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### Viewing cable 08SANJOSE969, HISTORICAL VISIT OF CHINESE PRESIDENT HU KICKS OFF

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08SANJOSE969 | 2008-12-12 02:12 | 2011-03-04 16:30 | CONFIDENTIAL | Embassy San Jose

Appears in these articles:
http://www.nacion.com/2011-03-04/Investigacion/NotasDestacadas/Investigacion2697549.aspx
http://www.nacion.com/2011-03-04/Investigacion/NotasSecundarias/Investigacion2697564.aspx
http://www.nacion.com/2011-03-04/Investigacion/NotaPrincipal/Investigacion2697557.aspx
http://www.nacion.com/2011-03-04/Investigacion/NotasSecundarias/Investigacion2697581.aspx
http://www.nacion.com/2011-03-04/Investigacion/NotasSecundarias/Investigacion2697579.aspx
http://www.nacion.com/2011-03-04/Investigacion/NotasSecundarias/Investigacion2702553.aspx
http://www.nacion.com/2011-03-04/Investigacion/Relacionados/Investigacion2702554.aspx

`

    VZCZCXYZ0000
    RR RUEHWEB

    DE RUEHSJ #0969/01 3470212
    ZNY CCCCC ZZH
    R 120212Z DEC 08
    FM AMEMBASSY SAN JOSE
    TO RUEHC/SECSTATE WASHDC 0346
    INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
    RUEHBJ/AMEMBASSY BEIJING 0153
    RUEHSG/AMEMBASSY SANTIAGO 0452
    RUEATRS/DEPT OF TREASURY WASHINGTON DC
    RHEHNSC/NSC WASHDC

` `

    C O N F I D E N T I A L SAN JOSE 000969

    SIPDIS

    DEPARTMENT FOR WHA/CEN, EAP/CM, WHA/EPSC AND EEB;
    TREASURY FOR SSENICH

    E.O. 12958: DECL: 12/09/2018
    TAGS: PREL PGOV PHUM ETRD EFIN EINV ECON CS CH CU
    SUBJECT: HISTORICAL VISIT OF CHINESE PRESIDENT HU KICKS OFF
    FTA TALKS, SEALS 11 ACCORDS

    REF: A. SAN JOSE 133
         ¶B. 07 SAN JOSE 1106
         ¶C. 07 SAN JOSE 1488
         ¶D. SAN JOSE 540
         ¶E. BEIJING 04253

    Classified By: DCM Peter M. Brennan for reason 1.4(d).

    -------
    SUMMARY
    -------

    ¶1. (SBU) "Chinese president (arrives) like Santa Claus with
    FTA, balls, and bicycles" read one headline recapping the
    historical visit of President Hu Jintao to San Jose November
    16-17.  Hu's rock-star-like reception included major street
    closures and a holiday for most government employees who work
    downtown, ensuring smooth travel and added
    security for Hu and his 184-member delegation.  The major
    significance of the event was the "official kick-off" of
    Sino-Costa Rican FTA negotiations (to begin in earnest in
    2009), wherein Chile will also provide technical assistance
    to Costa Rica (septel).  Officials signed a total of 11
    pre-drafted cooperative accords addressing, among other
    issues:  a joint venture to modernize the GOCR's RECOPE
    refinery; USD 10 million in additional funds for the new
    soccer stadium that China will build (Ref A); as much as USD
    80 million in bank lines of credit; creation of a "Confucian
    Institute" to teach Mandarin at the national university; and
    a sports equipment donation for underprivileged youth.
    President Arias invited Chinese companies to bid on a new
    concession for Costa Rica's major port in Limon.  In
    addition, the Costa Rican private sector signed cooperative
    agreements with Chinese counterparts.  China's human-rights
    record and Tibet were intentionally absent from discussions.
    END SUMMARY.

    -----------------------------------
    FIRST TIME ON CENTRAL AMERICAN SOIL
    -----------------------------------

    ¶2. (SBU) Hu's visit reciprocated President Arias' October
    2007 China trip which followed GOCR re-establishment
    diplomatic relations with the PRC on June 1, 2007 (Ref B).
    It also marked the first time that a Chinese president "set
    foot on Central American soil" according to FonMin Bruno
    Stagno, who described the 17-month old bilateral relationship
    as "historic and symbolic" in his welcoming remarks.  Stagno
    noted that Hu's visit came on the heels of the G20 Summit in
    Washington, and he extolled China's ability to help the world
    through the current financial crisis and to aid developing
    countries.  Stagno used the visit to publicly reiterate the
    GOCR's aspiration for APEC membership once the moratorium is
    lifted in 2010 (Ref C), as part of the administration's
    National Development Plan strategy to increase ties with
    Asia, especially with China and India.  Stagno proudly added
    that "not every country that has ties with China has received
    a visit of this caliber."

