging on within the next month or so… and I don’t see that CAFTA will be passed (here) before Jan. 2007.” Sergio Navas, vice-president of the Chamber of Exporters, took a more moderate approach, and said he expects the pact to be approved within the first half of this year.


“It does give us a breather,” he said of the delay. “But we can’t lose perspective.”


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