by Rod Hughes

The Legislative Assembly’s coalition of 38 deputies voted “yay!” yesterday after the second reading of the final of 13 bills needed to bring Costa Rican laws into accord with provisions of the Central American Free Trade Agreement (CAFTA). Now the country is officially a member of the trade pact on which President Oscar Arias bet so much of his political capital.

The two-thirds majority consisting of the National Liberation, Social Christian Unity and Libertarian Movement contingents in the unicameral congress capped a tough battle and the longest political soap opera in recent memory. The Citizen Action Party (PAC) maintained its opposition to the end after fighting a year and a half rear guard campaign that often held up votes on other issues.

Granted, some housekeeping measures are still to be performed, but the titanic struggle is over and the Executive Branch has until Dec. 31 to accomplish them. Three regulations relating to foreign trade have to be signed by the President and various ministries, including Foreign Trade and the Environmental Ministry, have to reform some rules. No difficulties are expected but, where bureaucracy is concerned, one never knows.

The jubilation on the Assembly floor yesterday may have masked how close run the whole affair had been, with only a bare, delicate coalition of 38 votes staving off the nullification of the plebecite last November, Costa Rica’s first, that approved CAFTA by a narrow margin. PAC’s opposition to the trade pact had made itself felt so definitely that Arias had to plead for two extensions on the deadline to join the other nations.

The final bill to clear the way was one that had not been expected to be especially controversial: the copyright and trademark law. But after it had been passed, just before the first extension deadline was about to run out, a constitutional review of the Supreme court found that on one provision the lawmakers had illegally cut corners.

The other CAFTA member nations graciously granted another three months, a generous concession considering that all of them had quickly ratified the treaty, some within days after signing. In the U.S. Congress, the measure had gone through after little debate despite opposition of the Democrats who were then in the minority.

PAC and a couple of socialist allies mainly objected to two of the laws needed to implement the treaty: one freeing the country from the monopoly of the government insurance company INS and the other opening the telecommunications market and breaking the ICE monopoly over the Internet access. Ironically, they were not the last to be passed, due to the procedural error on the copyright law. But PAC’s obstructionism cost them a lawmaker who withdrew from the party since, she said, the people had spoken in the referendum.

Some observers, especially foreigners, were puzzled by PAC’s fierce opposition and the pro-CAFTA determination to pass it at the expense of often urgent legislation. The English-language weekly The Tico Times editorially scratched its head and said, essentially, “What’s all the hoopla about? It’s just a trade treaty…”

But that ignores the ideological struggle going on between PAC and the President. Arias had taken his left-of-center National Liberation party into the center, even, some dissident members complained, right of center. While traditionally the party had not been hostile to business, it had been definitely socialist. That left the doctrinaire PAC under Otton Solis to fill the vacuum on the left, a place on the political spectrum that would have been, in the 1950-80 era, occupied by a handful of communist lawmakers.

Leglislative Assembly rules do not admit filibustering but PAC used something against the 13 CAFTA laws a tactic nearly as effective. The party whips tried to strangle those bills in their cribs by proposing an avalanche of amendments. Whether this tactic will backfire on the party and its almost inevitable presidential candidate, Otton Solis, in the 2010 elections remains to be seen, but it will likely be an issue to be exploited by their adversaries.

by Rod Hughes

President Oscar Arias’s approval improved markedly over his mid-year ratings, a Demoscopia poll published in today’s daily newspaper Al Dia indicates. Approval of his administration’s performance rose last month to 36.1% from 27.5% last July. The July figure showed a startling 17 point drop from grace earlier this year.

The polls showed a majority (43.1%) think Arias has handled things only so-so while nearly 20% were disenchanted with the government. Still, the poll was taken before the President moved boldly to loosen credit that businessmen complained was strangling the private sector. It may show that citizens are becoming aware that the government is not at fault in the global economic meltdown that is also effecting the nation and that, literally, things are tough all over.

The poll, taken between Oct. 20 and Nov. 2, indicates that Arias personally maintains a high regard in the eyes of his countrymen. Some 72% say they have no doubt he is a capable person and even slightly more told pollsters that he has a handle on what is going on in his country. More than half said they had confidence in the President and his cabinet, at 59%, a seven point rise from July.

Chinchilla Responds to Rival’s Accusation

Meanwhile, Arias’s former vice president and the person most observers think is his favorite to succeed him in office, Laura Chinchilla, challenged her rival for the National Liberation party nomination, Johnny Araya, to name the party members he says were pressured to support her. The San Jose mayor said last month that he had received complaints that central government officials were putting the thumbscrews on provincial Liberation officials to support Chinchilla.