    --------------------------------------
    POMP, CIRCUMSTANCE, AND ARMS WIDE OPEN
    --------------------------------------

    ¶3. (U) Hu's agenda included a one-on-one with President
    Arias, the agreement signing ceremony, and a visit with
    legislators at the National Assembly.  Aside from the usual
    fanfare (such as schoolchildren cheering Hu's arrival at
    Arias' office), the visit generated controversy for major
    street closures and a one-day holiday for government
    employees in downtown offices, and drew criticism from some
    legislators who noted the disparity in treatment of Panama's
    Torrijos and Chile's Bachelet during recent state visits.
    Minister of Public Security, Janina Del Vecchio said the
    measures were requested by the Chinese as reciprocal
    treatment (stemming from Arias' China trip) and that the
    closures were necessary to prevent traffic chaos.

    --------------------------------------
    "GREAT FRUITS" AND A POLITICAL MESSAGE
    --------------------------------------

    ¶4. (U) Hu's remarks touched on bonds of friendship, trust and
    support for the (eventual) FTA.  He noted that the
    re-establishment of diplomatic ties with the PRC had "borne
    great fruits (for Costa Rica) in just one year."  The

    official Chinese Embassy press statement declared that Costa
    Rica was a "relevant partner" in the region.  It heralded the
    "gigantic steps" in cooperation and friendship between the
    two "developing countries" that shared the mission of
    "safeguarding world peace" and promoting joint development.

    ¶5. (C) In a November 20 briefing for U.S. and Canadian
    PolOffs, the MFA's Deputy Director of Foreign Policy
    Alejandro Solano told us that China's primary purpose for the
    visit was to send a political message to countries in the
    region that they, too, could receive great economic benefits
    if they recognized China.  Timing may be running out to
    collect these benefits, he maintained, since the increased
    dialogue and commercial ties between China and Taiwan might
    resolve the intra-Chinese differences sooner than later.
    According to Solano, Chinese officials believe that
    Nicaragua, which they thought would be first in Central
    America to re-establish ties with the PRC, now could be the
    very last.  Because of the GON's heavy dependence on
    Taiwanese assistance (especially in light of EU aid
    reductions), Nicaragua could not even afford a short gap in
    aid flows while switching recognition to China.

    ------------------------------------------
    SINO-GOCR FTA NEGOTIATIONS IN JANUARY . . .
    ------------------------------------------

    ¶6. (U) Arias and Hu utilized the visit to announce the
    "kick-off" of negotiations on the proposed Chinese-Costa
    Rican FTA, after a year of exploratory talks, even though the
    first round will actually take place beginning January
    19, 2009, in San Jose.  Chinese Ambassador Wang Xiaoyuan told
    the press that, based on China's experience
    with other FTAs, his side expected negotiations to last "a
    year or so."  Minister of Foreign Trade Marco Vinicio Ruiz
    announced Costa Rica's intent to finish the FTA by 2010,
    before the end of Arias administration.  Arias himself told
    reporters he hoped that it would not take four-and-a-half
    years for the China FTA to be approved by the National
    Assembly, referring to the long, torturous battle to pass,
    ratify and implement CAFTA-DR.  Costa Rica expects to see an
    11 percent increase in duty-free exports to China under the
    FTA, especially in coffee, bananas and beef, with improved
    access to China's 1.3 billion-person market.

    ¶7. (SBU) Just after Hu's visit, Minister Ruiz told the
    Ambassador that President Hu's visit went very well and was
    another important step in "getting Costa Rica to look more
    towards Asia" for its economic future.  This remained very
    important to President Arias, and, according to Ruiz, had
    fueled the Arias administration's opening of relations with
    China in 2007.  With the GOCR stymied by previous attempts to
    foster deeper relations in Asia via Japan and South
    Korea, Ruiz offered that Arias' second presidency would be
    remembered for his engagement with China.  The Costa Rican
    public was looking for something "exciting" after the
    protracted CAFTA-DR battle, and the continued opening with
    China might satisfy that interest, according to Ruiz.

