San José, Costa Rica, since 1956

CAFTA Approved, Implementation Bills Debated

The government’s quest to join a freetrade agreement with the United States continued to be a wild ride in 2007, and wasn’t over at year’s end.
The Central American Free-Trade Agreement with the United States (CAFTA) was approved in the country’s first referendum Oct. 7, after a polarized and drawn-out campaign season.
The pact, perhaps the most divisive issue in the country’s recent history, was approved with 51.6% of valid votes.
At year’s end, the Legislative Assembly had yet to pass 9 of the 11 laws required to implement the treaty, already ratified by the United States, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic.
The treaty’s most vocal supporters were found in President Oscar Arias’ administration and business chambers, while its most visible detractors were union members, environmentalists, teachers and university students.
Supporters said CAFTA will spur economic growth, increase exports and attract foreign investment, which will in turn create jobs and reduce poverty. They also argued that eliminating tariffs on imported goods will decrease prices for consumers.
Opponents, who throughout the year filled the streets with protests against the pact, countered that it will flood the country  with foreign products and businesses, jack up prices on services such as telecommunications and insurance, and hurt Costa Rican farmers. They argued that most Costa Rican goods already enter the U.S. market tariff-free through the Caribbean Basin Initiative, a series of U.S. laws dating back to the 1980s.
The full Legislative Assembly began discussing CAFTA in February, but debate stalled as the Constitutional Chamber of the Supreme Court (Sala IV) reviewed a fasttrack process some lawmakers wanted to apply to the treaty. The court gave a green light to the procedure in March, and legislators resumed debate.
But beyond the Assembly’s walls, dissent was burbling. The same week as the court ruling, tens of thousands of people protested the treaty in downtown San José.
Meanwhile, a small group of activists led by former National Liberation Party (PLN) legislator José Miguel Corrales was pushing for a national referendum on the treaty.
Their campaign bore fruit in early April, when the Supreme Elections Tribunal (TSE) told Corrales he could begin collecting the required signatures to convene a binding referendum under the recently approved Referendum Law.
The ruling was a blow to President Arias, who had long insisted that CAFTA should be voted on in the assembly, where a fragile coalition of 38 pro-CAFTA legislators had formed. But if there had to be a referendum, Arias decided, it would be his way. He called for a referendum by decree, and the assembly acquiesced, sending official notice to the Elections Tribunal in late April.
The Tribunal set the referendum date for Sept. 23. But the process was again delayed when Ombudswoman Lisbeth Quesada joined a group of anti-CAFTA legislators in questioning the pact’s constitutionality before the Sala IV. The TSE then decided to move voting day to the first Sunday in October to have enough time to prepare everything for the big event.
The high court announced in July that the pact did not violate the Constitution, and both sides of the CAFTA debate geared up for the historic vote.
In the months leading up to the referendum, Production Minister Alfredo Volio stepped down to lead the pro-CAFTA campaign, while treaty opponents rallied around Eugenio Trejos, rector of the Technological Institute of Costa Rica (TEC).
President Arias campaigned actively for the treaty, touting it during nearly every tour and speech. CAFTA opponents filed a complaint before the Tribunal arguing that the president had violated electoral rules by using public resources in his campaign, but elections officials ruled the President had done nothing wrong.
The government’s campaign suffered a big blow in September, when the press published a leaked memo by Second Vice-President Kevin Casas and Liberation legislator Fernando Sánchez. The memo suggested questionable and possibly illegal tactics to convince the people to vote in favor of CAFTA. Casas resigned over the ensuing outcry, and Sánchez stepped down from two legislative commissions he headed.
The scandal helped fuel a massive anti-CAFTA demonstration in San José that attracted tens of thousands of protestors just one week before the vote. Several blocks of Paseo Colón were packed with students, union members, teachers, politicians, toddlers and even dogs.
A poll released just four days before the referendum gave the anti-CAFTA camp a 12- point lead – a shock to the treaty’s supporters, who had been up by nearly 10 percentage points in a July poll.
But last-minute announcements from the administration of U.S. President George W. Bush that the United States would not negotiate another trade pact with Costa Rica should this one be voted down, apparently pushed the vote back toward the “yes” side.
CAFTA was approved by about 50,000 votes. Oct. 7 was by most accounts a great democratic party. About 1.57 million voters descended on the polls, many with pro- and anti-CAFTA paraphernalia – T-shirts, banners, hats and even temporary tattoos.
More than 180 foreign observers watched the process – the most in the country’s recent history. About half were from the Organization of American States (OAS), which praised the referendum as free and fair.
Attention then turned to the bills required to put CAFTA in motion.
At year’s end, the assembly had passed only two of the 11 implementation bills – a law regulating relationships between foreign companies and their local representatives and a reform to the Penal Code to help fight corruption.
The remaining bills included the most controversial parts of CAFTA – laws to take monopolies away from the Costa Rican Electricity Institute (ICE), which runs the nation’s telecommunications system, and the National Insurance Institute (INS).
Other laws would strengthen these sectors, and change copyright and patent legislation.
According to the Arias administration, the deadline for Costa Rica to pass the laws is Feb. 29, 2008, two years after the treaty went into effect in the first signatory country, El Salvador. If Costa Rica needs more time, the Government must request an extension from the treaty’s other members.
Some 38 legislators, representing the ruling National Liberation Party, the Libertarian Movement and the Social Christian Unity Party (PUSC), support the treaty and associated laws. The remaining 19 legislators, mostly from the anti-CAFTA Citizen Action Party (PAC), oppose most of them.

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