Chinchilla, former Public Security minister, was an early favorite even before she resigned tne vice presidency to run for the presidential nomination in the 2010 national elections. Araya is her only credible rival, although former Security Minister Fernando Berrocal is also aspiring to the top spot on the ticket.

But Berrocal resigned under pressure or was fired (depending on the source of the story) from his cabinet post earlier this year after angering the President with an incautious statement in March. He said that he expected captured Colombian FARC guerrilla computer files to reveal that FARC influence had penetrated into the nation’s highest “political circles.” Subsequent questioning by a Legislative Assembly special investigating committee failed to reveal any confirmation of Berrocal’s claim.

by Rod Hughes

Sometimes when one reads a news item about government spending, one asks, “Where is the money coming from?” The daily newspaper La Nacion today answered that question as far as the injection of money into Costa Rica’s state banks to loosen up credit to private enterprise: The budget surplus that built up last year will go to this end.

The only question about the $100 million infusion is how it can be done legally. Will it be by Presidential decree or must it come from a special budget measure in the Legislative Assembly? The latter would be easy because next year’s budget is currently under debate by lawmakers and must be approved, according to the constitution, by Nov. 30.

The nation’s two largest banks, Banco de Costa Rica and Banco Nacional, slowed credit growth in a cautious reaction to the world economic uncertainty. This brought cries of pain from Costa Rican business and industry that companies could not grow without loans. Some export firms complained that they could not even fulfill orders without infusions of liquidity.

Then, earlier this week, President Oscar Arias turned a sympathetic ear to these outcries and promised $50 million to each bank to give officials courage to loosen the purse strings. This is hardly a princely sum on a national basis but should be enough to avoid a business meltdown. Construction, last year the strongest sector of a hearty economy, was especially hard hit by credit tightening with many projects frozen and most new projects unable to get off the ground. The effect on unemployment figures boded to be devastating.

Although Finance Minister Guillermo Zuniga said he is still unsure whether the budget surplus or an international bank loan, it is comforting to know that Costa Rica has funds to aid itself. Some of the most powerful international lending institutions, aware of the effect world marketing and financial difficulties are having on Latin American nations, have set aside funds for loans to these small economies. Many of those countries, especially in Centra America, are vulnerable, with large debts.

No matter what the ultimate funding source, the need is immediate and La Nacion financial writer Marvin Barquero put forth a strong case for transferring the funds by decree. Inevitable delay will result in getting the money into the banks if the lawmakers are to go through their laborious procedure.

Another important consideration, Zuniga pointed out, is the effect the credit loosening will have on inflation. Tight credit means a cooling of the economy with a depressing effect on inflation while encouraging loans means far less unemployment. In theory, it is a tradeoff.

But President Arias, a graduate of the London School of Economics, appears to be willing to run the inflation risk. Zuniga gave one indication of why: world petroleum and food prices have been declining in the past few months, and they were the main inflationary villains earlier this year. Also, the country’s internal economy has been cooling, relieving the pressure to raise prices. Even bad economic news has its bright side.

by Rod Hughes

A newly passed bill allowing projects to be subjected to a referendum on envrionmental grounds has met fierce opposition of the Arias Administration and sewed discord with its own congressional delegation. The bill passed with the backing of President Arias’s National Liberation party deputies.

Liberation floor leader Maureen Ballasteros says she was aware that the Envrionmental Ministry opposed the bill but that she was unaware that the administration itself was against it. Environmental Minister Roberto Dobles huddled with Minister of the Presidency Rodrigo Arias to find the legal means to block the bill’s implementation.

One avenue is, of course, a veto. The President could object to various provisions of the bill or all of it and send it back to committee. Then the lawmakers would be faced with the choice of either acceeding to the President’s wishes and amending the bill or overriding the veto with a two-thirds majority required. This would mean gathering 38 votes if all lawmakers are in attendance.

The controversy that causes so much consternation within the Liberation deputies comes on the heels of the beginning of a court investigation of both the President and Dobles. The issue there is a decree signed by President Arias allowing the Las Crucitas mining concession to clear cut 191 hectares of land in order to expand their open pit gold mining operation. Environmental advocates say the decree violated some articles of the environmental law.