    -----------------------------------
    . . . BUT ADJUST THOSE EXPECTATIONS
    -----------------------------------

    ¶8. (SBU) Ruiz acknowledged, however, that Costa Rican
    expectations might have to be "adjusted" to meet reality.
    Relations with China would continue to develop, but not
    necessarily in a spectacular fashion.  Based on the Costa
    Rican experience with even non-controversial trade agreements
    (such as with Panama), ratification of an FTA with China
    likely would take longer than expected.  Separately, the
    MFA's Solano noted opposition to a Sino-Costa Rican FTA from
    some domestic sectors, including packaging, container and toy
    importers/manufacturers.  COMEX, he added, would have to
    decide which sectors to "leave out".

    ¶9. (C) Solano acknowledged that a Chinese FTA could
    indirectly impact Costa Rica's other FTA partners, such as
    the U.S. Canada, and Chile.  The GOCR might re-examine rules
    of origin requirements, for example, in order to attract more
    Chinese FDI via products assembled in Costa Rica that might
    have preferred entry into the CAFTA or Chilean markets (Ref
    D).  COMEX would have to consult with other FTA partners
    during the negotiation process to be sure that
    any adverse effects or implications were taken into account.
    Solano said that Chile would provide technical training and

    "tips" (based on Chile's own negotiating experience with the
    Chinese) to GOCR negotiators, similar to the Chilean advice
    provided to the GOCR during the current FTA negotiations with
    the EU.

    --------------------------------------------- -
    ELEVEN ACCORDS SIGNED; OIL AND CREDIT TOP LIST
    --------------------------------------------- -

    ¶10. (U) In addition to the FTA negotiation agreement, the
    GOCR signed 10 more accords with the PRC during Hu's visit.
    Principal among them was a deal on behalf of China's CNPC
    International Ltd. to modernize Costa Rica's RECOPE oil
    Refinery on the Caribbean.  RECOPE sources tell us that the
    agreement would permit the creation of a 25-year joint
    venture to expand or build a new facility in Moin which would
    greatly increase production.  Construction and equipment
    costs could amount to between $800 million and $1 billion,
    and Costa Rica would retain the option to purchase at the end
    of the contract term.  The joint venture would undertake a
    feasibility study to determine the scope of construction,
    with the goal of building in a modular fashion that would
    facilitate future expansion.  The joint venture would front
    30 percent of costs, with the balance to be financed.  Once
    begun, construction would probably take three years.

    ¶11. (SBU) China's National Development Bank extended a $40
    million line of credit to Costa Rica's Central Bank (Banco
    Nacional) and signed a cooperative financial agreement with
    the national Bank of Costa Rica.  Though the amount set
    aside for the Bank of Costa Rica was not specified in the
    agreement, the MFA's Solano confirmed that a similar $40
    million figure was under discussion.  The funds would be
    available for recapitalization (to stabilize institutions
    against the global financial crisis).

    ¶12. (SBU) China donated 10,000 soccer balls and 1,000
    mountain bikes for disadvantaged youth, which the GOCR's
    ceremonial First Lady's Office will distribute, according to
    Solano.  Solano told us that this donation apparently
    resulted from an off-hand remark by President Arias himself,
    joked before the visit that perhaps the Chinese could bring
    balls and bikes as early Christmas presents. A staffer took
    him seriously and included those items in an official request
    to the PRC.  The deals also created a Confucian Institute at
    the University of Costa Rica for the study of Mandarin and
    Chinese culture; confirmed Costa Rica's participation in the
    2010 Shanghai Expo, established a Binational Business
    Council; launched relations between the GOCR Science and
    Technology Ministry and China's agricultural science and
    science academies; and covered additional economic and
    technological aid, including an additional $10 million for
    the new stadium (Ref A).