The bill is aimed at ensuring that projects will not be ramrodded through over the heads of local groups opposing it on environmental grounds. It requires a petition signed by 10% of the electorate in the district or canton in which the project is located, forcing a referendum vote. On its final reading, the measure passed by a unannimous 48 votes, all of the lawmakers attending the session.

by Rod Hughes

Former President Rafael Angel Calderon goes to trial today to answer charges that he used his political influence to swing a $39.5 million deal between the Fischel pharmaceutical and medical contracting firm and the Social Security Administration (Caja). The long awaited judgment pits the prosecutors against the lawyers for seven other defendants in the case.

Specifically, the charge reads that the eight colluded to speed through credit to buy hospital equipment through Fischel. Many of the defendants are charged with illicit enrichment and corruption but some merely destroyed documents to cover the conspiracy’s tracks, according to prosecutors. The names involved are some of the once-biggest players in medical administration. Chief among them is that of Walter Reich (his mother is a member of the Fischel family) who was president of Fischel at the time of the transactions.

Others are a Caja vice president, Eliseo Vargas, Gerardo Bolanos, Juan Carlos Sanchez, Olman Valverde, Marvin Barrantes and Randal Vargas. All the defendants whoed up on time this morning but one, Eliseo Vargas, was missing one of his defense team who resigned. The day’s procedure is a reading of the charges against each and the beginning of the prosecution exposition.

The case has international implications in that the Finnish government put forward $32 million in credit as long as more than half of the equipment’s components were made in Finland. That government’s spokesmen later said they did not dream that any of the money would wind up in someone’s pocket. One Finnish official was qyoted as saying it would be long time before any of his government aid ever went to Costa Rica again.

The prosecution maintains that, due to the conspiracy, millions of dollars of medical equipment for Caja hospitals was purchsed from the Finnish company Instrumentarium Medko Medical without regard to the usefulness of the equipment and without regard to legal procedure. Eliseo Vargas, accuses the prosecution, maneuvered the situation so that the Finnish firm was the only company that could fullfil the order. Moreover, says the prosecution, the principals in the case received, in return, healthy “commissions” on the deal.

The political fallout was considerable and resulted in a severe loss at the polls in 2006 for ex-President Calderon’s Social Christian Unity party. Unity received two blows when another of its ex-presidents, Miguel angel Rodriguez, was also accused of corruption in the acquisition of cell phone service from from the French company Alcatel. Eliseo Vargas, the Caja vice president, also was head of the Unity delegation in the Legislative Assembly at the time of the Finnish equipment sale and this did not help Unity’s standing in the polls.

Despite this, Calderon, the undisputed leader of Unity, plans to run for president in 2010. Although his party’s constitution stipulates that any member accused of a felony is barred from the candidate role, this is expected to be overturned by the hierarchy under Calderon’s control.

The longest lasting blow was probably to Costa Rica’s image as a country where one can do business without bribery. Many Ticos felt that having two expresidents jailed was a deep shame to the country but others contended that the country benefited by publicly cleaning house. The wisest pointed out that judgment is the court’s precinct and that presumption of innocence functions in this country equally well as it does under Anglo-Saxon law.

by Rod Hughes

National Liberation Party presidential nomination aspirant Johnny Araya seems unable to make up his mind. This week he told the daily paper La Nacion that he was quite comfortable being “independent” of administration backing of his candidacy. Today’s edition has him accusing Liberation administration officials and lawmakers of pressuring local party leaders to back former Vice President Laura Chinchilla.

Chinchilla resigned two weeks ago to officially enter the primary rasce leading to the 2010 national elections. Her candidacy caught nobody by surprise and earlier this year President Oscar Arias had hinted archly that he was not at all adverse to a woman president. This was as close as he could come to an indorsement, under election rules presided over by the Supreme Elections Tribunal. Elected officials are not permitted to openly favor candidates.

Araya, San Jose’s mayor, has accused President Arias of favoritism in the past but this time extended the courtesy to Liberation party deputies in the Legislative Assembly. “There are phone calls from the Presidential Offices (Casa Presidencial) to people to pressure them,” he charged.

But presidential press secretary Pablo Gueren replied, “Absolutely no comment.” Liberation’s floor leader Oscar Nunez emphatically denied Araya’s charge, calling it the equivalent of a “fairy tale.” Araya maintains he has received complaints from local party officials about pressure, mostly from Guanacaste province but the three sitting Liberation lawmakers also denied knowing anything about the matter.

Guanacaste Liberation deputy Maureen Ballestero scoffed that primaries are not supposed to be a “battle” and that “we’re all Liberationists.” She added that pressuring local leaders “isn’t the best way anyway to get people’s favor.”

One National Liberation nomination hopeful does not have to worry about Presidential favor. Fernando Berrocal knows he won’t have it. Berrocal was fired as Security Minister earlier this year for making incautious statements that infuriated his boss.

by Rod Hughes

One seldom hears the subject of Nicaraguan immigrants brought up these days in Costa Rica. As with the U.S. presidential campaign with illegal Mexican immigrants, such concerns have been swept away into a corner by issues such as high petroleum and food prices and other economic issues. That situation has been helped by, in Costa Rica’s case, the low unemployment rate (4.6% earlier this year) that ease’s worry that low salaried Nicaraguans will take jobs away from Ticos.

This will undoubtedly continue with the news that Nicaraguan laborers are no longer a burdon on this country’s health care system. Under the country’s socialized medicine, even illegal residents are entitled to hospitalization under Costa Rica’s Social Security (Caja) system. This was a worry to former President Abel Pacheco’s austerity administration that ended in 2006.

But Nicaraguan workers are now paying their way with their contributions to the Caja, reported health authorities this week. Some 120,000 Nicaraguan workers are contributing to their benefits, reports the daily paper La Nacion. In just 2007 alone, the Caja incurred costs of some 80 billion colones, but income from Nicaraguans was barely a third of that.

The figures tell the tale: some 400,800 immigrants reside in this country, according to the Central American Population Center. Of those, an estimated 230,000 are economically active, more than half of whom are registered with the Caja. Unfortunately, some 110,000 workers 12 years or older are still outside the health care system and pay notheing. (Note: Child labor is illegal in Costa Rica but still occurs, especially in the immigrant population.)

Population Center director Luis Rosero points out, “Contributions to the Social Security system could be better if it would develop a mechanism for the undocumented to contribute or if employers of the undocumented would fulfill their obligations to affiliate (those workers) with Social Security.” In Costa Rica, every employer has (theoretically) the duty to sign up even part-time workers with social security and pay the employer’s quota and deduct from the wages and pay employee quota as well.

Unfortunately, greedy employers are only too happy to forgo the expense of insuring their workers’ health benefits. Many of these delinquent employers run farms and prey on unskilled seasonal Nicaraguan workers. The lack of labor inspection by the Ministry of Labor and the Caja ensures that foreign workers are exploited by the unscrupulous with complete impunity.

La Nacion, in the absence of figures from the Caja, calculates that the workers who do pay into their own health care are also paying for care of the undocumented ones who contribute nothing. “These immigrants tend to be younger and therefore demand fewer health services,” points out Population Center director Rosero.

One unanswered question in all this information is whether employers may be credited with this happy situation. Perhaps more employers are registering their workers and paying their part. Certainly most or all the immigrants would be happy to have the small workers’ fee deducted from their pay for some health coverage.

by Rod Hughes

As the national election campaign in the United States winds down, Costa Rica’s primary run up to the 2010 election is heating up. It’s official: Vice President Laura Chinchilla resigned her two posts on the cabinet (she was also Minister of Justice) Wednesday in order to run for the presidential nomination of the government’s National Liberation Party. Since the resignation under pressure of Second Vice President Kevin Casas, she was the only one who can substitute as chief executive in the Presiddent Oscar Arias’s absence. Now the country has no vice president.

Her desire to run for the top post was an open secret, especially since President Arias mentioned slyly that he would “not be opposed” to a female president. This is about as direct as he can be to favoring Chinchilla publicly under the country’s tough regulations against an elected official meddling in pre-election partisan politics, rules watched over by the Supreme Elections Tribunal.

Former Public Security Minister Ferando Berrocal, who has also has his eye on the standard bearer spot, commented sourly that since she has Arias’s support she has an advantage. Berrocal was fired as minister after his incautious remarks earlier this year alleging that the Colombian narco-terrorist group FARC had penetrated into high political circles. Since then, he has been increasingly critical of his ex-boss.

But politics, like romance, seldom runs smoothly and rumors have circulated that Chinchilla has clashed with the president’s brother, Rodrigo Arias, over issues discussed in cabinet meetings. Both Arias, Minister of the Presidency and the President’s closest advisor, and Chinchilla have poo-poohed the rumors. To make matters even more fascinating for the political observer, Minister of Finance Guillermo Zuñiga has hinted that he has support in the cabinet for the nomination as the party standard-bearer. But he has since lapsed into silence about the matter.