    ---------------------------------
    THE PRIVATE SECTOR GETS ITS SHARE
    ---------------------------------

    ¶13. (SBU) On the sidelines of the visit, members of the Costa
    Rican Chamber of Exporters (CADEXCO, Spanish acronym)
    signed pacts with representatives of the International
    Business Chamber of Wenzhou, the Sichuan Council for
    International Business Promotion, and the Guangxi Sub-Council
    for International Business Promotion, who were
    among the 60-100 (official numbers vary) Chinese business
    leaders who accompanied Hu.  These pacts were the only
    agreements signed with Costa Rica's private sector and paved
    the way for Chinese technical assistance to Costa Rican
    companies and for opening commercial offices in China.
    CADEXCO Vice President Sergio Navas told us that the
    agreements represented a strategic move to work with regional
    Chinese markets as opposed to with Beijing and Shanghai
    alone.  Given Mexican, Colombian, and Chilean competition in
    China, and the size of the Chinese market relative to Costa
    Rica, the regional agreements signal an emerging niche export
    strategy for the GOCR.

    ----------------
    THE INTEL FACTOR
    ----------------

    ¶14. (SBU) Since INTEL comprises an overwhelming share of
    Costa Rican exports to China (96 percent INTEL; 4 percent
    everything else), the decisions of INTEL regarding future
    manufacturing weighs heavily on the Sino-Costa Rican trade

    relationship.  Navas fretted that the soon-to-be-opened INTEL
    production facilities in China may compromise INTEL's
    production in Costa Rica. In general terms, Navas saw three
    different horizons for the agreements:

    -- Short Term:  Chinese foreign direct assistance and
    cooperation in the form of technical assistance.

    -- Medium Term:  Working to expand the four percent of
    non-INTEL exports to China while maintaining the INTEL
    relationship in Costa Rica.  Raw materials, foodstuffs, and
    tourism are the leading candidates to increase Costa Rican
    trade revenue with China.

    -- Long Term:  market analysis and research by Costa Rica on
    which Chinese consumer sectors to target. Size matters;
    coffee exporters note that if only two percent of China's
    population drank coffee at one-third the consumption of the
    average Costa Rican, the demand would use up all of Costa
    Rica's current annual production.

    Navas believes that the commercial benefits will develop
    slowly, however, as do all relationships with China.
    Successful business with China depends on building trusting
    relationships over time.

    ------------------------------
    HUMAN RIGHTS NOT ON THE AGENDA
    ------------------------------

    ¶15. (SBU) A reporter from TV Channel 42 raised the issue of
    China's human-rights record during the Arias/Hu joint press
    conference, and he questioned whether
    Nobel-Peace-Prize-Winner Arias broached the topic of human
    rights during their one-on-one.  In a telling commentary on
    his administration's current focus with China, the president
    responded -- on camera -- that the two did not talk about
    human rights, and that he "took advantage of the opportunity
    to talk about things that are important and urgent to Costa
    Rica."  FonMin Stagno subsequently backpedaled a little to
    explain that there were other fora (including the UN) and
    moments in which representatives of the two nations discussed
    "with much patience and much more time, topics such as human
    rights."

    ¶16. (C) Interestingly, human rights was the second topic that
    the MFA's Solano broached with us in his November 20
    briefing.  He said that the Chinese wanted to put Tibet on
    the agenda, but the GOCR declined due to difficulties for
    Arias given his still-close relationship with the Dalai Lama.
     Solano fumbled a bit trying to rectify the GOCR's new "one
    China" policy and its continued interest in human rights
    issues in Tibet.  When asked, Solano said that Arias had made
    no/no offers to help moderate or negotiate on Tibet.
    However, the GOCR would begin to take up human rights during
    bilateral political consultations with China planned over the
    next year.  Solano indicated that perhaps some special
    administrative arrangement could be made for Tibet a-la Hong
    Kong, but for now the GOCR had to weigh political
    "equilibrium" (and economic benefits) against public
    sentiment (on human rights).

    -------
    COMMENT
    -------

    ¶17. (C) Hu's visit demonstrated the GOCR's and Costa Rica's
    continuing exuberance for China more than a year after
    diplomatic relations were restored.  Stagno's vision of the
    21st Century as the "Chinese Century" shows that the Arias
    administration is continuing to look hopefully to Asia for
    its economic future; China has already begun the second-most
    export market for the Costa Rica.  Though the PRC Embassy's
    press statement tried to portray the two countries as equal
    partners in a similar struggle along the path of development,
    officials involved in the day-to-day business of building
    relations, such as Minister Ruiz and Chinese interlocutors in
    Beijing (Ref E), are well aware that this new relationship is
    anything but equal.  For now, trade with China has apparently
    trumped all other issues on the Costa Rican-Chinese agenda, a
    departure for the little country with the big love of human
    rights.
    CIANCHETTE

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