The strongest challenge to Chinchilla so far is San Jose mayor Johnny Araya, a long-time party stalward. Contrasted with Berrocal, he graciously welcomed Chinchilla into the race but he has had some pointed things to say about the president’s apparent backing of the vice president. His brother, Rolando Araya, was the 2002 nominee but lost to ex-President Abel Pacheco of Social Christian Unity party in a close run election that required the country’s first runoff.

One thing is certain: Araya will face opposition from the country’s small but increasingly visible gay community. Last week, the English-language weekly The Tico Times broke the story of Araya’s homophobic role in denying a liquor license to a gay club, characterizing homosexuality as “unnatural” and implying that freedom has its limits. But the newspaper also speculated that in this conservative Catholic country that may help, more than hinder, his political career.

By Rod Hughes

The Citizen Action Party (PAC) Legislative Assembly floor leader Francisco Molina sys his party will present no further Constitutional challenges to the final bill that will bring Costa Rican law into accord with the Central American Free Trade Agreement (CAFTA)– if the pro-CAFTA parties agree to PAC’s and the Libertarian Movement’s proposed amendments.

The environmental bill was kicked back to the lawmakers last month when the Supreme Court’s Constitutional Chamber ruled one article unconstitutional. The legislators have until Dec. 31 to approve the bill. If it is not passed by then, Costa Rica will be left out of the free trade treaty. So far, 12 other laws have been passed to align the nation’s laws with articles of CAFTA.

But everyone seems to have an idea of how the bill should be rewritten. The pro-CAFTA National Liberation party and Social Christian Unity have also written amendments aimed at the bill’s reform. A strange aspect to Molina’s maneuver is that the leftist PAC and the Libertarians are as far apart on the political spectrum as any two parties can get. Since the trade pact was approved narrowly in last October’s nationwide referendum, PAC has fought stiffly against it while the Libertarians have been for it from the beginning.

If the rewritten bill is again appealed to the Supreme Court, it would be a near thing to get a ruling and passage by the New Year’s Eve deadline, the court docket being as jammed as it is.

by Rod Hughes

The United States and five other countries in the Central American Free Trade Agreement (CAFTA) have given Costa Rica’s lawmakers three more months to get their act together to pass the last of 13 bills designed to bring the country’s law into accord with the treaty’s provisions. The announcement came in a news conference yesterday by U.S. Trade Secretary Carlos Gutierrez and Nicaraguan officials in Managua.

The situation was a real cliffhanger and the last nation to give Costa Rica a break in the September 30 deadline was Nicaragua. Taking into account that relations between Nicaragua’s Sandinista regime and this country have not always been the fondest, President Oscar Arias’s trade officials– indeed, his entire National Liberation Party– breathed a sign of relief. If Secretary Gutierrez had to twist any arms in Managua will probably not be known until long in the future and may have to wait for Arias to publish his memoirs.

This is the second extension that Costa Rica has had to plead for in order to get its legal house in order after a referendum last Oct. 7 ratified the trade pact. Things looked close but hopeful early in September in getting the enabling legislation past and 12 of the unlucky 13 bills had been passed, including two hotly contested ones to open up insurance and telecommunications to free market participation, breaking the monopolies of two cherished government companies.

The the Supreme Court’s Constitutional Chamber (Sala IV) sent back an environment bill to the legislators on a technicality and the entire movement was derailed days before the deadline. But the Citizen Action Party and two small party lawmakers who bitterly opposed the pact could scarcely contain their glee after having resorted to delaying actions earlier this year.

(Perhaps our conjecture that the U.S. trade secretary pressured Managua to agree to the second extension is misplaced. The weekly newspaper in English Nica Times has reported steadily deteriorating relations between Washington and the Sandinista regime during the past year. Such pressure might have backfired, leaving Gutierrez to explain to President George W. Bush why Costa Rica was left dangling outside the treaty.)

Meanwhile, the new extension, granted a bare seven hours before the first extension was to expire, means that the legislators have until New Year’s Eve to get the bill firmly placed in the lawbooks. Some editorial flak was thrown up by Central America’s leading English-language publication, The Tico Times, because leaders of the three major parties supporting the bill, National Liberation, Social Christian Unity and the Libertarian Movement, ignored opposition warnings that the environmental bill would run into constitutional snags. It is unlikely they will make the same mistake again.